ETF Glossary - Deferred Sales Charge - Growth Fund
Deferred sales charge
A sales charge deducted from an investment for exiting early, or before the sales charge ceases to exist. Mutual fund class B and C shares often carry a deferred sales charge. Also called back end load, CDSC or contingent deferred sales charge.
Discount to nav
The price discount or difference between a fund's net asset value (NAV) and the actual value of its portfolio holdings. Some closed end funds and ETFs may trade at a discount to NAV.
Dividend
Distribution of earnings paid out to shareholders. With mutual funds and ETFs, dividends can be a result of capital gains, interest income, or dividends paid to the fund itself by securities within the portfolio. Dividends are often paid quarterly, but the frequency can be less and is determined by fund management.
Dividend yield
The distribution rate of a fund calculated by dividing the amount of the dividends per share by the per share market price of the fund. For example, a fund price of $20 that pays a $2 dividend per year has a 10% dividend yield.
Dividend yield
The DJIA is a widely followed index that is used as a barometer of stock market performance. This stock index is based upon 30 major companies, or components in diversified industries, such as banking, consumer staples, retail, healthcare, and technology.
Eafe index
European, Australia, and Far East index computed and published by Morgan Stanley Capital International. (MSCI)
Efficient market
A market theory that dissuades investors from using fundamental research to find undervalued or mis-priced securities. The central idea is that market prices already reflect the full knowledge of investors, which makes it impossible to outperform the market.
Emerging market
Refers to the financial market or economy of a developing nation, which is often new or has a short history.
Enhanced indexing
This market strategy seeks incremental outperformance of a benchmark index without changing the profile characteristics of the index. By using leverage, options trading, or another mechanism, enhanced indexing offers the potential of outperforming a benchmark index.
Exchange traded fund (etf)
ETFs are an emerging class of low cost index funds that trade like stocks. Inexpensive, tax-efficient, and flexible, they offer investors instantaneous exposure to local or global indexes via a single trade. Sometimes referred to as "tracking stocks."
Expense ratio
The expense ratio includes investment management administrative costs, and 12b-1 fees. The expense ratio does not include the cost of acquiring a fund, such as commissions and loads.
Fund of funds
Investment strategy that seeks to diversify risk exposure and manager style among various fund managers. Potential pitfalls include a lack of transparency and an added layer of fees. This strategy is popular with hedge fund investors looking to diversify risk among various fund groups.
Fund flows
Describes the money flow into or out of mutual funds and ETFs. The Investment Company Institute (ICI) tracks and reports monthly fund flow data.
Fund overlap
Fund overlap refers to the duplication in owning two or more ETFs or mutual funds that have the same identical securities and/or underlying investment strategy. Investors are effectively paying twice for double work. They pay one fund company to execute an investment strategy and then they pay again to a competing fund to do the exact same work.
Global fund
A type of mutual fund, closed end fund, or ETF designed to give exposure to any international or emerging market, including the United States.
Gold fund
A type of mutual fund or ETF designed to give exposure to gold related securities. This can include stocks in companies engaged in the production, processing, or mining of gold. Often used to hedge against inflation and currency risks.
Government securities
Securities issued by U.S. government agencies and international governments. U.S.Treasuries are generally considered the safest, because they are backed by the full faith and credit of the government.
Grantor trust
This type of fund structure distributes dividends directly to shareholders and allows investors to retain their voting rights on the underlying securities within the fund. The original fund components of the index remain fixed and this ETF structure is not registered under the SEC Investment Company Act of 1940. Merrill Lynch's HOLDRs follow this format.
Growth and income fund
A mutual fund, closed end fund, or ETF with both the growth of capital and income as the primary investment objective.
Growth fund
A mutual fund, closed end fund, or ETF with the growth of capital as the primary investment objective.
ETF Glossary Terms D-G
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