knowledge topics
Investment Trusts
KNOWLEDGE EXPECTED OF: Both CFP® Professionals and QAFPTM Professionals
- Define an investment trust.
- Identify that investment trusts require a securities license in order for an individual to act in furtherance of a trade.
- Identify that investment trusts must be approved by the securities administrator of the province/territory in which they are traded.
- Explain how each of the factors may impact the suitability of an investment trust, such as:
- Time horizon
- Volatility
- Risk tolerance
- Investment objective
- Financial situation
- Personal situation
- Income
- Liquidity
- Control
- Tax impact
- Investment management process
- Economic cycle
- Cost
- Historical performance
- Performance expectations
- Evaluate how each of the factors may impact the suitability of an investment trust.
- Explain for whom an investment trust may be suitable.
- Identify the structure that an investment trust may have.
- Trust
- Corporation
- Identify that investment trusts are offered via prospectus, on a stock exchange.
- Explain fees associated with investment trusts, such as:
- Management fees
- Commissions
- Explain types of investment trusts, such as:
- Real estate income trusts
- Business trusts
- Define the Net Asset Value Per Share (NAVPS) for an investment trust.
- Interpret the Net Asset Value Per Share (NAVPS) for an investment trust.
- Explain types of income that may be distributed by an investment trust, such as:
- Interest
- Dividends
- Capital gains
- Explain how income earned by an investment trust is handled when distributed to unitholders of the investment trust.
- For Canadian real estate income trusts
- For non-Canadian real estate income trusts
- For business trusts
- Explain the impact of a distribution from an investment trust on the net asset value per share (NAVPS).
- Explain the impact of reinvested distributions from an investment trust on adjusted cost basis.
- Interpret the return for an investment trust.
- Explain the tax impact (based on asset location) of an investment trust.
- When distributions are received due to trading activity in the pool of investments
- Upon disposition of the income trust
- Estimate the tax impact (based on asset location) of an investment trust.
- When distributions are received due to trading activity in the pool of investments
- Upon disposition of the income trust
- Explain that the return of an investment trust may be presented gross of fees before expenses have been deducted.
Glossary of Verbs (mouse over to see definition)
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Define
To state exactly the meaning of
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Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
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Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
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Compare
To note the similarities and differences between two or more things
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Estimate
To determine an approximate value for
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Calculate
To find the value using mathematics
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Convert
To change from one form or purpose to another
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Evaluate
To reach a conclusion or make a judgement through careful study
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Interpret
To give the meaning of / to construe or understand / to translate orally
Read more about the Taxonomy used in the FP-BoK
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