A type of mutual fund that has a tendency to perform well during a bull market. In other words, it is a mutual fund that generally outperforms the market when the market is doing well, and underperforms the market when the market is doing poorly. Fair weather funds are very active during bull markets. For example, mutual funds that focused on technology companies in the early stages of the tech bubble in the 1990s were very successful. To determine whether a prospective mutual fund is a fair weather fund, simply compare the fund's relative returns to the market index during both bear and bull markets.
A commission or sales charge applied at the time of the initial purchase for an investment, usually mutual funds and insurance policies. It is deducted from the investment amount and, as a result, it lowers the size of the investment. Front-end loads are paid to investment intermediaries (financial planners, brokers, investment advisors) as sales commissions. As such, these sales charges are not part of a mutual fund's operating expenses. It is argued that a load is a cost that investors incur for obtaining an investment intermediary's expertise in selecting appropriate funds for clients. It is a matter of record that load funds do not outperform no-load funds.Generally, the sales charge on a load mutual fund will be waived if such a fund is included as an investment option in a retirement plan such as a 401(k).
A form sent to investors by investment fund companies. The form is a record of all taxable capital gains and dividends paid to an investor, including those that have been re-invested in a given taxation year. The amounts stated on the form represent the amounts that fund companies are attributing to each investor's investment return for the year and reporting to the IRS. Investors use Form 1099-DIV to help report income received from investments on their tax return each year. Form 1099-DIV reports the ordinary dividends, total capital gains, qualified dividends, non-taxable distributions, federal income tax withheld, foreign tax paid and foreign source income from each investment account held by a fund company. Forms are not sent to investors who received or re-invested a total of less than $10 per fund.
The difference in earnings or performance between what is actually achieved and what could have been achieved with the absence of specific fees, expenses or lost time. Forgone earnings represent the investment capital that the investor spent on investment fees. The assumption is that if the investor had been exposed to lower fees, he or she would have generated a better return. This term is often used when referring to management fees or other expenses paid to mutual funds, exchange-traded funds, or other pooled investment vehicles. Foregone earnings as they relate to investment performance can be a big drag on the long-term growth of assets. Something as seemingly innocent as a front-end load or a 1% management fee can cost thousands of dollars as the years pile up, thanks to the wonders of compound returns. To limit forgone earnings, it is important to look at the costs associated with each investment. For example, say you have $10,000 to invest and one fund charges 0.5%, while the other fund charges 2%. If you invest in the 2% fund, you will be charged $200, while the 0.5% fund only charges $50. The difference, or $150, is your forgone earnings, which could have been invested instead of being lost to fees.
In mutual funds, a unique number identifying your account with the fund. Like a bank account number, the folio number can be used as a way to uniquely identify fund investors and keep records of items such as how much money each investor has placed with the fund, their transaction history and contact details. A folio number can also be used to identify journal entries or parcels of land. All mutual funds need some sort of recordkeeping system in place. This information is necessary for ensuring each investor is returned the money they are entitled to, and for determining what fee structure applies to each investor. While recordkeeping is most often facilitated by the broker, in some cases an investor may be asked for a folio number by the fund provider to help ensure accuracy. This folio number may be present on investment statements or may be obtained through your broker.
An investment firm or brokerage that offers investors a wide array of mutual funds from different fund families. Investors benefit by obtaining access to an extensive range of top performing funds, as well as by receiving a consolidated statement of all their mutual fund holdings. As the mutual fund industry has matured, fund families have been finding it increasingly difficult to channel investors to funds solely from their family, due to competition from other mutual funds and newer products such as exchange-traded funds. Investors also prefer investing across different fund families, since a single family is unlikely to have the top performers in all of the myriad categories now available.
A mutual fund that invests in other mutual funds. This method is sometimes known as "multi-management". A fund of funds allows investors to achieve a broad diversification and an appropriate asset allocation with investments in a variety of fund categories that are all wrapped up into one fund. However, if the fund of funds carries an operating expense, investors are essentially paying double for an expense that is already included in the expense figures of the underlying funds. Historically, a fund of funds showed an expense figure that didn't always include the fees of the underlying funds. As of January 2007, the SEC began requiring that these fees be disclosed in a line called "Acquired Fund Fees and Expenses" (AFFE).
The person(s) resposible for implementing a fund's investing strategy and managing its portfolio trading activities. A fund can be managed by one person, by two people as co-managers and by a team of three or more people. Fund managers are paid a fee for their work, which is a percentage of the fund's average assets under management.Also known as an "investment manager". The individuals involved in fund management (mutual, pension, trust funds or hedge funds) must have a high level of educational and professional credentials and appropriate investment managerial experience to qualify for this position. Investors should look for long-term, consistent fund performance with a fund manager whose tenure with the fund matches its performance time period.The whole point of investing in a fund is to leave the investment management function to the professionals. Therefore, the quality of the fund manager is one of the key factors to consider when analyzing the investment quality of any particular fund.
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