IFIC Study Guide – Chapter 12: Taxes on Fund Income
and Distributions
-invest in the common and preferred shares of publicly-traded companies.
-have the goal of earning capital gains, sometimes with a current dividend income component.
-the riskiest of the three basic mutual fund types—money market, fixed-income, and equity
funds
-suitable primarily for clients with longer investment time horizons.
-make no specific attempt to preserve capital
-average return performance of equity funds parallels that of the TSX Index - correct answer
✔✔Equity Mutual Funds
-standard equity
-equity growth
-equity index - correct answer ✔✔Canadian Equity Mutual Fund Categories
-seeks to earn some combination of dividend income and capital gains from investment in
Canadian common stocks.
-this objective appears to be similar to that of a preferred dividend fund. The difference
between the two is that an equity fund usually has a much stronger capital gains focus. - correct
answer ✔✔Standard Equity Fund
-hold common shares of large capitalization firms with strong dividend records. The capital
appreciation potential for this type of shares is, however, limited. - correct answer
✔✔Conservative Equity Funds
, -the investment objective of an equity growth fund is capital gains. Some dividend income may
be earned, but probably not much (these companies tend to keep their profits as retained
earnings, reinvesting to continue to grow)
-seek out smaller firms that do not have the financial ability to pay dividends. They need all the
funds they can obtain in order to grow. - correct answer ✔✔Equity Growth Funds
-smaller, growing firms have a greater potential for failure
-these growth firms often trade at very high price/earnings ratios
-share price volatility - correct answer ✔✔Equity Growth Fund Risks
-an aggressive growth fund that invests exclusively in smaller, lesser-known firms that are
expected to grow at a faster rate than normal growth companies
-"Small cap" stands for small capitalization, which means that the market value of the equity of
the firm is relatively low, probably because the firm itself is small.
-rarely pays dividends.
-aggressive and riskier than regular growth funds.
-return is expected to be primarily from capital gains.
-typically firms making and marketing new types of products for which market demand may be
difficult to determine
-a type of specialty fund - correct answer ✔✔Small Cap Funds
-Market Capitalization = Number of shares outstanding × Current Market Share Price - correct
answer ✔✔Market Capitalization Calculation
-seek out small, growth-oriented firms that have higher market capitalizations than small cap
funds - correct answer ✔✔Conservative Equity Growth Funds
-has the goal of replicating the movements of a market index.
and Distributions
-invest in the common and preferred shares of publicly-traded companies.
-have the goal of earning capital gains, sometimes with a current dividend income component.
-the riskiest of the three basic mutual fund types—money market, fixed-income, and equity
funds
-suitable primarily for clients with longer investment time horizons.
-make no specific attempt to preserve capital
-average return performance of equity funds parallels that of the TSX Index - correct answer
✔✔Equity Mutual Funds
-standard equity
-equity growth
-equity index - correct answer ✔✔Canadian Equity Mutual Fund Categories
-seeks to earn some combination of dividend income and capital gains from investment in
Canadian common stocks.
-this objective appears to be similar to that of a preferred dividend fund. The difference
between the two is that an equity fund usually has a much stronger capital gains focus. - correct
answer ✔✔Standard Equity Fund
-hold common shares of large capitalization firms with strong dividend records. The capital
appreciation potential for this type of shares is, however, limited. - correct answer
✔✔Conservative Equity Funds
, -the investment objective of an equity growth fund is capital gains. Some dividend income may
be earned, but probably not much (these companies tend to keep their profits as retained
earnings, reinvesting to continue to grow)
-seek out smaller firms that do not have the financial ability to pay dividends. They need all the
funds they can obtain in order to grow. - correct answer ✔✔Equity Growth Funds
-smaller, growing firms have a greater potential for failure
-these growth firms often trade at very high price/earnings ratios
-share price volatility - correct answer ✔✔Equity Growth Fund Risks
-an aggressive growth fund that invests exclusively in smaller, lesser-known firms that are
expected to grow at a faster rate than normal growth companies
-"Small cap" stands for small capitalization, which means that the market value of the equity of
the firm is relatively low, probably because the firm itself is small.
-rarely pays dividends.
-aggressive and riskier than regular growth funds.
-return is expected to be primarily from capital gains.
-typically firms making and marketing new types of products for which market demand may be
difficult to determine
-a type of specialty fund - correct answer ✔✔Small Cap Funds
-Market Capitalization = Number of shares outstanding × Current Market Share Price - correct
answer ✔✔Market Capitalization Calculation
-seek out small, growth-oriented firms that have higher market capitalizations than small cap
funds - correct answer ✔✔Conservative Equity Growth Funds
-has the goal of replicating the movements of a market index.
