A fee-payment structure applicable to mutual funds in which the sales charge or commission (load) is not entirely paid at the time the investor first contributes funds to the mutual fund (or in the first several contributions either). Instead, the mutual fund load is dispersed across an extended time period, so that the load is more accurately applied to each contribution. This type of load payment plan allows greater portions of the investor's initial contributions to the account to be applied to actual investments, instead of sales charges. By doing so, the investor is able to gain a relatively larger position in the mutual fund in the short term, but their future contributions to the fund will be marginally smaller than they would have been without such a plan.
The amount of time an investor must wait until he or she can withdraw funds from an annuity without facing a penalty. Withdrawing money before the agreed-upon holding period can result in a surrender charge. Generally, but not always, the longer the surrender period, the better the terms of the annuity. After the surrender period has passed, the investor is free to withdraw the funds without being subject to a fee.
An account created in 1982 that offers a higher interest rate than a NOW account but lower interest than a money market account. Specific requirements, such as minimum deposits and interest rates, for super NOW accounts vary between banks. This is due to the 1986 deregulation of bank deposit accounts. Today, banks can charge interest based on their costs and competitive requirements.
A fee that a mutual fund manager pays to a salesperson who sells the fund to investors. The trailer fee pays the salesperson for providing the investor with ongoing investment advice and services.Also known as a "trailer commission". It is important to know whether your mutual fund salesperson is receiving a trailer fee because it may cause him or her to try to sell you a particular fund not because it is a good investment but because selling it to you will make him or her money. This fee is paid annually for as long as the investor holds shares in the fund.
An index fund that tracks a broad market index or a segment thereof. Such a fund invests in all, or a representative number, of the securities within the index. Also know as an "index fund". The term "tracker fund" comes from the tracking function of index fund management, which attempts to replicate the performance of a market index.Investing in an index fund is a form of passive investing. The primary advantage to such a strategy is the lower expense ratio on an index fund. Also, a majority of mutual funds fail to beat broad indexes such as the S&P 500.
The name given to institutions that sell or distribute mutual funds to investors for fund management companies without direct relation to the fund itself. For mediating these transactions, third-party distributors receive a portion of the trailer fees associated with mutual fund sales for acquiring new business. This arrangement works well for fund companies that don't have the necessary resources to enter new markets and instead decide to outsource to existing fund marketing companies.
An account that is set up within a fund to hold a balance as a result of a significant cash inflow or outflow to a fund. The account is set up to hold these funds temporarily until they can be distributed to unit holders, used to acquire additional assets for the fund or for other large fund expenditures. Temporary new accounts are set up by funds in order to help streamline and simplify the accounting and cash flow process. By setting up separate accounts, a fund can easily determine the amount of money that is going to be distributed to unit holders, or roughly the amount of money it will use to purchase additional holdings for the fund.
A mutual fund in which structure and operations are based on reducing the tax liability that its shareholders face. Reducing the tax liability of a fund is done in three main ways: 1. By purchasing tax-free (or low taxed) investments such as municipal bonds. 2. Keeping the fund's turnover low, especially if the fund invests in stock. Stocks held for more than one year are taxed at a lower long-term capital gains rate than short-term transactions. 3. Avoiding or limiting income-generating assets, such as dividend-paying stocks, which create a tax liability at each dividend issuance. Because tax-efficient funds have a low tax liability, they are often good investments to make outside of a tax-deferred account. This is because there is a minimal amount of tax to be deferred and the space in an investor's tax-deferred account is better suited for higher taxed securities, such as dividend-paying stocks. To determine how much you will save in this type of fund compared to other funds, review the investment company's and/or mutual fund's tracking services for statistics regarding a fund's historic tax costs.
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