Glossary
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12b-1 Fees: fees charged for the expenses of selling, marketing, and distributing a mutual fund. 12b-1 fees include advertising costs such as printing materials and mailing prospectuses. They also include the salaries of the sales people. 12b-1 fees do not include transaction costs. Many advisor-sold 529 plans attach similar fees.
529 Plan: a college savings plan that gives tax benefits to both the contributor and the recipient. It was authorized in 2003 by the IRS (Section 529 of the Internal Revenue Code) to encourage and help people save for college. The big advantage of a 529 plan is that it allows earnings in the account to grow tax-free and to be withdrawn tax-free at the federal level.
A
A shares: mutual fund shares that are sold at a public offering price, NAV + front-end sales charge. The sales charge can be reduced through breakpoints. They may include a 12b-1 fee, but it is usually lower than for B or C shares. A shares are most appropriate for larger accounts that can achieve breakpoints.
Account Statement: a report sent to a customer that describes their positions, money balances, and account activity for the preceding quarterly period. A firm is required to send account statements at least once per quarter and must send them monthly if there has been any activity in the account.
Accredited Investors: a type of investor that may participate in Regulation D offerings without restrictions. Accredited investors include:
- • A large institutional investor
- • Corporations, trusts, partnerships with more than $5 million in assets
- • Issuer’s directors, executive officers, and general partners
- • Individuals with net worth more than $1 million, alone or with a spouse, not including home
- • Individuals with income of $200,000 within the last 2 years, or $300,000 with spouse
- • Any firm where all owners are accredited investors (venture capital firms)
Acc