Tag: funds

Asset Allocation Fund definition explanation

What is Asset Allocation Fund?
A mutual fund that provides investors with a portfolio of a fixed or variable mix of the three main asset classes – stocks, bonds and cash equivalents – in a variety of securities. Some asset allocation funds maintain a specific proportion of asset classes over time, while others vary the proportional composition in response to changes in the economy and investment markets. Read more for examples and further explanation including related video clips and also comments
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Franking Credit definition explanation

What is Franking Credit?
A type of tax credit found in countries such as Australia that allows domestic companies to pass through taxes that have already been paid on corporate profits. The investor receiving stock dividends will also receive a quantity of franking credits in proportion to the overall tax rate of the company per dollar in profits.

When filing personal income taxes, the investor will record as income both the amount of the dividend and the amount of the franking credit; however, the franking credits can be deducted from the total tax due. If the investor has franking credits remaining and no more income tax due, franking credits can be returned as a tax refund to the investor. Read more for examples and further explanation including related video clips and also comments
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Backup Withholding definition explanation

What is Backup Withholding?
Tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors’ earnings. Backup withholding may be applied when an investor has not met rules regarding taxpayer identification numbers (TIN). At the time the investor withdraws his or her investment income, the amount mandated by the backup withholding tax is remitted to the government, providing the tax-collecting body with the required funds immediately, but leaving the investor with less short-term cash flow. Read more for examples and further explanation including related video clips and also comments
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Life Option definition explanation

What is Life Option?
An annuitization-method option for a typical annuity offered by an insurance company with which the annuitant chooses to receive regular income payments from his or her annuity account for life. The insurance company guarantees that the annuitant will receive payments for the rest of his or her life, and structures the payment amounts to provide room for the insurance company’s profit margin. Read more for examples and further explanation including related video clips and also comments
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Momentum Fund definition explanation

What is Momentum Fund?
Investment funds that invest in companies based on current trends in such things as earnings or price movement. The portfolio manager will look for companies that have been trending in a certain direction (e.g. a series of extremely positive earnings releases or upward price momentum in the short term). The manager will then take positions in the same direction as the trend and attempt to ride the wave and sell once it has peaked.

These funds are also known as “”momo funds””. Read more for examples and further explanation including related video clips and also comments
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Passive Foreign Investment Company – PFIC definition explanation

What is Passive Foreign Investment Company – PFIC?
A foreign-based corporation that has one of the following attributes:

1. At least 75% of the corporation’s income is considered “”passive””, which is based on investments rather than standard operating business.

2. At least 50% of the company’s assets are investments that produce interest, dividends and/or capital gains

PFICs include foreign-based mutual funds, partnerships and other pooled investment vehicles that have at least one U.S. shareholder. Most investors in PFICs must pay income tax on all distributions and appreciated share values, regardless of whether capital gains tax rates would normally apply. Read more for examples and further explanation including related video clips and also comments
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Market Exposure definition explanation

What is Market Exposure?
The amount of funds invested in a particular type of security and/or market sector or industry and usually expressed as a percentage of total portfolio holdings. Thus, it is the amount an investor has at risk or the amount he/she can lose. Also known as “”exposure””. Read more for examples and further explanation including related video clips and also comments
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Incubated Fund definition explanation

What is Incubated Fund?
A fund that is offered privately when it is first created. Investors of this type of fund are usually employees associated with the fund and their family members. Incubation allows fund managers to keep a fund’s size small while testing different investment styles before the fund is available to the public and subject to rules and regulations.

These types of funds are never officially called “”incubated,”” but are instead called “”limited distribution”” funds. Read more for examples and further explanation including related video clips and also comments
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