travel related mutual funds

Fidelity® Select Leisure Portfolio Overview

• # 2 in Consumer Cyclical

About FDLSX

The investment seeks capital appreciation. The fund invests primarily in common stocks. It invests at least 80% of assets in securities of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. The fund invests in domestic and foreign issuers. It uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions to select investments. The fund is non-diversified.

U.S. News evaluated 20 Consumer Cyclical Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

FDLSX is listed as:

Scorecard 8.

Trailing Total Returns Monthly

Updated 10/31/23

Performance

The fund has returned 9.54 percent over the past year, 11.92 percent over the past three years, 10.94 percent over the past five years, and 10.19 percent over the past decade.

Fees are Below Average compared to funds in the same category. Fidelity® Select Leisure Portfolio has an expense ratio of 0.74 percent.

Net Expense Ratio

Category Average: 1.26%*

Category Average: 0.65%*

Risk is Above Average compared to funds in the same category according to Morningstar.

Volatility Measurements

Volitility measures reflect the uncertainty or risk of change in a security`s value.

Quotes delayed at least 15 minutes. Market data provided by Xignite. Fund data provided by Xignite and Morningstar . See Disclaimer . Contact U.S. News Best Funds . Use of this website constitutes acceptance of the Best Funds Terms and Conditions of Use .

Fidelity® Select Semiconductors Port

positive 48.32%

Fidelity Advisor® Semiconductors Fund

positive 46.87%

Fidelity® Select Communication Svcs Port

positive 34.88%

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Travel ETFs List

Travel ETFs seek to provide investors with access to exposure to several aspects of the travel niche of the consumer discretionary market. These may include technology-based companies focused on booking or ride sharing, while others may focus more on airline, hotel or cruise services.

Click on the tabs below to see more information on Travel ETFs, including historical performance, dividends, holdings, expense ratios, technical indicators, analysts reports and more. Click on an ETF ticker or name to go to its detail page, for in-depth news, financial data and graphs. By default the list is ordered by descending total market capitalization.

As of 06/12/24

ETF Overview

Etf returns, etf fund flows, etf expenses, etf dividends, etf holdings, etf tax rates, etf technicals, etf analysis, etfs: etf database realtime ratings.

• Realtime Ratings

This is a list of all Travel ETFs traded in the USA which are currently tagged by ETF Database. Please note that the list may not contain newly issued ETFs. If you’re looking for a more simplified way to browse and compare ETFs, you may want to visit our ETF Database Categories, which categorize every ETF in a single “best fit” category.

This page includes historical return information for all Travel ETFs listed on U.S. exchanges that are currently tracked by ETF Database.

The table below includes fund flow data for all U.S. listed Travel ETFs. Total fund flow is the capital inflow into an ETF minus the capital outflow from the ETF for a particular time period. Fund Flows in millions of U.S. Dollars.

The following table includes expense data and other descriptive information for all Travel ETFs listed on U.S. exchanges that are currently tracked by ETF Database. In addition to expense ratio and issuer information, this table displays platforms that offer commission-free trading for certain ETFs.

Clicking on any of the links in the table below will provide additional descriptive and quantitative information on Travel ETFs.

The following table includes ESG Scores and other descriptive information for all Travel ETFs listed on U.S. exchanges that are currently tracked by ETF Database. Easily browse and evaluate ETFs by visiting our Responsible Investing themes section and find ETFs that map to various environmental, social and governance themes.

This page includes historical dividend information for all Travel listed on U.S. exchanges that are currently tracked by ETF Database. Note that certain ETFs may not make dividend payments, and as such some of the information below may not be meaningful.

The table below includes basic holdings data for all U.S. listed Travel ETFs that are currently tagged by ETF Database. The table below includes the number of holdings for each ETF and the percentage of assets that the top ten assets make up, if applicable. For more detailed holdings information for any ETF , click on the link in the right column.

The following table includes certain tax information for all Travel ETFs listed on U.S. exchanges that are currently tracked by ETF Database, including applicable short-term and long-term capital gains rates and the tax form on which gains or losses in each ETF will be reported.

This page contains certain technical information for all Travel ETFs that are listed on U.S. exchanges and tracked by ETF Database. Note that the table below only includes limited technical indicators; click on the “View” link in the far right column for each ETF to see an expanded display of the product’s technicals.

This page provides links to various analyses for all Travel ETFs that are listed on U.S. exchanges and tracked by ETF Database. The links in the table below will guide you to various analytical resources for the relevant ETF , including an X-ray of holdings, official fund fact sheet, or objective analyst report.

This page provides ETF Database Ratings for all Travel ETFs that are listed on U.S. exchanges and tracked by ETF Database. The ETF Database Ratings are transparent, quant-based evaluations of ETFs relative to other products in the same ETF Database Category. As such, it should be noted that this page may include ETFs from multiple ETF Database Categories.

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Harvest Travel & Leisure Index ETF

Access The Long-Term Growth Prospects Of Travel

The Harvest Travel & Leisure Index ETF provides investors with exposure to the growth trends in the travel industry driven by structural, demographic forces. This ETF offers diversified access to the airlines, cruise lines, hotels, and online booking services we believe are set for long-term growth.

As at 2024/06/11

Updated Daily

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• DISTRIBUTIONS

Semi-annually

Inception date.

• PERFORMANCE

Portfolio Analysis ‡

As at May 31, 2024

Sub-Sector Allocation

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Annualized Performance

Calendar Year Performance †

Cumulative Growth $10,000 Invested

(NAV pricing)

The “Growth of $10,000 invested” chart shows the final value of a hypothetical $10,000 investment in securities in this class/series of the fund as at the end of the investment period indicated and is not intended to reflect future values or returns on investment in such securities.

TRVL Historical Daily Prices (CLICK HERE)

Distributions

** Notional non-cash distributions are paid annually (if any). There is no impact on net asset value per unit. The notional distribution is added to the cost base of the ETF and is taxable if not held in a registered account (RSP/RIF/TFSA and RESP).

2023 Annual Tax Information can be accessed here .

TRVL Historical Documents (CLICK HERE)

Investment Goal

The Harvest Travel & Leisure Index ETF provides investors access to a diversified portfolio of large capitalization companies that own or operate travel related businesses. Harvest believes that prior to the pandemic, global travel growth had structural long-term drivers and, in the shorter term, these companies stand to benefit from a resumption in travel following global shutdowns.

The Harvest Travel & Leisure Index ETF has been designed to replicate, to the extent possible, the performance of the Solactive Travel & Leisure Index GTR (the “Index”), net of expenses. The ETF intends to invest in and hold the Constituent Securities of the Index in the same proportion as they are reflected in the Index.

Benefits of investing in TRVL

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Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing.The indicated rates of return are the historical annual compounded total returns (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.The funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax investment and all other decisions should be made with guidance from a qualified professional.

Solactive Indices The financial instrument is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade name or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG northe licensing of the Index or Index trade name for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.

* Represents aggregate AUM of all classes denominated in Canadian dollars.

† The first year of Calendar Year Performance presents the rate of return from commencement of operations to December 31 of that year.

‡ Source: Bloomberg. Average statistics calculated based on portfolio weighted average. Dividend yield (gross) based on Bloomberg indicated 12 month yield of portfolios positions and does not represent the distribution yield paid to investors. The above information is for illustrative purposes only, is estimated and unaudited.

Fundata FundGrade is an independent and objective investment fund rating system that was developed to recognize Fund Managers who have achieved superior risk adjusted returns. The FundGrade rating system assigns a letter grade to approximately 20,000 investment funds each month, providing a quick and easy tool to identify top performing funds.

FundGrade ratings are published on the 7th business day of each month and distributed to numerous well known industry distribution channels, including www.fundata.com and www.fundlibrary.com . For a detailed explanation as to how FundGrade is calculated, please click here .

Should you have any questions about the FundGrade rating system or experience problems with the above links, please contact [email protected] .

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News & Insights

Travel & Leisure ETFs Ready to Bloom in Spring

April 06, 2021 — 11:10 am EDT

Written by Sweta Killa for Zacks  ->

With rapid COVID-19 vaccinations, a larger number of Americans are expected to travel this spring. The bouts of latest data coupled with positive news in the space indicate that travel demand is picking up.   This is especially true considering the latest data from Transportation Security Administration, which shows that in the United States, more than one million passengers have consistently passed through a Transportation Security Administration (TSA) screening checkpoint in a day since mid-March. In fact, U.S. air travel set a pandemic-era record with more than 1.5 million people screened during the Easter weekend, a record since March 2020. The announcement from the Centers for Disease Control and Prevention (CDC) that “those who are fully vaccinated against the coronavirus can safely travel in the U.S. without having to quarantine or get tested” also fueled optimism over travel demand. Per CDC, though fully vaccinated travelers are less likely to get and spread COVID-19, they must adhere to guidelines put in place by their travel destination such as potential testing requirements. With enough supply of vaccines, President Joe Biden recently doubled the country’s coronavirus vaccination target to 200 million shots in his first 100 days in office. Biden has vowed to have enough vaccine supply to cover every American by the end of May. About 14% of the total U.S. population has been fully vaccinated, according to data from the Centers for Disease Control and Prevention. Over 130 million vaccine doses have been administered. Per NPR's vaccine tracker, 16.9% of the U.S. population is fully vaccinated, and 30% has had at least one dose. Researchers estimate that 70-85% of the country would need to have immunity for COVID-19 to stop spreading through communities (read: Travel ETFs Flying High on Vaccine Optimism ). According to data compiled by Bloomberg and The New York Times, the United States has vaccinated more people than any other country, with more than 40% of adults and 75% of more senior people having received at least one dose of COVID-19 vaccine. In total, the country has doled out more than 165 million doses as of Apr 4, and is most closely followed by China (138 million), the European Union (79 million), India (74.4 million) and the United Kingdom (36.6 million). The United States has continued to see its vaccine rollout speed up for months, setting a one-day record of nearly 4.1 million shots on Apr 3. The average number of doses administered each day has risen to 3.08 million over the past week, leaving the United States second only to China (4.89 million), which has a population roughly four times larger in size. Given the speedy ramp up in vaccinations, ETFs that track travel and leisure stocks are set to surge this spring. Below we have highlighted them in detail below: U.S. Global Jets ETF JETS This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 40 securities and charges investors 60 bps in annual fees. The fund has gathered $4 billion in its asset base while seeing a solid trading volume of more than 7 million shares a day. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Air Travel Demand Nears 1-Year High: ETFs to Fly High ). ETFMG Travel Tech ETF AWAY This is the first ETF that offers direct access to the technology-focused global travel and tourism industry. It follows the Prime Travel Technology Index, charging investors 75 bps in annual fees. The fund holds 31 stocks in its basket with travel bookings & reservations companies accounting for 48.6% of assets, followed by 20.1% in travel advice companies and 17.2% share in travel price comparison firms. AWAY has accumulated $317.3 million in its asset base and trades in an average daily volume of 458,000 shares. SPDR S&P Transportation ETF XTN This fund targets the broad transportation sector and tracks the S&P Transportation Select Industry Index. It holds 41 stocks in its basket with 33% of the portfolio dominated by trucking and airlines. Air freight and logistics take 25.8% and 22.8% share, respectively. With AUM of $734.1 million, the fund charges 35 bps in fees per year from investors and trades in a good volume of around 91,000 shares a day. It has a Zacks ETF Rank #2 (Buy) with a High risk outlook. Invesco Dynamic Leisure and Entertainment ETF PEJ This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 32 stocks. From an industry look, broadcasting, and restaurants & bars take the largest share at 24.6% and 23.8%, respectively, while casinos & gaming, and leisure & recreation round off the next two spots with double-digit exposure. The ETF has amassed $1.9 billion in its asset base and trades in an average daily volume of 860,000 shares. PEJ charges 63 bps in annual fees and has a Zacks ETF Rank #3 with a High risk outlook (read: 4 Sector ETFs to Sizzle on Robust March Jobs Report ).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Best airline ETFs and top transportation funds

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As tourism begins to pick back up for the summer travel season, the travel industry is hoping for strong results despite ongoing challenges with inflation and increasing fuel prices. The potential for a strong travel economy has prompted some investors to consider getting behind airlines, cruise lines and other transportation-related stocks once again. One way to get in on the action is through exchange-traded funds (ETFs).

Transportation exchange-traded funds primarily invest in companies involved in travel services and the industries that support them. These companies include airlines, railroads, trucking and vehicle manufacturers.

Through ETFs, investors get access to a basket of companies with a similar profile – in this case, transportation-related services. ETFs are convenient because they provide instant diversification at a low cost. This added benefit is appealing to all types of investors, especially when picking stocks requires a certain level of investment knowledge.

Top airline and transportation ETFs

Below are some of the most widely held airline and transportation ETFs on the market. (Data is as of April 1, 2024)

U.S. Global Jets ETF (JETS)

JETS invests in a wide range of airline companies, including aircraft manufacturers and airport operators. The fund, issued by US Global Investors, selects both domestic and international companies with varying degrees of market capitalization. This ETF is a pure-play on the airline industry.

• Five-year returns (annualized) : –6.4 percent
• Top holdings : American Airlines (AAL),  Delta Airlines (DAL), United Airlines (UAL) and Southwest Airlines (LUV)
• Expense ratio : 0.60 percent
• Assets under management : ~$1.3 billion

iShares Transportation Average ETF (IYT)

IYT invests in U.S. airline, railroad and trucking companies. The fund tracks the performance of 20 transportation stocks that make up the S&P Transportation Select Industry FMC Capped Index.

• Five-year returns (annualized) : 9.1 percent
• Top holdings : Uber Technologies (UBER), Union Pacific Corp (UNP), United Parcel Service (UPS) and CSX Corp (CSX)
• Expense ratio : 0.40 percent
• Assets under management : ~$979.7 million

First Trust Nasdaq Transportation ETF (FTXR)

FTXR invests in U.S. companies involved in car manufacturing, airports and airlines, trucking and railroads. The fund tracks 30 transportation companies that are part of the Nasdaq US Smart Transportation Index. The fund launched in September 2016.

• Five-year returns (annualized) : 7.6 percent
• Top holdings : FedEx Corp (FDX), Ford Motor (F), General Motors (GM) and Tesla (TSLA).
• Assets under management : ~$40.1 million

SPDR S&P Transportation ETF (XTN)

XTN has about a 40 percent allocation to airline and air freight companies, with the remainder invested in railroads, marine ports and services, as well as trucking. The fund from State Street Global Advisors tracks the performance of the S&P Transportation Select Industry Index.

• Five-year returns (annualized) : 7.4 percent
• Top holdings : Alaska Air Group (ALK), FedEx Corp (FDX), Delta Air Lines (DAL) and United Airlines (UAL).
• Expense ratio : 0.35 percent
• Assets under management : ~$193.1 million

Amplify Travel Tech ETF (AWAY)

Although not a traditional transportation ETF, AWAY invests in technology-focused travel and tourism companies that benefit the travel industry. The fund tracks the performance of 30 companies involved in travel booking and reservations and ride-sharing applications, as well as travel advice. The fund launched in February 2020.

• Three-year returns (annualized) : -13.6 percent
• Top holdings : Lyft (LYFT), Airbnb (ABNB), Trainline PLC (TRN.L)  and Booking Holdings Inc (BKNG)
• Expense ratio : 0.75 percent
• Assets under management : ~$89.0 million

How to invest in airline ETFs

Depending on your financial goals, asset allocation and risk tolerance, there are various strategies for investing in airline and transportation stocks. Your level of financial knowledge and engagement with your investments also plays a factor.

After you determine your comfort level and narrow your options, the key features to consider are:

• Fund performance : Numbers don’t lie. So while you do your research, take a look at a fund’s short-, mid- and long-term performance.
• Trading volume : The more liquid a fund is, the easier it will be to buy and sell. Look at how average trading volume compares to similar ETFs.
• ETF top holdings : By law, fund companies need to disclose their holdings, which is beneficial for investors as it provides transparency. It’s also helpful to decide whether those investments line up with your financial goals. When looking at holdings, pay attention to the portfolio weightings.
• Fund flows : Many investors track how much capital flows in and out of funds, often weekly and monthly. Any long-term trends in fund flows are valuable as they paint a picture of investors’ sentiment.
• Expense ratios and fees : By default, most ETF providers charge competitive fees. But even at relatively low levels, those fees can add up, so make sure to compare apples-to-apples and read the fine print.
• Assets under management (AUM) : Many investors use this figure as a vote of confidence to assess other investors’ engagement with a particular ETF. Along with AUM figures, it might be helpful to check the longevity of the fund.
• Fund issuer : Brands are powerful, and that’s no different in the ETF space. Some investors feel comfortable only investing in large asset managers, while others see the value in newcomers. Decide what works for you and your financial needs.

Use the factors above as a guide to discovering your next transportation ETF.

While discretionary travel was on pause during the pandemic, the travel industry is back.  Airline and transportation ETFs can be a gateway to riding any lift in the sector.

— Bankrate’s Georgina Tzanetos contributed to a recent update of this story.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

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The Best (and Only) Airline ETF

JETS is the best (and only) airline ETF

For investors optimistic that the airline industry will keep rebounding from its pandemic-era travails, one airline ETF provides a way for broad exposure without tying their investment to a single carrier.

Key Takeaways

• Airline stocks have underperformed the broader market over the past year.
• The best (and only) airline ETF is JETS.
• The fund's top holdings are United Airlines Holding Inc., American Airlines Group Inc., and Delta Air Lines Inc.

The only option when it comes to ETFs focused on the airline industry is the U.S. Global Jets ETF ( JETS ). The airline industry has underperformed compared to the S&P 500 Index in the past year. The benchmark S&P 500 Airlines Industry Index has fallen 24% compared with a 19% drop in the S&P 500 Index as of Nov. 3. Note that this index includes only U.S. companies and isn't a perfect metric for JETS, which has a global focus. JETS provides diversified exposure to the air travel industry, including aircraft manufacturers, airports, terminal services, and airlines.

Airline companies have staged a profit and revenue rebound amid a recovery of travel worldwide in the past year, though the industry's outlook is clouded by a slowing economy and high jet fuel prices.

Here's a closer look at JETS. All of the data below are also as of Nov. 3.

U.S. Global Jets ETF (JETS)

• Performance Over One Year: -25.2%
• Expense Ratio: 0.60%
• Annual Dividend Yield: 0.04%
• Three-Month Average Daily Volume: 6,359,474
• Assets Under Management: $2.1 billion
• Inception Date: April 28, 2015
• Issuer: U.S. Global Investors

JETS is the only pure play airline ETF. As of Sept. 30, the date of its most recent fact sheet, this fund allocates three quarters of its portfolio to airlines and companies involved in the aviation industry (aircraft manufacturers, terminal services companies, and airports), with the remaining quarter invested in companies involved in transportation infrastructure, internet, transportation, and commercial services. More than three quarters of the fund's holdings are securities domiciled in the U.S., with smaller allocations to companies in Canada, Europe, and Asia.

Although JETS is a multi-cap ETF , it is weighted predominantly toward large-cap and mid-cap companies, small-cap companies make up just over 8% of the portfolio. Overall, its investment strategy is to track the U.S. Global Jets Index, although the fund doesn't guarantee 100% replication and may invest in securities not included in the index. Below, we look at the top 10 holdings in this fund.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

YCharts. “ Financial Data .”

VettaFi. “ ETF Screener .”

CNBC. " High inflation has many Americans tweaking their holiday travel plans ."

U.S. Global ETFs. “ JETS Fact Sheet ," Pages 1-2.

VettaFi. “ U.S. Global Jets ETF .”

U.S. Global ETFs. “ U.S. Global Jets ETF — Overview .”

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JRNY ALPS Global Travel Beneficiaries ETF

Alps global travel beneficiaries etf.

ALPS Global Travel Beneficiaries ETF (JRNY)

• Holistic and diversified exposure
• Quality and growth overlay
• Artificial intelligence-assisted screening

   Investment Objective

The ALPS Global Travel Beneficiaries ETF (JRNY) seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network Global Travel Index (TRAVEL).

   Strategy

The ALPS Global Travel Beneficiaries ETF (JRNY) invests in companies principally engaged in, or deriving significant revenue from, the global travel industry, including four segments: Booking & Rental Agencies, Airlines & Airport Services, Hotels, Casinos & Cruise Lines and Global Travel Beneficiaries.

Fund Details

Performance and fees, calendar year.

Performance data quoted represents past performance. Past performance is no guarantee of future results so that shares, when redeemed, may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. For current month-end performance call 1-866-759-5679 or visit www.alpsfunds.com . Performance includes reinvested distributions and capital gains. Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. Fund inception date: 09/08/2021 S-Network Global Travel Index: a rules-based methodology developed by S-Network Global Indexes Inc., which is designed to identify exchange-traded stocks of companies that are materially engaged in the global travel industry, including four segments: Airlines & Airport Services; Hotels, Casinos, Cruise Lines; Booking & Rental Agencies; and Ancillary Beneficiaries, which is based on the research of the Index Provider.  Morningstar Global Markets Index: measures the performance of the stocks located in the developed and emerging countries across the world. Stocks in the index are weighted by their float capital, which removes corporate cross ownership, government holdings and other locked-in shares. One may not invest directly in an index.

$10,000 Hypothetical Investment

The chart above represents the total return historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance is no guarantee of future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

Facts and Characteristics

Fund pricing.

• Last 5 Days

Trading Characteristics

Fund yields, sector breakdown, - top five holdings, geography breakdown, fund holdings, top 10 holdings, full holdings, distributions, fund distributions, current year, previous years.

As of 03/31/2024

Funds Related to JRNY

ALPS Clean Energy ETF

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Learn More About DTEC

ALPS Medical Breakthroughs ETF

Learn More About SBIO

Fund Disclosure

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemable. Diversification does not eliminate the risk of experiencing investment losses. The Fund is subject to investment and operational risks associated with the travel industry. Companies engaged in the travel industry may be adversely affected by a downturn in economic conditions that can result in decreased demand for travel. These companies may be significantly impacted by the performance of the overall economy, changing consumer tastes and demands, consumer discretionary income levels, intense competition, technological developments, and government regulation. Additionally, uncertainty regarding international travel and other events such as political or social violence, terrorist attacks, and biological outbreaks may significantly impact the travel and vacation industry.  The Fund employs a “passive management” - or indexing - investment approach and seeks investment results that correspond (before fees and expenses) generally to the performance of its underlying index. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell or buy a security unless that security is removed from or added to the underlying index, respectively. The Fund is not sponsored, endorsed, sold or promoted by Morningstar, Inc. or any of its affiliates (all such entities, collectively, “Morningstar Entities”). The Morningstar Entities make no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in mutual funds generally or in the Fund in particular or the ability of the Morningstar Index Data to track general mutual fund market performance. THE MORNINGSTAR ENTITIES DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE MORNINGSTAR INDEX DATA OR ANY DATA INCLUDED THEREIN AND MORNINGSTAR ENTITIES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. ALPS Advisors, Inc., registered investment adviser with the SEC, is the investment adviser to the Fund. ALPS Advisors, Inc. is affiliated with ALPS Portfolio Solutions Distributor, Inc. ALPS Portfolio Solutions Distributor, Inc. is the distributor for the Fund.

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By Vikram Barhat on May 17, 2023 Estimated reading time: 6 minutes

Ready for take-off: Is now a good time to invest in a travel ETF?

Sponsored By

Harvest ETFs

After a tough few years for the travel industry, people are spending big on vacations again. Here’s a look at opportunities for investors.

Travel is making a comeback. The sector was hit hard by the COVID-19 pandemic, with many hospitality, tourism and transportation companies losing money or closing down. Now, as the world emerges from the global health crisis, the travel sector’s future is looking bright, a view supported by improved economic indicators specific to the sector.

According to recent data from the United Nations World Tourism Organization (UNWTO) , over 900 million tourists travelled internationally in 2022—double the number recorded in 2021, though still just 63% of pre-pandemic levels. For 2023, the UNWTO forecasts further recovery, to between 80% and 95% of pre-pandemic levels. 

Travel and tourism is one of the largest sectors of the global economy : Prior to the pandemic, in 2019, it contributed $9.63 trillion to global GDP (all figures in U.S. dollars). In 2020, with much of the world under lockdown, that figure fell to $1 trillion, but it rebounded to $5.81 trillion in 2021—and it’s expected to keep rising.

Signs of growth: Is there money to be made in travel industry stocks?

Things are looking up for the travel sector, for several reasons. The biggest one is that people are returning to their pre-pandemic travel patterns—even cutting back on other types of spending in order to splurge on holidays, according to RBC’s Consumer Spending Tracker . Many of us are also in the mindset of “revenge travel,” booking big bucket-list trips to make up for lost time.

Travel industry observers point out other trends that could fuel the sector’s long-term growth:

• Baby boomer travel boom: As baby boomers—the generation born between 1946 and 1965—reach retirement age, they have more time and money to travel. Boomers are expected to travel extensively in the coming years.
• Demand for new experiences: Many Canadians, especially Millennials and Gen Z, are picking “experiences” over “things,” splurging on flights and hotels while spending less on goods, groceries, restaurants and new cars.
• The rise of travel tech: Technology is making travel planning more convenient. From booking flights and hotels to finding attractions, travellers can plan their entire trip on their smartphones. That’s helping to fuel the demand for personalized travel and customized itineraries.
• Growing LGBTQ2S+ market: The lucrative LGBTQ2S+ travel market has grown rapidly in recent years. Pre-pandemic, in 2018, LGBTQ2S+ travellers spent an estimated $218 billion , and they’ve become a key demographic in the industry.
• Exploring the great outdoors: Months of indoor confinement and lockdowns have given rise to strong demand for outdoor activities and nature-based tourism, creating a new source of revenue generation for travel companies.
• Destination weddings are back: Micro weddings are out and destination weddings are in, with market value expected to reach $54 billion by 2027.
• Work from anywhere: Flexible work arrangements have allowed more Canadians to relocate for a sun-soaked “workcation” or an extended stay abroad—and travel companies are catering to this new crop of digital nomads.

How to invest in travel companies

With the worst of the pandemic in the rear-view mirror, the industry is expected to rebound, offering investors opportunities to invest in quality names at “discounted” prices.

Investors could pick individual stocks of leading industry players or buy into mutual funds that package names from across travel, tourism and peripheral industries. However, a more cost-effective, lower-risk option could be to invest in travel-themed exchange-traded funds (ETFs), composed of a basket of leisure and business travel companies from a wide spectrum of industries.

One such ETF is the Harvest Travel & Leisure Index ETF (TRVL). This fund holds a diversified portfolio of large-cap companies that own or operate travel-related businesses, including airlines, cruise lines, hotels and booking platforms. TRVL offers exposure to a range of growth opportunities within the sector.

“We’ve seen the positive tailwinds in travel and leisure since before the pandemic, but we noticed that many Canadians who wanted travel exposure just bought a few airline stocks and called it a day,” says Paul MacDonald, chief investment officer and portfolio manager at Harvest ETFs. “TRVL was the very first ETF to offer a diverse array of travel companies to Canadian investors in a single ETF. It invests in airlines, cruise lines, hotels and resorts, casinos and the online booking companies like Airbnb that are opening travel up to so many people. These companies are all categorized in different sectors, but they share the same tailwind: People are travelling more.”

An index ETF, TRVL invests in 30 large-cap travel and leisure companies in North America, including familiar names like Hilton, Marriott International, Airbnb, Carnival, Air Canada and Delta Air Lines, among others.

Harvest recently launched another travel-focused ETF, the Harvest Travel & Leisure Income ETF (TRVI) , which also holds the same diversified portfolio of large-cap travel companies, with the addition of monthly income.

As travel makes a strong comeback from the depths of the pandemic, these companies are well positioned to reap the benefit of the sector’s return to profitability.

Income generation in a travel ETF

Like many other Harvest equity income ETFs, TRVI employs a covered call writing strategy. This involves selling call options on the securities within the funds to generate higher income—a feature that may appeal especially to investors who are saving for retirement and concerned about ongoing economic uncertainty and stock market volatility.

What is a call option?

A call option is a contract that lets the buyer decide if they want to buy a stock from the seller at a certain price within a certain time period. The buyer pays a fee, called a premium, for this option, and the seller keeps the fee no matter what happens.

Covered call ETFs like TRVI offer the potential for increased cash flow and reduced portfolio volatility. Moreover, writing covered calls can be a tax-smart investment strategy, as the cash flow generated is considered capital gains, which are taxed at lower rates compared to dividend income. (Learn more about call option ETFs .)

“TRVI captures the same portfolio as TRVL but adds an income component that we saw many investors seeking,” says MacDonald. “Because we use an active call option strategy, we can actually monetize any short-term volatility in the travel space while giving investors long-term exposure to the growth prospects we see for travel.”

Investors should note that the income from covered call options sometimes means less market upside opportunity: If the underlying stock rises in value, the option holder will probably exercise their right to buy it, and the ETF will own less of it. For this reason, Harvest ETFs limits option writing to a maximum of 33% of its portfolio holdings.

Should you invest in a travel ETF?

Before buying a travel ETF or any other investment, it’s important to consider how it will fit into your overall investing strategy. A travel ETF may be a good fit for your portfolio if you’re able to take on a certain level of risk and want exposure to the travel industry rebound.

In addition to the appeal of investing in blue-chip travel and hospitality firms, there are several other benefits to consider, including diversification across a wider range of companies than you would get from buying individual stocks, potentially lower fees than investing in stocks or mutual funds, and higher income yields through covered call writing.

Read more about ETFs :

• 3 ways to recession-proof your RRIF
• Get paid to wait—is now an opportunity to invest in tech stocks?
• What does high inflation mean for your retirement savings?
• Best in show: How to find and invest in market leaders

This article is sponsored.

It is a paid article that may feature a partner’s product or service. It was produced by MoneySense’s editorial team with input from the partner.

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Travel & leisure etfs jump on vaccine optimism.

The development in the potential coronavirus vaccine has infused strong optimism into the broader markets. This is especially true, as Moderna Inc. MRNA has inched closer to a vaccine following promising early data (read: Moderna Inches Closer to Coronavirus Vaccine: ETFs to Shine). The data demonstrates that vaccination with mRNA-1273 elicits a robust immune response across all dose levels as it produced neutralizing antibodies in all 45 patients. In the trial, each participant received a 25, 100 or 250 microgram dose, with 15 people in each dose group. Participants received two doses of the potential vaccine. The positive result has pushed the vaccine into the phase 3 trial, which is slated to start on Jul 27. The trial will enroll 30,000 participants across 87 locations, according to ClinicalTrials.gov. Participants in the experimental arm will receive a 100 microgram dose of the potential vaccine on the first day and another dose 29 days later. Added to the enthusiasm, the Federal Reserve’s Beige Book survey showed that U.S. businesses saw an uptick in activity in the beginning of July as states eased restrictions to contain the novel coronavirus pandemic. Market Impact Wall Street saw smooth trading in the Jul 15 trading session with the S&P 500 climbing nearly 1% and Dow Jones gaining 0.5%. While most of the corners were in green, investors rushed to the beaten-down sectors, including cruise lines, airlines, hotel and casino operators, and travel and entertainment-booking companies. In fact, 20 companies in the S&P 500 gained more than 9% on the day, with a dozen of those in travel, entertainment, and hospitality businesses. The three biggest winners were cruise line companies — Royal Caribbean RCL, Norwegian Cruise Line Holdings NCLH, and Carnival Corp CCL — that gained 16% or more. In the travel industry, Liberty TripAdvisor LTRPA jumped 13.5% while Park Hotels & Resorts PK, TripAdvisor TRIP, and Marriott International MAR gained 12.9%, 9.1% and 7.9%, respectively. Further, the five airlines in the S&P 500 Index rose at least 7.5% with American Airlines AAL and United Airlines UAL leading the way higher, jumping 16% and 14.6%, respectively. ETFs That Gained Given this, ETFs that track stocks in these sectors jumped the most on the day. Below we have highlighted them in detail below: U.S. Global Jets ETF JETS – Up 7.7% This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 40 securities and charges investors 60 bps in annual fees. The fund has gathered $1.2 billion in its asset base while seeing solid trading volume of nearly 3.7 million shares a day. It has a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: Top & Flop Zones of First-Half 2020 and Their ETFs). Invesco Dynamic Leisure and Entertainment ETF PEJ – Up 5.4% This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 32 stocks. From an industry look, broadcasting and airlines take the largest share at 26.2% and 21.2%, respectively, while restaurants & bars round off the next spot with double-digit exposure. The ETF has amassed $232.9 million in its asset base and trades in average daily volume of 209,000 shares. PEJ charges 63 bps in annual fees and has a Zacks ETF Rank #4 with a High risk outlook (read: Jobs Market Strengthening Fast: 4 Sector ETFs & Stocks to Buy). ETFMG Travel Tech ETF AWAY – Up 4.4% This is the first ETF that offers direct access to the technology-focused global travel and tourism industry. It follows the Prime Travel Technology Index, charging investors 75 bps in annual fees. The fund holds 29 stocks in its basket with travel bookings & reservations companies accounting for 45% of assets, followed by 19.3% share in riding sharing & hailing firms. AWAY has accumulated $8.3 million in its asset base and trades in average daily volume of 13,000 shares. SPDR S&P Transportation ETF XTN – Up 4.3% This fund targets the broad transportation sector and tracks the S&P Transportation Select Industry Index. It holds 42 stocks in its basket with 36% of the portfolio is dominated by trucking and air freight & logistics, and airlines take 25.2% and 22% share, respectively. With AUM of $195.2 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 46,000 shares a day. It has a Zacks ETF Rank #4 with a High risk outlook. VanEck Vectors Gaming ETF BJK – Up 4% This ETF provides investors with exposure to companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology and gaming equipment. It follows the MVIS Global Gaming Index, holding 42 securities in its basket. The product has AUM of $46.1 million and average daily volume of roughly 31,000 shares. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Click to get this free report Moderna, Inc. (MRNA) : Free Stock Analysis Report ETFMG Travel Tech ETF (AWAY): ETF Research Reports U.S. Global Jets ETF (JETS): ETF Research Reports VanEck Vectors Gaming ETF (BJK): ETF Research Reports SPDR SP Transportation ETF (XTN): ETF Research Reports Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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Learn Mutual Funds How to Invest in Mutual Funds for Your Vacations?

How to Invest in Mutual Funds for Your Vacations?

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From a solo bike trip to Leh to seeing the spectacular Northern Lights with your partner, to taking your children to Disneyland; we all have a bucket list of our dream destinations where we want to go with our loved ones. The list of things-to-do or places-to-visit must be long enough and you are not alone.

Over the last few years, for most Indians, annual vacations and experiencing new cultures have become almost as important as saving for retirement or buying a house. However, the reality is that vacations cost a good amount of money and lack of planning for this goal means either you have to take a loan or use your credit cards to fund them. But it doesn’t have to be this way.

Here’s how to invest in mutual funds and start saving money, and then enjoy it all on your vacations that you have been dreaming of:

Start by Finding How Much You Need to Save

The first step to save for your vacation is figuring out the money you will need for them. To begin with, decide how many vacations you want to take in a year. Is it one within India, and one international, or one international every two years or something else.

Once you decide the frequency, pick the places you want to visit on these trips. Not all destinations within India are cheap and not every international destination is expensive. With this done, comes the part of figuring out the expenses.

Most people tend to look at only major costs like hotels and flight tickets to calculate the expenses and when the trip starts they realize that they are short on money. That’s because all these so-called small expenses – be it shopping, meals, local transfers, etc., make a big chunk of the amount you will spend during your vacation. So, to avoid this pain, include everything while figuring out the money you will need.

Start a SIP in Low-risk Debt Mutual Funds to Save For These Vacations

Now that you know how much money you will need, the next step is to save for them.

Though you have the option to leave the money you are saving for a vacation in your bank account, it might not be the best option. That’s because you have instant access to this money and there is a high probability that you will end up using it for some other expenses.

So the best way is to put it aside every month, at a place where it can be accessed at short notice and there is minimal risk. Although you have RDs as an option, they come with a fixed tenure and withdrawing it before the tenure ends means penalties.

Then there are mutual funds. However, the approach to save for your travel has to be different from what you might be doing for your long term investments. That’s because saving for a vacation is a short to medium-term goal and you can’t take much risk with this amount.

The good part is that there are specific Debt mutual funds that are almost perfect for this kind of need.

Although the primary aim of these funds is to protect your capital, they still end up providing at least 50% higher returns than your savings account. Plus there are no tenure commitments or penalties for withdrawal, which means you get the flexibility.

Which Debt Mutual Funds You Should Pick?

Liquid Funds for Vacation Plans within 1-year : If you want to visit your dream destination within six months or a year you should start an SIP in Liquid Funds. These funds lend to good companies for a short period and the interest income earned is the primary source of returns. Due to this, Liquid Funds are low risk and at the same time, you get a chance to earn up to 50% higher returns than your savings bank account.

Moreover, some Liquid Funds allow you to redeem instantly, there is no lock-in period and are almost as liquid as a savings bank account.

Ultra Low Duration Debt Funds for Vacations 1 to 3 years Away:

If you are saving for a vacation you want to take in the next 1 to 3 years, you can opt for Ultra Low Duration Funds. Although these funds have a slightly higher risk than Liquid Funds, even then they are one of the least risky mutual funds. These funds lend for 3 to 6 months and this helps them keep the risk under check.

If you are willing to take slightly more risk (although we don’t recommend this) for a chance to earn slightly better returns, then you can opt for Short Term Funds. These funds lend to companies for 1-3 duration and this gives them an opportunity to generate higher returns but this increased duration means increased risk too.

You can see top Ultra Low Duration Funds  here .

Bottom line

Travelling enriches our lives in multiple ways. You distress and spend time with yourself and your family, coming back more energized. So you should travel, but if you really want to make it stress-free, plan and travel. The best part, it is really not complicated. All it takes is starting mutual fund investment .

Ready? Head to  ETMONEY  and you can start one in minutes. It’s 100% paperless and completely free.

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Travel related etfs.

Exchange-traded funds, or ETFs, are securities that track an index, commodity, or a basket of assets, and trade like a stock on a stock exchange. ETFs have become increasingly popular among investors, including those interested in the travel industry. Travel-related ETFs offer exposure to companies involved in the travel and tourism sector, such as airlines, hotels, and travel booking sites. In this article, we will provide a comprehensive guide to travel-related ETFs, including their benefits, risks, and popular options available for investors.

What are the benefits of investing in travel-related ETFs?

There are several benefits of investing in travel-related ETFs, including:

• Diversification: Travel-related ETFs offer exposure to a diverse range of companies in the travel industry, reducing the risk of investing in a single company.
• Liquidity: ETFs trade like stocks, meaning they can be bought and sold throughout the trading day at market-determined prices.
• Low fees: ETFs typically have lower fees than mutual funds, making them an affordable option for investors.
• Easy access: Travel-related ETFs can be easily bought and sold through a brokerage account.

What are the risks of investing in travel-related ETFs?

Like any investment, investing in travel-related ETFs comes with risks. Some of the risks include:

• Market risk: Travel-related ETFs are subject to market risk, meaning their value can fluctuate based on market conditions and the performance of companies in the travel industry.
• Industry risk: The travel industry is subject to various risks, including economic conditions, geopolitical events, and natural disasters.
• Liquidity risk: Although ETFs are generally liquid, there may be times when it is difficult to buy or sell shares due to market conditions or lack of demand.

What are some popular travel-related ETFs?

There are several travel-related ETFs available for investors, including:

• The U.S. Global Jets ETF (JETS): This ETF tracks the performance of the global airline industry, including airlines, airports, and manufacturers.
• The Invesco Dynamic Leisure and Entertainment ETF (PEJ): This ETF invests in U.S. leisure and entertainment companies, including hotels, restaurants, and entertainment venues.
• The iShares U.S. Home Construction ETF (ITB): Although not directly related to the travel industry, this ETF invests in U.S. homebuilders, which can indirectly benefit from an increase in travel and tourism.

Investing in travel-related ETFs can be a smart way to gain exposure to the travel and tourism sector, while also diversifying your portfolio. Like any investment, it is important to understand the risks and benefits before investing. Consider consulting with a financial advisor to determine if investing in travel-related ETFs is right for you.

Stable Investor

Financial Planning & Investment Advisory

How to save for Holidays using Travel Fund (2024)?

For many, travelling is an important goal. I am one of them. I like to travel (read this ). If time and schedule permit. But in general, I aim to travel to a new location once every 6 months.

So if you too can’t live without travelling periodically but are unable to fund the money to do so, then you should consider saving for your vacation using a Travel Fund . Or you can call it a Holiday Fund .

If you are a regular traveller, then holidays will be a recurring financial expense for you. So you can treat funding your vacation as any other financial goal. It’s just that unlike other important goals of children’s education , retirement , house purchase which generally are one-time goals, the goal of vacation will be a recurring annual goal for you.

So how to go about saving for your vacations?

Generally, a goal of a vacation is a short-to-medium term goal. You can have the following goals related to travelling:

• Travelling abroad every year
• Travelling domestically twice a year
• Taking a vacation once every 2 years
• Domestic holiday once-a-year and foreign holiday once every 3 years

So different people will have different travel/vacation goals. And depending on a person’s risk appetite, available time horizon and flexibility, one needs to choose a financial instrument to save for the goal:

• If your vacation is less than 6 months away, then you can opt for Recurring/Fixed Deposits .
• If your vacation is about 1 year away, you can opt for Recurring/Fixed Deposits or Liquid Funds .
• If your vacation is about 2 years away, you can opt for Recurring/Fixed Deposits or Ultra-Short Duration Debt Funds.
• If your vacation is about 3 years away, you can opt for Recurring/Fixed Deposits or Ultra-Short / Low / Short Duration Debt Funds.
• If your vacation is about 5+ years away, you can go for Ultra-Short / Low / Short Duration Debt Funds and a small portion (10-30%) in pure Equity Funds / Balanced Advantage Funds as well.

Note – Only a handful of debt fund categories are suitable for saving for your vacation / holiday goals amongst all the SEBI mutual fund categories in India.

And what if you want to put in place a rolling corpus that continuously gets funded from your monthly savings and from which, you can withdraw money periodically whenever you wish to travel? So if some years you do not withdraw the money as your travel plans are postponed (like what happened in 2020 with everyone), then the travel fund keeps getting bigger and bigger to fund your larger travel expenses in the future.

So let’s say you have in mindset a budget of Rs 1.5 lakh for annual holidays. So assuming you are pretty flexible with your travel plans and budget in general, you can opt for having Rs 10,000 in Debt Funds and Rs 2000 in Equity Funds. Having debt gives you safety and predictability about being able to save money in time. Having a small equity component can act as a return kicker in good years. So if in one year say you are planning to travel, and the equity returns have been great in the recent past, then you can withdraw from equity funds as well to book your profits.

Mind you that the discussion we are having here is about periodic vacations that people take. Some Indians travel full time. Their strategies will be very different as they need to fund their expenses on the road for long periods of time. I have a friend in Singapore who loves to travel and is a futures trader. He has set up a trading system for himself that helps him accumulate money for his world travels gradually. But trading futures isn’t for everyone and you should Read more and understand what are the pros and cons and more importantly, the risks of trading before you get into it.

If you are an ardent traveller, then it’s best to make vacations a clear financial goal in your overall financial plan. That way, you will be diligently saving for the goal and increase the probability of your goal achievement so that you can travel guilt-free whenever you want.

To get yourself a well-thought-through detailed goal-oriented financial plan (that also takes care of your vacation/holiday goals ), that tackles all goals like children’s education, retirement, house purchase, travelling, etc. you can consider professional Stable Financial Planning Service . If you are interested, then head to this page for smart Financial Planning Service . You will increase the probability of achieving your goals on time without stress.

These days, many people take a personal loan to travel and then pay back in monthly EMIs. But I think that since travel is a discretionary expense and not exactly a critical one, it is better to save for it and then spend on it instead of spending on it and then repaying loans for it. Taking a personal loan to fund a holiday isn’t exactly a wise financial move. So in the debate of EMI vs SIP for this goal, I would suggest going for regular SIP and hence, it’s best to set aside a dedicated savings corpus for this goal and create a travel savings fund to begin saving for your holidays well ahead of time.

Now let me give you a ready reckoner on how much you need to save for different holiday fund requirements over different time periods. You can consider this as a holiday savings calculator. For simplicity, it is assumed that you will be investing only in debt instruments (giving 6% returns), monthly savings will increase by about 5% every year and for further simplifying, we will be ignoring inflation here.

So here is your vacation savings calculator :

• How to save Rs 1 lakh for travel in 1 year – Start saving Rs 7-8000 per month.
• How to save Rs 2 lakh for travel in 1 year – Start saving Rs 15-16,000 per month.
• How to save Rs 3 lakh for travel in 1 year – Start saving Rs 23-24,000 per month.
• How to save Rs 4 lakh for travel in 1 year – Start saving Rs 31-32,000 per month.
• How to save Rs 5 lakh for travel in 1 year – Start saving Rs 39-40,000 per month.
• How to save Rs 1 lakh for travel in 2 years – Start saving Rs 3-4,000 per month.
• How to save Rs 2 lakh for travel in 2 years – Start saving Rs 7-8000 per month.
• How to save Rs 3 lakh for travel in 2 years – Start saving Rs 11-12,000 per month.
• How to save Rs 4 lakh for travel in 2 years – Start saving Rs 14-15,000 per month.
• How to save Rs 5 lakh for travel in 2 years – Start saving Rs 18-19,000 per month.
• How to save Rs 1 lakh for travel in 3 years – Start saving Rs 2-3000 per month.
• How to save Rs 2 lakh for travel in 3 years – Start saving Rs 4-5000 per month.
• How to save Rs 3 lakh for travel in 3 years – Start saving Rs 7-8000 per month.
• How to save Rs 4 lakh for travel in 3 years – Start saving Rs 9-10,000 per month.
• How to save Rs 5 lakh for travel in 3 years – Start saving Rs 11-12,000 per month.
• How to save Rs 2 lakh for travel in 4 years – Start saving Rs 3-4000 per month.
• How to save Rs 3 lakh for travel in 4 years – Start saving Rs 5-6000 per month.
• How to save Rs 4 lakh for travel in 4 years – Start saving Rs 6-7000 per month.
• How to save Rs 5 lakh for travel in 4 years – Start saving Rs 8-900 per month.
• How to save Rs 3 lakh for travel in 5 years – Start saving Rs 3-4000 per month.
• How to save Rs 4 lakh for travel in 5 years – Start saving Rs 5-6000 per month.
• How to save Rs 5 lakh for travel in 5 years – Start saving Rs 6-7000 per month.
• How to save Rs 6 lakh for travel in 5 years – Start saving Rs 7-8000 per month.
• How to save Rs 7 lakh for travel in 5 years – Start saving Rs 8-9000 per month.
• How to save Rs 8 lakh for travel in 5 years – Start saving Rs 10-11,000 per month.
• How to save Rs 9 lakh for travel in 5 years – Start saving Rs 11-12,000 per month.
• How to save Rs 10 lakh for travel in 5 years – Start saving Rs 12-13,000 per month.

So given your travel budget, the above list tells you How Much You Need to Save for Vacations.

Some people prefer to accumulate money for a vacation in a savings account . I think that’s not the best approach as, given the instant access to this money that a savings account provides, there is a high probability that they will end up using it for some or the other expenses. So it should ideally be recurring deposits (RD) or investing via SIP in mutual funds . If it’s mutual funds, then you simply need to start a SIP in low-risk safe Debt Mutual Funds to save for your vacations.

With the increasing costs of travel and our intent to live big, it is important to plan for regular vacations as a financial goal and save for them regularly. Dedicated systematic saving can help fund your holidays without depleting your regular savings for other goals or resorting to loans.

So if you are smart about it, you can easily plan your travel and the next big holidays with a Travel Fund and regular SIP in mutual funds. So make sure that you figure out how much money you need to save for travel and then, create a dedicated travel savings fund. So that’s all about how to save for your travel holidays using mutual fund SIPs (2024).

Travel is one of the most enriching experiences that one can have in life. It allows you to step out of your comfort zone, explore new cultures and cuisines, and make memories that will last a lifetime.

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Anti-Money Laundering (AML) Source Tool for Mutual Funds

May 12, 2017

This guide was last updated on May 16, 2022.

This research guide, or “source tool,” is a compilation of key AML laws, rules, and guidance applicable to “mutual funds” ( i.e. , open end investment companies as defined in Section 5(a)(1) of the Investment Company Act of 1940). Several statutory and regulatory provisions impose AML obligations on mutual funds. A wealth of related AML guidance materials is also available. To aid research efforts into AML requirements and to assist mutual funds with AML compliance, this source tool organizes key AML compliance materials and provides related source information.

When using this research tool, you should keep the following in mind:

First,  mutual funds are responsible for complying with all AML requirements to which they are subject. Although this research guide summarizes some of the key AML obligations that are applicable to mutual funds, it is not comprehensive. You should not rely on the summary information provided but should refer to the relevant statutes, rules, orders, and interpretations.

Second,  AML rules, regulations, and orders are subject to change and may change quickly. Statutes that include AML-related provisions may be amended from time to time, and new statutes may be enacted which include AML-related provisions. The Anti-Money Laundering Act of 2020 (AMLA) tasked the Secretary of the Treasury, in consultation with specified regulators and law enforcement, with undertaking a review of BSA regulations and guidance and directed the Secretary to make appropriate changes to improve the efficiency of the regulations and guidance. [1] Other provisions of AMLA and the Corporate Transparency Act require the Secretary to revise the AML program rules and beneficial ownership rule. [2]

Finally,  you will find a list of telephone numbers and useful websites at the end of this guide. If you have questions concerning the meaning, application, or status of a particular law, rule, order, or interpretation, you should consult with an attorney experienced in the areas covered by this guide.

This source tool represents the views of the staff of the Division of Examinations. It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content.  This source tool, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.

The Division of Examinations regularly publishes Risk Alerts on its webpage, www.sec.gov/exams , some of which deal with AML topics, and also maintains a source tool regarding the AML obligations of broker-dealers.

TABLE OF CONTENTS

The following topics are addressed in this guide:

• The Bank Secrecy Act
• The USA PATRIOT Act
• AML Programs
• Customer Identification Programs
• Beneficial Ownership
• Due Diligence Programs for Correspondent Accounts
• Due Diligence Programs for Private Banking Accounts
• Suspicious Activity Monitoring and Reporting
• Other Reporting and Recordkeeping Requirements
• Information Sharing With Law Enforcement and Financial Institutions
• Special Measures Imposed by the Financial Crimes Enforcement Network
• Office of Foreign Asset Control (OFAC) Sanctions Programs and Other Lists
• Selected Additional AML Resources
• Useful Contact Information

1. The Bank Secrecy Act

The Bank Secrecy Act (BSA), initially adopted in 1970, established the basic framework for AML obligations imposed on financial institutions. Among other things, it authorizes the Secretary of the Treasury to issue regulations requiring financial institutions to keep records and file reports on financial transactions that may be useful in investigating and prosecuting money laundering and other financial crimes. Treasury has determined that mutual funds should be considered “financial institutions” for certain purposes and thus certain BSA rules are applicable to mutual funds. The Financial Crimes Enforcement Network (FinCEN), a bureau within Treasury, has regulatory responsibilities for administering the BSA.

Source Documents:

• Bank Secrecy Act: The Bank Secrecy Act is codified at 31 U.S.C. §§ 5311 et seq.
• Bank Secrecy Act Rules: The rules adopted by Treasury implementing the BSA are located at 31 C.F.R. Chapter X . 31 C.F.R. Chapter X is comprised of a “General Provisions Part” and separate financial-institution-specific parts for those financial institutions subject to FinCEN regulations. The General Provisions Part (Part 1010) contains regulatory requirements that apply to more than one type of financial institution, and in some cases, individuals. The financial-institution-specific parts contain regulatory requirements specific to a particular type of financial institution. Part 1024 pertains to mutual funds (31 C.F.R. §§ 1024.100 et seq. ).

2. The USA PATRIOT Act

The USA PATRIOT Act was enacted by Congress in 2001 in response to the terrorist attacks on September 11, 2001. Among other things, the USA PATRIOT Act amended and strengthened the BSA. One provision of the Act mandated a study that ultimately contained recommendations for extending certain AML obligations to open-end investment companies, or mutual funds. Currently, as a result of the USA PATRIOT Act and its implementing rules, there are a number of BSA/AML obligations that are applicable to “mutual funds,” including:

• AML compliance programs;
• customer identification programs;
• obtaining beneficial ownership information and customer due diligence;
• monitoring, detecting, and filing reports of suspicious activity;
• due diligence for foreign correspondent accounts, including prohibitions on transactions with foreign shell banks;
• due diligence for private banking accounts;
• mandatory information-sharing (in response to requests by federal law enforcement);
• compliance with “special measures” imposed by FinCEN to address particular AML concerns; and
• other reporting and recordkeeping requirements, including requirements to file currency transaction reports and reports in connection with foreign bank and financial accounts.
• USA PATRIOT Act : Title 3 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 296 (2001).
• Report to Congress under the USA Patriot Act containing recommendations for applying anti-money laundering controls to investment companies , Joint Report of the SEC, Treasury, and the Board of Governors of the Federal Reserve System (Dec. 31, 2002).

3. AML Programs

Section 352 of the USA PATRIOT Act amended the BSA to require financial institutions to implement AML programs. Toward that end, FinCEN has implemented a rule that requires mutual funds to establish AML programs. Because mutual funds operate through a variety of different business models, one generic AML program is not possible; rather, each mutual fund must develop a program based upon its own business structure. As a result, each mutual fund complex should identify its vulnerabilities, understand applicable BSA requirements, identify the risk factors relating to these requirements, design the procedures and controls that will be required to reasonably assure compliance with these requirements, and periodically assess the effectiveness of the procedures and controls.

A mutual fund’s AML compliance program must be in writing, must be approved by the mutual fund’s board of directors, and must include at a minimum:

• policies, procedures, and internal controls reasonably designed to prevent the mutual fund from being used for money laundering or the financing of terrorist activities and to achieve compliance with the BSA and its implementing rules;
• the designation of a person or persons responsible for implementing and monitoring the operations and internal controls of the AML program (AML Officer);
• ongoing AML training for appropriate persons;
• an independent test of the mutual fund’s AML program conducted by the mutual fund’s personnel or by a qualified outside party. For the testing to be independent, it must not be done by the same employees involved in the operation or oversight of the AML program; and
• risk-based procedures for conducting ongoing customer due diligence. These should include, but not be limited to, procedures to: (1) identify and verify the identity of customers, (2) understand the nature and purpose of customer relationships so customer risk profiles can be developed, and (3) conduct ongoing monitoring to identify and report suspicious transactions as well as to maintain and update customer information, including beneficial ownership information.

Because mutual funds do not have direct employees, they may delegate certain aspects of their AML programs to their service providers; however, mutual funds remain responsible for assuring compliance with the rule and overseeing the performance of any delegated responsibilities. In addition, if a mutual fund delegates responsibility for its AML program to a service provider, the mutual fund must obtain a written consent that will ensure the ability of federal regulators to obtain information and records relating to the AML program and to inspect the third party for purposes of the program.

Rule 38a-1 under the Investment Company Act of 1940 requires investment companies, including mutual funds to establish and implement compliance programs that include provisions for compliance with the BSA and rules adopted thereunder. Under Rule 38a-1, fund compliance programs include oversight over the compliance efforts of service providers through which the fund conducts its business ( e.g. , the fund’s investment adviser, principal underwriter, administrator and transfer agent of the fund).

• Mutual Fund AML Program Rule:   31 C.F.R. § 1024.210 .
• Adopting Release:   67 Fed. Reg. 21117  (Apr. 29, 2002) (interim final rule).
• SEC Investment Company Compliance Program Rule:   17 C.F.R. § 270.38a-1.
• Adopting Release:   68 Fed. Reg. 74714  (Dec. 24, 2003).

4. Customer Identification Programs

Section 326 of the USA PATRIOT Act amended the BSA to require financial institutions to establish written customer identification programs (CIP). A joint SEC/FinCEN implementing rule imposes CIP obligations on mutual funds. The implementing rule requires mutual funds to establish, document, and maintain a written CIP that includes procedures for:

• obtaining customer identifying information from each customer prior to account opening;
• verifying the identity of each customer, to the extent reasonable and practicable, within a reasonable time before or after account opening;
• making and maintaining a record of all information obtained relating to customer identity and verification;
• determining within a reasonable time after account opening or earlier whether a customer appears on any list of known or suspected terrorist organizations designated by Treasury; [3] and
• providing each customer with adequate notice, prior to opening an account, that information is being requested to verify the customer’s identity.

The CIP rule provides that, under certain defined circumstances, mutual funds may rely on the performance of another financial institution to fulfill some or all of the requirements of the mutual fund’s CIP. For a mutual fund to rely on another financial institution, the reliance must be reasonable. The financial institution being relied on by the mutual fund must be subject to an AML program rule and be regulated by a federal functional regulator. The mutual fund and the other financial institution must enter into a contract, and the other financial institution must certify annually to the mutual fund that it has implemented an AML program. The other financial institution must also certify to the mutual fund that the financial institution will perform the specified requirements of the mutual fund’s CIP. [4]

• Customer Identification Program Rule: 31 C.F.R. § 1024.220 ( see also 17 C.F.R. 270.0-11 ).
• Joint FinCEN/SEC Final Rule Release: 68 Fed. Reg. 25131 (May 9, 2003).
• Treasury and SEC Staff Views: Staff Q&A Regarding the Mutual Fund Customer Identification Program Rule (Aug. 11, 2003).
• Other Related SEC Staff Views:   No-Action Letters to the Securities Industry and Financial Markets Association (SIFMA) (formerly the Securities Industry Association) ( Feb. 12, 2004 ; Feb. 10, 2005 ; July 11, 2006 ; Jan. 10, 2008 ; Jan. 11, 2010 ; Jan. 11, 2011 ; Jan. 9, 2015 ; Dec. 12, 2016 , Dec. 12, 2018 ,  Dec. 9, 2020 , and Dec. 9, 2022 ). (The letters provide staff no-action statements regarding broker-dealers relying on investment advisers to conduct the required elements of the CIP rule. Among other things, the 2015 letter addresses the reasonableness of a broker-dealer’s reliance on an investment adviser and the investment adviser’s prompt reporting to the broker-dealer of potentially suspicious or unusual activity detected as part of the CIP being performed on the broker-dealer’s behalf.)

5. Beneficial Ownership

Covered financial institutions are required to establish and maintain written procedures that are reasonably designed to identify and verify beneficial owners of legal entity customers and to include such procedures in their anti-money laundering compliance program required under 31 U.S.C. 5318(h) and its implementing regulations.

Legal entity customer means an account holder that is a corporation, limited liability company, or other entity that is created by the filing of a public document with a Secretary of State or similar office, a general partnership, and any similar entity formed under the laws of a foreign jurisdiction.

Beneficial owner means each of the following:

• Each individual, if any, who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25 percent or more of the equity interests of a legal entity customer; and
• An executive officer or senior manager (e.g., a chief executive officer, chief financial officer, chief operating officer, managing member, general partner, president, vice president or treasurer); or
• Any other individual who regularly performs similar functions.
• If a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25 percent or more of the equity interests of a legal entity customer, the beneficial owner shall mean the trustee. If an entity that is excluded from the definition of “legal entity customer” owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25 percent or more of the equity interests of a legal entity customer, no individual need be identified with respect to that entity’s interests.
• Beneficial Ownership Requirements for Legal Entity Customers:   31 C.F.R. § 1010.230 .
• Adopting Release:   81 Fed. Reg. 29398  (May 11, 2016).
• Joint Guidance Issued by FinCEN, SEC, and other federal regulators: Guidance on Obtaining and Retaining Beneficial Ownership Information (Mar. 2010).
• FAQs Regarding Customer Due Diligence Requirements for Financial Institutions (Aug. 3, 2020).
• FAQs Regarding Customer Due Diligence Requirements for Financial Institutions  (Apr. 3, 2018).
• FAQs Regarding Customer Due Diligence Requirements for Financial Institutions  (July 19, 2016).

6. Due Diligence Programs for Correspondent Accounts and Enhanced Due Diligence for Certain Foreign Bank Correspondent Accounts

Section 312 of the USA PATRIOT Act amended the BSA to, among other things, impose special due diligence requirements on financial institutions that establish, maintain, administer, or manage a private banking account or a “correspondent account” in the United States for a “non-United States person.”

A correspondent account includes any account established for a foreign financial institution (including a foreign bank) to receive deposits from, or to make payments or other disbursements on behalf of, the foreign financial institution, or to handle other financial transactions related to the foreign financial institution.

FinCEN’s regulations implementing the special due diligence requirements provide, among other things, that a “covered financial institution” (which includes a mutual fund) is required to establish a risk-based due diligence program reasonably designed to enable the mutual fund to detect and report money laundering conducted through, or involving, a foreign correspondent account established, maintained, administered, or managed by the covered financial institution in the United States for a foreign financial institution.

In the case of a correspondent account established, maintained, administered, or managed in the United States for certain foreign banks, the due diligence program must include “enhanced” due diligence procedures in accordance with certain requirements specified in FinCEN’s regulations.

• Correspondent Account Due Diligence Rule:   31 C.F.R. § 1010.610 . See also 31 C.F.R. § 1010.605  (definitions).
• Adopting Release :  71 Fed. Reg. 496  (Jan. 4, 2006).
• Extension of Applicability Date:   71 Fed. Reg. 16040  (Mar. 30, 2006).
• Enhanced Due Diligence Adopting Release:  72 Fed. Reg. 44768  (Aug. 9, 2007).
• Enhanced Due Diligence Re-Proposed Rule: 71 Fed. Reg. 516 (Jan. 4, 2006).
• Proposed Rule: 67 Fed. Reg. 37736 (May 30, 2002).
• Interim Final Rule: 67 Fed. Reg. 48348 (July 23, 2002).
• SEC Staff Views: Staff Bulletin: Risks Associated with Omnibus Accounts Transacting in Low-Priced Securities (Nov. 12, 2020)
• Fact Sheet: Section 312 of the USA PATRIOT Act  (Dec. 2005).
• FIN-2006-G008: Application of the Regulations Requiring Special Due Diligence Programs for Certain Foreign Accounts to NSCC Fund/SERV Accounts  (May 3, 2006).

7. Due Diligence Programs for Private Banking Accounts

Section 312 of the USA PATRIOT Act amended the BSA to, among other things, impose special due diligence requirements on financial institutions that establish, maintain, administer, or manage a private banking account or a “correspondent account” in the United States for a “non-United States person.” FinCEN regulations provide that a “covered financial institution” is required to maintain a due diligence program that includes policies, procedures, and controls that are reasonably designed to detect and report any known or suspected money laundering or suspicious activity conducted through or involving a “private banking account” that is established, maintained, administered, or managed in the U.S. by the financial institution. In addition, the regulations set forth certain minimum requirements for the required due diligence program with respect to private banking accounts and require enhanced scrutiny to any such accounts where the nominal or beneficial owner is a “senior foreign political figure.”

The regulations define a “private banking account” as an account that: (a) requires a minimum deposit of assets of at least $1,000,000; (b) is established or maintained on behalf of one or more non-U.S. persons who are direct or beneficial owners of the account; and (c) has an employee assigned to the account who is a liaison between the financial institution and the non-U.S. person.

The definition of “senior foreign political figure” extends to any member of the political figure’s immediate family, and any person widely and publicly known to be a close associate of the foreign political figure as well as any entities formed for the benefit of such persons (such persons are commonly referred to as PEPs, or Politically Exposed Persons).

The definition of “beneficial owner” is limited to individuals with control over the account (as opposed to passive investors with only financial interests). Although the definition of a “covered financial institution” under FinCEN’s regulations includes mutual funds, FinCEN acknowledged when it adopted its rule that, “as a general matter,” accounts held by public corporations, mutual funds, or other collective investment vehicles would not fall within the definition of “private banking account.” In addition, in December 2005, FinCEN stated that “mutual funds do not currently offer private banking accounts.”

• Private Banking Due Diligence Rule:   31 C.F.R. § 1010.620 .  See also   31 C.F.R. § 1010.605  (definitions).
• Adopting Release:   71 Fed. Reg. 496  (Jan. 4, 2006).
• Extension of Applicability Date: 71 Fed. Reg. 16040  (Mar. 30, 2006).
• FIN-2006-G009: Application of the Regulations Requiring Special Due Diligence Programs for Certain Foreign Accounts to the Securities and Futures Industries (May 10, 2006).

8. Suspicious Activity Monitoring and Reporting

Section 356 of the USA PATRIOT Act amended the BSA to require financial institutions to monitor for, and report, suspicious activity (so-called SAR reporting).

Under FinCEN’s SAR rule ( 31 C.F.R. § 1024.320 ), a mutual fund is required to file a suspicious activity report if: (i) a transaction is conducted or attempted to be conducted by, at, or through a mutual fund; (ii) the transaction involves or aggregates funds or other assets of at least $5,000; and (iii) the mutual fund knows, suspects, or has reason to suspect that the transaction:

• involves funds derived from illegal activity or is intended or conducted to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or evade any federal law or regulation;
• is designed to evade any requirements set forth in regulations implementing the BSA;
• has no business purpose or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or
• involves use of the broker-dealer to facilitate criminal activity. 

Mutual funds must report the suspicious activity using FinCEN SAR Form 111, which is confidential. FinCEN maintains instructions for filing the form, which detail, among other things, the minimum information requirements for the form.

Mutual funds must maintain a copy of any SAR filed and supporting documentation for a period of five years from the date of filing the SAR.

The rule recognizes that the activity of a particular mutual fund shareholder may involve more than one mutual fund in a mutual fund complex, so the rule permits all the mutual funds involved in a particular suspicious transaction to file a single joint report. As with other AML requirements applicable to mutual funds, the adopting release acknowledges that a mutual fund may contract with a service provider to perform the reporting obligation as the mutual fund’s agent, and thus the service provider will be aware of the circumstances surrounding the filing of the SAR. Nevertheless, the mutual fund remains responsible for assuring compliance with the rule and must maintain an active working relationship with the service provider’s compliance personnel to oversee the performance of its SAR reporting obligations.

In situations that require immediate attention, such as terrorist financing or ongoing money laundering schemes, mutual funds should immediately notify law enforcement in addition to filing a SAR. In addition, if a mutual fund wishes to immediately report suspicious activities, in addition to filing a SAR, they may call FinCEN’s Hotline at 1-866-556-3974. [5]

• Fund SAR Rule:   31 C.F.R. § 1024.320 .
• Confidentiality of Suspicious Activity Reports,  75 Fed. Reg. 75593  (Dec. 3, 2010) (amending FinCEN’s regulations regarding the confidentiality of SAR reports).
• BSA E-Filing System and BSA Forms and Filing Requirements .
• FIN-2006-G013: Frequently Asked Questions: Suspicious Activity Reporting Requirements for Mutual Funds  (Oct. 4, 2006).
• FIN-2006-G014: Potential Money Laundering Risks Related to Shell Companies (Nov. 9, 2006).
• FIN-2007-G003: Suspicious Activity Report Supporting Documentation (June 13, 2007).
• FIN-2007-G002: Requests by Law Enforcement for Financial Institutions to Maintain Accounts (June 13, 2007).
• Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting (Oct. 10, 2007).
• Guidance to Financial Institutions on Filing Suspicious Activity Reports regarding the Proceeds of Foreign Corruption (Apr. 17, 2008).
• Sharing Suspicious Activity Reports by Securities Broker-Dealers, Mutual Funds, Futures Commission Merchants, and Introducing Brokers in Commodities with Certain U.S. Affiliates (Nov. 23, 2010).
• Sharing Suspicious Activity Reports by Depository Institutions with Certain U.S. Affiliates (Nov. 23, 2010).
• FIN-2016-A005: Advisory to Financial Institutions on Cyber-Events and Cyber-Enabled Crime .
• SAR Activity Reviews: These are available on FinCEN’s website at: https://www.fincen.gov/sar-activity-review-trends-tips-issues . [6]

9. Other Reports and Recordkeeping Requirements

Mutual funds have other reporting obligations imposed by the BSA. They include:

Currency Transaction Reports (CTRs):  Mutual funds are obligated to file with FinCEN CTRs (Form 112, formerly IRS Form 4789) for certain currency transactions involving the transfer of more than $10,000 in currency. ’The CTR filing obligation covers incoming, outgoing, and exchange transactions in currency. Under the CTR rule, a financial institution must treat multiple transactions as a single transaction if the financial institution has knowledge that the transactions are conducted by or on behalf of the same person and result in either cash in or cash out totaling more than $10,000 during any one business day.

Reports of Foreign Bank and Financial Accounts (FBARs):  Mutual funds may be required to file FBARs if the mutual fund has a financial interest in, or signature authority over, any bank account, securities account, or “other financial account” (as defined in 31 C.F.R. § 1010.350(c)(3) ) in a foreign country and the aggregate value of these accounts exceeds $10,000. FBARs are filed using Form 114.

The Recordkeeping and Travel Rule and Related Recordkeeping Requirements:  Mutual funds are subject to requirements relating to the creation and retention of records involving the transmittal of funds (Recordkeeping and Travel Rule). The rule applies to transmittals of funds in amounts that equal or exceed $3,000, and requires the transmittor’s financial institution to obtain and retain name, address, and other information about the transmittor and the transaction. The Recordkeeping and Travel Rule requires the recipient’s financial institution and, in certain instances, the transmittor’s financial institution to obtain or retain identifying information about the recipient. The rule also requires that certain information obtained or retained by the transmittor’s financial institution “travel” with the transmittal order through the payment chain.

FinCEN’s amendment to the definition of “financial institution” also resulted in mutual funds being required to create and retain records for certain extensions of credit and cross-border transfers of currency, monetary instruments, checks, investment securities, and credit. These requirements apply to transactions in amounts exceeding $10,000.

These rules provide for exceptions for certain transactions entered into by the mutual fund, including transactions with banks, broker-dealers and federal, state, and local governments.

• CTR: 31 C.F.R. §§ 1010.311 , 1010.306 , 1010.312 .
• FBAR: 31 C.F.R. §§ 1010.350 , 1010.306 , 1010.420 .
• Adopting Release: 76 Fed. Reg. 10234 (Feb. 24, 2011).
• CMIR: 31 C.F.R. §§ 1010.340 , 1010.306 .
• FinCEN Ruling 2003-1: Regarding the Aggregation of Currency Transactions Pursuant to 31 CFR Section 103.22 (Oct. 3, 2002).
• Guidance on Interpreting Financial Institution Policies in Relation to Recordkeeping Requirements under 31 C.F.R. 103.29 (Nov. 2002).
• FinCEN Ruling 2005-6: Suspicious Activity Reporting (Structuring) (July 15, 2005).
• Adopting Release:   75 Fed. Reg. 19241  (Apr. 14, 2010).
• Proposing Release:   74 Fed. Reg. 26996  (June 5, 2009).
• FinCEN Advisory: Funds Transfers: Questions & Answers (June 1996). [7]
• FinCEN Advisory: Funds “Travel” Regulations: Questions & Answers (Nov. 2010).

10. Information Sharing with Law Enforcement and Financial Institutions

Two provisions relating to information sharing were added to the BSA by the USA PATRIOT Act. One provision requires broker-dealers to respond to mandatory requests for information made by FinCEN on behalf of federal law enforcement agencies. The other provides a safe harbor to permit and facilitate voluntary information sharing among financial institutions.

Mandatory Information Sharing (Section 314(a) Requests):  FinCEN’s BSA information sharing rules, under Section 314(a), authorize law enforcement agencies with criminal investigative authority to request that FinCEN solicit, on the agency’s behalf, certain information from a financial institution (including a mutual fund). These requests are often referred to as “Section 314(a) information requests.” Upon receiving such a request, a financial institution is required to search its records to determine whether it has accounts for, or has engaged in transactions with, any specified individual, entity, or organization. If the financial institution identifies an account or transaction identified with any individual, entity or organization named in the request, it must report certain relevant information to FinCEN.

Some mutual funds register directly with FinCEN to receive Section 314(a) notices; others rely on their affiliated bank or broker-dealer intermediaries to register and conduct these searches. Mutual funds should maintain the confidentiality of any request and any responsive reports to FinCEN. Mutual funds with questions concerning Section 314(a) requests should contact FinCEN.

• Section 314(a) Rule:   31 C.F.R. § 1010.520 .  See also   31 C.F.R. § 1010.505  (definitions).
• Adopting Release: 67 Fed. Reg. 60579 (Sept. 26, 2002).
• Proposed Rule Release: 74 Fed. Reg. 58926 (Nov. 16, 2009).
• Broadening Access to the 314(a) program: 75 Fed. Reg. 6560 (Feb. 10, 2010).
• FinCEN 314(a) Fact Sheet (June 30, 2020).
• Changing your Point of Contact for 314(a) (Nov. 2019).

Voluntary Information Sharing Among Financial Institutions: Section 314(b):  A separate safe harbor provision encourages and facilitates voluntary information sharing among participating financial institutions. The safe harbor provision, added to the BSA by Section 314(b) of the USA PATRIOT Act, protects financial institutions, including investment companies, from certain liabilities in connection with sharing certain AML related information with other financial institutions for the purposes of identifying and reporting activities that may involve terrorist acts or money laundering activities. FinCEN’s implementing regulations ( 31 C.F.R. § 1010.540 ) require that a financial institution or an association of financial institutions that intends to share information pursuant to the regulations must file an annual notice with FinCEN, maintain procedures to protect the security and confidentiality of the information, and take reasonable steps to verify that the financial institution or association of financial institutions with which it intends to share the information has filed the required notice with FinCEN. This may be done by checking a list that FinCEN makes available. FinCEN’s website contains an online registration system for section 314(b) notifications.

• Section 314(b) Rule: 31 C.F.R. § 1010.540 .
• Interim Final Rule: 67 Fed. Reg. 9874 (Mar. 4, 2002).
• FinCEN 314(b) Webpage (provides information on section 314(b) and an online registration system).

11. Special Measures Imposed by the Secretary of the Treasury

Section 311 of the USA PATRIOT Act amended the BSA to authorize the Secretary of the Treasury to require financial institutions, including mutual funds, to take “special measures” to address particular money laundering concerns. The Secretary of the Treasury may impose special measures on foreign jurisdictions, financial institutions, or transactions and accounts found to be of “primary money laundering concern.” FinCEN’s BSA Rules include special measures that, among other things, prohibit “covered financial institutions” (which includes open-end investment companies registered with the Commission) from opening or maintaining certain correspondent accounts.

• Section 311 Special Measures

12. OFAC Sanctions Programs and Other Lists

OFAC is an office within Treasury that administers and enforces economic and trade sanctions, based on U.S. foreign policy and national security goals, against targeted foreign countries, terrorism sponsoring organizations, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under U.S. jurisdiction.

OFAC’s sanctions programs are separate and distinct from, and in addition to, the AML requirements imposed on mutual funds under the BSA.

As a tool in administering sanctions, OFAC publishes lists of sanctioned countries and persons that are continually being updated. Its list of Specially Designated Nationals and Blocked Persons (SDNs) lists individuals and entities from all over the world whose property is subject to blocking and with whom U.S. persons cannot conduct business. OFAC also administers country-based sanctions that are broader in scope than the “list-based” programs.

In general, OFAC regulations require funds to:

• block accounts and other property or property interests of entities and individuals that appear on the SDN list and blocked persons or entities that are blocked by operation of law;
• block accounts and other property or property interests of governments, other entities and individuals subject to blocking under OFAC country-based programs; and
• reject prohibited, unlicensed trade and financial transactions, including those  with OFAC-sanctioned countries.

Funds must report all blockings and rejections of prohibited transactions to OFAC within 10 days of their being identified and then annually. OFAC has the authority to impose substantial civil penalties administratively. To guard against engaging in OFAC prohibited transactions, it is advisable that funds or their service providers “screen against the OFAC list.” U.S. investment companies and their investment managers also should conduct the necessary due diligence to ensure that their investment decisions do not violate U.S. sanctions. OFAC has stated that it will take into account the adequacy of a firm’s OFAC compliance program when it evaluates whether to impose a penalty if an OFAC violation has occurred.

Investment companies and their investment managers should also be aware of other lists, such as the Financial Action Task Force (“FATF”) publications that identify “high risk and other monitored jurisdictions” and list countries with weak measures to combat money laundering and terrorist financing. If transactions originate from, or are routed to, any FATF-identified countries, it might be an indication of suspicious activity. [8]

• 31 C.F.R. §§ 501   et seq .
• Program information, including the SDN list and countries subject to OFAC sanctions, is available on the OFAC website at: www.treas.gov/ofac .
• OFAC Resource Center .
• Adopting Release, Economic Sanctions Enforcement Guidelines , 74 Fed. Reg. 57593 (Nov. 9, 2009).
• Interim Final Rule, Economic Sanctions Enforcement Guidelines , 73 Fed. Reg. 51933 (Sept. 2, 2008).
• Opening Securities and Futures Accounts from an OFAC Perspective (Nov. 5, 2008).
• Risk Factors for OFAC Compliance in the Securities Industry (Nov. 5, 2008).
• OFAC Frequently Asked Questions .
• Interpretative Release No. 2004-02 — Unitary Filing of Suspicious Activity and Blocking Reports , 69 Fed. Reg. 76847 (Dec. 23, 2004).
• U.S. State Dept.: https://www.state.gov/country-reports-on-terrorism/ .
• FATF: www.fatf-gafi.org .
• FinCEN High Intensity Financial Crimes Areas Designation: https://www.fincen.gov/‌hifca .

13. Selected Additional AML Resources

SEC Staff Materials:

• Leaders of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets (Oct. 11, 2019).
• Driscoll, Peter, “Staying Vigilant to Protect Investors,” Remarks at the SIFMA Operations Conference & Exhibition (May 8, 2019).
• Kevin Goodman, “Anti-Money Laundering: An Often-Overlooked Cornerstone of Effective Compliance” (June 18, 2015).
• Examinations/NEP Risk Alert: Broker-Dealer Controls Regarding Customer Sales of Microcap Securities (Oct. 9, 2014).
• David W. Blass, Broker-Dealer Anti-Money Laundering Compliance — Learning Lessons from the Past and Looking to the Future” (Feb. 29, 2012) .

FinCEN Materials:

• FinCEN Advisories/Bulletins/Fact Sheets
• National Strategy for Combating Terrorist and Other Illicit Financing (2020).
• Remarks of FinCEN’s Deputy Director, Jamal El-Hindi, SIFMA AML and Financial Crimes Conference (Feb. 6, 2020).
• Remarks of FinCEN Director, Kenneth A. Blanco, SIFMA AML and Financial Crimes Conference (Feb. 4, 2019).
• 2018 National Money Laundering Risk Assessment .
• 2018 National Terrorist Financing Risk Assessment .
• FFIEC AML Examination Manual (This examination manual, issued by the federal banking regulators regarding the AML requirements applicable to banks, contains guidance that may be of interest to securities firms.)
• FATF: Anti-money Laundering and Counter-Terrorist Financing Measures: Mutual Evaluation of the United States (Dec. 2016).
• Risk Based Approach Guidance for the Securities Sector, FATF (2018)

14. Useful Contact Information

[1] William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283, § 6216, 134 Stat. 3388, 4582-83 (2021).

[2] Id.  §§ 6101(b), 6403(d).

[3] As of the date of this guide, there are no designated government lists to verify specifically for CIP purposes. Customer comparisons to lists issued by OFAC involve separate and distinct requirements.

[4] FinCEN and the federal banking agencies have issued guidance applicable to banks regarding the CIP rule that may be of interest to securities firms. See Interagency Interpretive Guidance on Customer Identification Program Requirements under Section 326 of the USA PATRIOT Act (Apr. 28, 2005).

[5]   Mutual funds may also, but are not required to, contact the SEC to report situations that may require immediate attention by the SEC. The  SEC SAR Alert Message Line  number [202-551-SARS (7277)] should only be used in cases where a mutual fund has filed a SAR that may require immediate attention by the SEC and wants to alert the SEC about the filing. Calling the  SEC SAR Alert Message Line  does not alleviate the mutual fund’s obligation to file a SAR or notify an appropriate law enforcement authority.

[6] SAR Activity Reviews include two separate publications: SAR Activity Review Trends, Tips & Issues and SAR Activity Review by the Numbers . They were published under the auspices of the Bank Secrecy Act Advisory Group. These publications include: statistics regarding SAR filings and trends; an industry forum highlighting compliance issues and practices prepared by private sector members of the Advisory Group; and guidance regarding practical issues relevant to SAR filing and reporting.

[7] FinCEN staff have indicated that the responses to Questions 17 and 18 in this Advisory are no longer completely accurate due to the expiration on July 1, 2004, of an exception relating to coded names and pseudonyms, at which time FinCEN confirmed the prohibition of the use of coded names and pseudonyms, but determined that the Travel Rule should be read to allow the use of mailing addresses. See 68 Fed. Reg. 66708 (Nov. 28, 2003).

[8] As of the date of this guide, FATF has identified Iran and North Korea as high risk jurisdictions. Eighteen other countries are also “monitored jurisdictions.” See http://www.fatf-gafi.org/countries/#high-risk .

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NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.

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Mutual Funds: What They Are and How They Work

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Mutual funds let you pool your money with other investors to purchase stocks, bonds, and other securities.

Mutual funds act as a basket of securities you buy all at once, which can be easier than picking and choosing individual investments.

Actively managed mutual funds tend to be more expensive than passively managed mutual funds.

What is a mutual fund?

Mutual funds a type of investment that pools together money from many investors, then uses that money to mutually invest in stocks, bonds or other assets. Mutual funds are typically managed by a professional who selects the investments for the fund.

By allowing investors to buy into many investments with a single purchase, a mutual fund can help build more diversified portfolios than most investors could build on their own. Index funds , bond funds and target date funds are all types of mutual funds.

Mutual fund investors don’t directly own the stock or other investments held by the fund, but they do share equally in the profits or losses of the fund’s total holdings — hence the “mutual” in mutual funds.

» Learn how to invest in mutual funds

Active vs. passive mutual funds

A mutual fund's fees and performance will depend on whether it is actively or passively managed.

Passive mutual funds

Passively managed funds invest to align with a specific benchmark. They try to match the performance of a market index (such as the S&P 500), and therefore typically don’t require management by a professional. That translates into lower overhead for the fund, which means passive mutual funds often carry lower fees than actively managed funds.

» Ready to invest? View the best brokers for buying mutual funds

Here are two types of mutual funds popular for passive investing:

Index funds are made up of stocks or bonds that are listed on a particular index, so the risk aims to mirror the risk of that index, as do the returns. If you own an S&P 500 index fund and you hear that the S&P 500 was up 1% for the day, that means your index fund should be up about that much, too.

Exchange-traded funds can be traded like individual stocks, but offer the diversification benefits of mutual funds. In many cases, ETFs will have a lower minimum investment than index funds. ETFs may be more tax-efficient than index funds.

Active mutual funds

Actively managed funds have a professional manager or management team making decisions about how to invest the fund's money. Often, they try to outperform the market or a benchmark index, but studies have shown passive investing strategies often deliver better returns .

Categories of mutual funds

Beyond the active and passive designations, mutual funds are also divided into other categories. Some mutual funds focus on a single asset class, such as stocks or bonds, while others invest in a variety. These are the main types of mutual funds:

Stock (equity) funds

Typically carry the greatest risk alongside the greatest potential returns. Fluctuations in the stock market can drastically affect the returns of equity funds. There are several types of equity funds, such as growth funds, income funds and sector funds. Each of these groups tries to maintain a portfolio of stocks with certain characteristics.

» View the best mutual funds this month

Value funds

Equity funds that seek to invest in companies that are determined to be undervalued based on the company's fundamentals.

Balanced funds

invest in a mix of stocks, bonds and other securities. Balanced funds (also called asset allocation funds or hybrid funds) are often a “fund of funds,” investing in a group of other mutual funds. One popular example is a target-date fund , which automatically chooses and reallocates assets toward safer investments as you approach retirement age.

Blended funds

These include a mix of value and growth stocks, or those that offer strong earnings growth.

Bond (fixed-income) funds

Bond funds are typically less risky than stock funds. There are many different types of bonds, so you should research each mutual fund individually in order to determine the amount of risk associated with it. (View our list of the best-performing bond ETFs .)

Money market funds

These products often have the lowest returns because they carry the lowest risk. Money market funds are legally required to invest in high-quality, short-term investments that are issued by the U.S. government or U.S. corporations.

» Learn more: Understand the different types of mutual funds

How do mutual fund profits work?

When you buy into a mutual fund, your investment can increase in value in three ways:

1. Dividend payments

When a fund receives dividends or interest from the securities in its portfolio, it distributes a proportional amount of that income to its investors. When purchasing shares in a mutual fund, you can choose to receive your distributions directly, or have them reinvested in the fund.

2. Capital gains

When a fund sells a security that has gone up in price, this is a capital gain. (And when a fund sells a security that has gone down in price, this is a capital loss.) Most funds distribute any net capital gains to investors annually. In a year with high capital gains payouts, investors may see a large tax bill, especially high-net-worth individuals who will pay higher capital gains tax rates .

3. Net asset value

Mutual fund share purchases are final after the close of market, when the total financial worth of the underlying assets is valued. The price per mutual fund share is known as its net asset value, or NAV. As the value of the fund increases, so does the price to purchase shares in the fund (or the NAV per share). This is similar to when the price of a stock increases — you don’t receive immediate distributions, but the value of your investment is greater, and you would make money should you decide to sell.

Mutual fund pros and cons

Mutual funds are a solid investment option, which is why they are used so widely. They have many pros — but that doesn't mean they don't come with a few cons, or things to watch out for.

These are the primary benefits to investing in mutual funds:

Simplicity. Once you find a mutual fund with a good record, you have a relatively small role to play: Let the fund managers (or the benchmark index, in the case of index funds) do all the heavy lifting.

Professional management. Active fund managers make daily decisions on buying and selling the securities held in the fund — decisions that are based on the fund's goals. For example, in a fund whose goal is high growth, the manager might try to achieve better returns than that of a major stock market like the S&P 500. Conversely, a bond fund manager tries to get the highest returns with the lowest risk. If you're interested in (and willing to pay for) professional management, mutual funds offer that.

Affordability. Mutual funds often have a required minimum from $500 to $3,000, but several brokers offer funds with lower minimums, or no minimum at all.

Liquidity. Compared with other assets you own (such as your car or home), mutual funds are easier to buy and sell.

Diversification. This is one of the most important principles of investing. If a single company fails, and all your money was invested in that one company, then you have lost your money. However, if a single company within a mutual fund fails, your loss is constrained. Mutual funds provide access to a diversified investment without the difficulties of having to purchase and monitor dozens of assets yourself.

Here are the major cons of mutual funds:

Fees. The main disadvantage to mutual funds is that you'll incur fees no matter how the fund performs. However, these fees are much lower on passively managed funds than actively managed funds.

Lack of control. You may not know the exact makeup of the fund's portfolio and have no say over its purchases. However, this can be a relief to some investors who simply don't have the time to track and manage a large portfolio.

Mutual funds vs. ETFs vs. stocks

With so many different types of investments out there, it can be difficult to choose which ones are right for you. Here is a quick comparison between three of the most popular types of investments.

Source for fee information: The Investment Company Institute, Trends in the Expenses and Fees of Funds [0] The Investment Company Institute . Trends in the Expenses and Fees of Funds . Accessed Mar 29, 2024. View all sources .

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Funds “Travel” Regulations: Questions & Answers

The following is revised guidance to financial institutions on the transmittal of funds "Travel" rule. This guidance updates the document “Funds ‘Travel’ Regulations: Questions & Answers” issued in 1997. It includes a parenthetical at the end of each answer indicating the date the answer was issued.

1. Are all transmittals of funds subject to this rule?

No. Only transmittals of funds equal to or greater than $3,000 (or its foreign equivalent) are subject to this rule, regardless of whether or not currency is involved. In addition, transmittals of funds governed by the Electronic Funds Transfer Act (Reg E) or made through ATM or point-of-sale systems are not subject to this rule. (January 1997)

2. What are the "Travel" rule's requirements?

All transmittor's financial institutions must include and send the following in the transmittal order:

• the name of the transmittor
• the account number of the transmittor, if used
• the address of the transmittor
• the identity of the transmittor's financial institution
• the amount of the transmittal order
• the execution date of the transmittal order 
• the identity of the recipient's financial institution

    and, if received:

• the name of the recipient 
• the address of the recipient 
• the account number of the recipient, and 
• any other specific identifier of the recipient.

An intermediary financial institution must pass on all of the above listed information, as specified in the travel rule, it receives from a transmittor's financial institution or the preceding intermediary financial institution (exceptions are noted below, in FAQ #3), but has no general duty to retrieve information not provided by the transmittor's financial institution or the preceding intermediary financial institution.

An intermediary financial institution may receive supplementary information about a payment beyond the information the travel rule requires to be sent to the next financial institution in the payment chain. For example, a payment order may contain additional information about the payment or the parties to the transaction. Due to differences in format and detail included in different systems, such as Fedwire, CHIPS, SWIFT and proprietary message formats, this additional information may not be readily transferable to the format used to send a subsequent payment order. In that event, the sending intermediary institution would be in compliance with the travel rule as long as all of the information specified in the travel rule was included in the subsequent payment order. The information does not have to be structured in the same manner or appear in the same format so long as all of the information required by the travel rule is included. For example, if certain information specified in the travel rule was present in two or more fields in the payment order received, that information need only be included once in the payment order sent to satisfy the requirements of the travel rule.

Intermediary financial institutions in receipt of additional information not required by the travel rule should note that, while compliance with the travel rule is accomplished by inclusion of the information identified in the rule, other monitoring and reporting requirements may apply to additional information and nothing in this FAQ relieves a financial institution of any of its duties with regard to other requirements. In addition, as a matter of risk management, an intermediary financial institution may choose to provide a receiving financial institution supplemental information about a payment and the parties involved. Currently, limited interoperability between systems may prevent a bank from choosing to include certain supplementary information in a payment order. These limitations, however, may be temporary as systems develop.

Moreover, if any lawful order is received at, or if a request from another financial institution is made to a recipient's financial institution, all financial institutions must go back to the transmittor's financial institution, or any other preceding financial institution, if the transmittor's financial institution is unknown, and retrieve information required by the travel rule not included in the transmittal of funds due to system limitations. (Updated November 2010)

3. Are there any exceptions to these requirements?

Yes. If the transmittor and the recipient are the same person, and the transmittor's financial institution and the recipient's financial institution are the same domestic bank or domestic securities broker, the transaction is excepted from the requirement contained in these new rules.

In addition, if both the transmittor and the recipient, that is, as defined, the beneficial recipient, are any of the following, then the transmittal of funds is not subject to these rules:

• Domestic bank;
• Wholly owned domestic subsidiary of a domestic bank;
• Domestic broker or dealer in securities;
• Wholly owned domestic subsidiary of a domestic broker or dealer in securities;
• Domestic futures commission merchant or an introducing broker in commodities;
• Wholly owned domestic subsidiary of a domestic futures commission merchant or an introducing broker in commodities;
• The United States;
• Federal agency or instrumentality;
• State or local government; State or local agency or instrumentality; or
• Domestic mutual fund. (Updated November 2010)

4. Does this rule require any reporting to the government of any information?

No. However, if a transmittal of funds seems to the financial institution to be suspicious, then a Suspicious Activity Report is required, if the financial institution is subject to the Bank Secrecy Act's suspicious activity reporting requirement. (January 1997)

5. How long does a financial institution have to keep records required by these new rules?

Five (5) years. (January 1997)

6. What is the benefit of this rule to the public?

Law enforcement authorities have identified instances to the Treasury in which records maintained by financial institutions were incomplete or insufficient and thereby hampered criminal investigations. In addition, in certain criminal investigations, financial institutions were unable, on a timely basis, to provide law enforcement authorities with useful financial records of transmittals of funds. This rule was created to ensure that in criminal investigations, as well as tax or regulatory proceedings, sufficient information would be available to quickly enable authorities to determine the source of the transmittal of funds and its recipient. Finally, it is anticipated that this rule will more easily permit law enforcement authorities to determine the parties to a transaction. (January 1997)

7. What is a financial institution for the purposes of this rule?

The term "financial institution" includes: banks; securities brokers or dealers; casinos subject to the Bank Secrecy Act; money transmitters, check cashers, currency exchangers, and money order issuers and sellers subject to the Bank Secrecy Act; futures commission merchants and introducing brokers in commodities; and mutual funds. Please see 31 CFR 103.11 for more information. (November 2010)

8. Does this rule treat banks and non-bank financial institutions differently?

No. Banks and non-bank financial institutions are treated identically under the Travel rule. (January 1997)

9. What are some of the implications of the Travel rule for financial institutions subject to this rule?

The most important implication is that financial institutions must be aware that if a transmittal of funds involves both bank and non-bank financial institutions, each financial institution must carefully analyze and understand all of the definitions that apply to its role in the transmittal of funds. This is important because the rule's requirements on financial institutions differ, depending on what role a financial institution plays in a transmittal of funds.

For example, in a situation in which the customer of a securities broker initiates a transmittal of funds that is sent through a bank, that bank is an intermediary financial institution for the purposes of the Travel rule.

The next important implication is that financial institutions must carefully understand the role of the succeeding financial institution in the chain of each transmittal of funds, particularly where a transmittal of funds moves from a bank to a non-bank, or vice versa. This is important because the Travel rule's requirement to pass information to the next financial institution in the chain implicitly requires financial institutions that carry out transmittals of funds to coordinate the transfer of information required by this new rule.

Finally, as the range of services offered by financial institutions expands, financial institutions must recognize that a single transmittal may involve two or more funds transfer systems. In such cases, it is important that financial institutions understand their roles in such a complex transmittal of funds, because their duties under this rule arise from their role(s) in the transmittal of funds. (January 1997)

10. What is the relationship between the terms used in this rule and those used within Article 4A of the Uniform Commercial Code (UCC)?

This rule uses terms that are intended to parallel those used in UCC Article 4A, but that are applicable to all financial institutions, as defined within the Bank Secrecy Act's implementing regulations.

(January 1997)

11. Do the terms created in this regulation apply to transmittals of funds to or from anywhere in the world?

Yes. However, the requirements of the Bank Secrecy Act apply only to activities of financial institutions within the United States. Thus, for example, part, but not all, of an international transmittal of funds can be subject to the Travel rule. (January 1997)

12. Is this rule limited to wire transfers?

No. The term transmittal of funds includes other transactions and transfers in addition to wire transfers or electronic transfers. (January 1997)

13. What are examples of transmittals of funds that are not wire transfers?

Financial institutions sometimes carry out transmittals of funds using correspondent accounts or journal entry transfers such as "due from" and "due to" accounts. In such cases, covered transmittals of funds have occurred even though no wire transfer has occurred.

In addition, a check can be the transmittal order within a transmittal of funds. This limited case occurs when Customer 1 goes into Financial Institution A and orders a transmittal of funds be sent to Customer 2 at Financial Institution B. Financial Institution A, perhaps because it is a small financial institution or because the transaction involves a function (such as a trust) that is segregated from the rest of the financial institution, sends a check, payable to Financial Institution B, directly to Financial Institution B, and does not send the check directly to Customer 1 or to Customer 2. This check must be Financial Institution A's own check (however, it need not be drawn on Financial Institution A), and not the check of the customer. This check contains accompanying instructions to have Financial Institution B subsequently credit Customer 2's account. In such a case, the check and its instructions are the transmittal order effecting a transmittal of funds. (January 1997)

14. How should aggregated transmittals of funds be treated?

This is a situation where a financial institution aggregates many separate requests for transmittals of funds into one combined transmittal of funds.

Whenever a financial institution aggregates separate transmittors from separate transmittals of funds, the transmittor's financial institution itself becomes the transmittor, for the purpose of the Travel rule. Conversely, any time a financial institution combines separate recipients from separate transmittals of funds, the recipient's financial institution itself becomes the recipient, for the purpose of the Travel rule.

For example, if a money transmitter has five (5) customers who wish to have funds disbursed to five separate recipients at a separate money transmitter, and the money transmitter uses a bank to carry out the movement of funds, the bank might aggregate the five (5) separate customers. In such an instance and for the purposes of the Travel rule, the bank may list as transmittor the transmittors’ money transmitter, and as recipient the recipients' money transmitter. However, the transmittors' money transmitter itself is independently obligated to make travel the required information to the recipients' money transmitter. Thus, the information is still required to travel in an aggregated transmittal of funds, although not necessarily in the same manner or by the same parties as in a non-aggregated transmittal of funds. (January 1997)

15. How should joint party transmittals of funds be treated?

For example, Ms. A and Ms. B, sisters with different names and addresses, jointly act as the transmittor or as the recipient. In such cases, it may be impossible to transfer all the information required under the Travel rule. In this instance, the Treasury suggests the following:

When a transmittal of funds is initiated by more than one transmittor, or sent to more than one recipient, the transmittor's financial institution may select one transmittor, or one recipient, as the person whose information must be passed under the “Travel” rule. In all cases involving a transmittal of funds from a joint account, the account holder that ordered the transmittal of funds should be identified as the transmittor on the transmittal order. Please note that for the Joint Rule [31 CFR 103.33(e) and (f)], records must still be kept on all parties. (January 1997)

16. How should a financial institution treat a customer who uses a code name or a pseudonym, or a customer who has requested that the financial institution hold his/her mail?

For purposes of compliance with the Travel rule, the use of a code name or pseudonym is prohibited. In all such cases, the financial institution must use the customer's true name, and the customer's address. Customers may use abbreviated names, names reflecting different accounts of a corporation, as well as trade and assumed names, or names of unincorporated divisions or departments of businesses.

There may be legitimate reasons for having the financial institution's address serve as the transmittor's mailing address, such as where a customer has requested that the financial institution hold his/her mail. Consequently, so long as the financial institution maintains on file the transmittor's true address and such true address is retrievable upon request by law enforcement, the financial institution may comply with Section 103.33(g) by forwarding with the transmittal order the customer’s mailing address that is maintained in its automated Customer Information File (CIF) (even if that address happens to be the bank's own mailing address). (Updated November 2010)

17. To whom can a financial institution go should it have further questions?

Any financial institution may contact its primary Bank Secrecy Act examination authority, or the Treasury Department's Financial Crimes Enforcement Network can be contacted regarding questions on the Bank Secrecy Act rules at (800) 949-2732. (Updated November 2010)

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A beginner's guide to travel credit cards

Key takeaways

• Travel reward programs allow you to earn points or miles when you make purchases with certain credit cards.
• Once you hit a specific spending threshold, points can be redeemed for flights, hotel stays, and other travel-related perks.
• The point-to-dollar exchange rate varies widely with each program and could add up to big savings, but program fees could offset the benefits in some cases.
• Rewards cards that aren't tied to a specific company often let you transfer points to a participating travel partner like a hotel or airline.

Using credit to book travel can unlock cheaper, even free ways to see the world if you play your cards right. Travel credit cards also may offer airport lounge access or rewards you can redeem for travel-related perks like hotel or flight upgrades. There's a reason why 41% of Americans already use a travel rewards credit card, according to a 2023 NerdWallet survey. 1 But choosing one can be daunting. Here's how travel rewards work and how to navigate the options.

Feed your brain. Fund your future.

How do travel rewards work?

Travel reward programs function on a simple premise: You earn points or miles by spending on a designated credit card. Depending on the specific card, transactions such as booking flights or hotel stays through partner companies can earn you these points. Some cards even offer points on everyday purchases, like groceries or gas, or for every dollar spent. You could even earn bonus incentives by signing up (these are called introductory offers) or by passing a spending threshold on certain types of purchases.

Once you've accumulated enough points, you can then spend them on benefits within your travel rewards programs, such as flights, hotel stays, upgrades, and more, depending on the program. And these points can add up to some serious savings. Although it's tricky to assign a specific dollar value to points (more on that later), a 2023 survey found that the average travel card holder had a balance of over 50,000 points. 2

If these rewards would act as a coupon for your current spending habits, a travel rewards credit card could be a good financial move if you'd save more than the annual fees and pay off your balance each month. But if one of these credit cards would encourage you to spend more than you would without it, then a travel rewards program may end up costing you more money than it saves.

Travel rewards and credit card features to consider

Every travel rewards program is unique, but here are some common features to consider when trying to score travel rewards with a credit card.

Annual fees

An annual fee is the cost of owning a travel rewards credit card and reaping the benefits that come with it. Not all travel rewards credit cards have annual fees, but those that do can range from less than $50 to more than $500. 3 While these fees may sound like a drawback, they often correlate with enhanced benefits and rewards potentially including lucrative sign-up bonuses, complimentary travel insurance, and airport lounge access, to name a few.

Before committing to a card with an annual fee, it's important to do a cost-benefit analysis first. Weigh the value of the benefits against the annual fee and decide whether the card would save you money, based on your spending habits and travel aspirations. Also, keep an eye out for waived annual fees in the intro period enabling you to test-drive the card's features without an immediate financial commitment. An introductory bonus offer may cover a card's annual fee for one year, for example, which could be a good trial run to see if the card's perks are worth it.

Initial spend/sign-up bonuses

Sign-up bonuses are an incentive to join a credit card travel rewards program. These bonuses typically come in the form of points or miles awarded to your account—commonly in bulk, at one time—after meeting a minimum spending requirement in a specific timeframe. It gives you a head start on accumulating rewards and can help justify an annual fee (if there is one). Like many promotions, rewards for new cardholders can change at any time, so keep in mind that an offer you see today could be different tomorrow.

And while the allure of a boatload of points may seem irresistible, read the fine print so you know up front whether the required spending aligns with your budget and financial habits. Ultimately, sign-up bonuses (and travel rewards in general) are designed to encourage you to spend more on a given card. This gamification of spending may seem exciting, but it can also foster bad financial habits if you aren't careful. A good guideline to help keep spending in check is to never put more on a credit card than what you can pay off when the bill comes. If the card offers a reward for signing up, consider the long-term value beyond that initial bonus.

Cash-conversion rate for points

Once you've narrowed down your travel rewards program options, get a rough estimate of the cash conversion rate for points or miles. Some programs allow you to directly convert your points to cash and pay down your credit card bill, in which case, the point-to-dollar ratio shouldn't be too hard to figure out. But many don't, only allowing you to spend those points or miles to book travel.

The value of your points or their redemption value aren't always a one-for-one exchange. Online calculators are one way to check whether a specific rewards deal is a good one.

Although it varies from card to card, points may have more lucrative redemption values for some rewards over others. For instance, booking travel through the card issuer's portal might mean 100,000 points gets you a $100 flight—but booking that same flight on another platform might cost 150,000 points. If this sounds confusing that's because it is, and each program has its own incredibly nuanced points exchange program. Online communities for travel rewards points could be another resource for decoding the points value for your specific program and getting info about how other travelers have used their points.

Foreign transaction fees

A foreign transaction fee is an extra charge added to transactions that aren't in US dollars. This includes charges on the ground in another country and purchases online from retailers that work in different currencies. Although these fees vary from card to card, they usually range from 1% to 3% of the transaction. 4

If all your travel is domestic or in countries that use US dollars, you won't have to worry about these fees. But if you plan to travel internationally, you might want to look for a card that waives foreign transaction fees. This will ensure that you're not charged extra for that croissant in Paris or for those souvenirs in Tokyo.

General travel vs. specific travel company rewards

Some travel rewards programs are tied to a specific airline or hotel, while others reward you for spending no matter who you book with. If you always book with a specific airline, stay at one brand of hotel, or use a specific rental car company, you could get more value for your points—or earn more points—if you use that company's travel rewards credit card.

Transfer point programs

Many general travel rewards credit cards let you transfer their points to loyalty programs at different hotels and airlines, which you can then redeem for hotel stays and flights. These exchange programs tend to have a higher redemption value than programs offering cash back and, by most estimates, are the best way to maximize the benefits of a travel rewards credit card. Keep in mind that credit card companies have different exchange rates for each hotel and airline partner, so you'll have to determine on a case-by-case basis whether an exchange program is worthwhile for your specific card.

Airport perks

Airport lounge access is a popular perk for travel rewards credit card holders, especially those who travel often. Some programs will also cover the cost of programs that make getting through airport security easier. Consider the annual fees associated with each card and whether these perks would cost less if you paid for them with cash—and without paying for the card.

Consider general cash-back cards

Making the most of a travel rewards program can be a lot of work. Not to mention, travel rewards points can't always be easily redeemed unless you plan to travel. If you're looking for a less fussy and more liquid way to earn rewards for your credit card spending, consider a general cash-back card. Typically, these credit cards give you a percentage of your total spending back in cash without having to calculate exchange rates or redemption values.

One to consider: the Fidelity® Rewards Visa Signature® Credit Card, which can earn you unlimited 2% cash back on everyday spending. 5 That cash back can be deposited into any eligible Fidelity account, 6 giving your money more chances to grow.

Spend and earn at the same time

Spending on your Fidelity ® Rewards Visa Signature ® Card can put money in your Fidelity account.

More to explore

How to save money on travel, 10 credit card security tips, subscribe to fidelity smart money ℠, looking for more ideas and insights, thanks for subscribing.

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Oh, hello again, thanks for subscribing to looking for more ideas and insights you might like these too:, looking for more ideas and insights you might like these too:, fidelity viewpoints ® timely news and insights from our pros on markets, investing, and personal finance. (debug tcm:2 ... decode crypto clarity on crypto every month. build your knowledge with education for all levels. fidelity smart money ℠ what the news means for your money, plus tips to help you spend, save, and invest. active investor our most advanced investment insights, strategies, and tools. insights from fidelity wealth management ℠ timely news, events, and wealth strategies from top fidelity thought leaders. women talk money real talk and helpful tips about money, investing, and careers. educational webinars and events free financial education from fidelity and other leading industry professionals. fidelity viewpoints ® timely news and insights from our pros on markets, investing, and personal finance. (debug tcm:2 ... decode crypto clarity on crypto every month. build your knowledge with education for all levels. fidelity smart money ℠ what the news means for your money, plus tips to help you spend, save, and invest. active investor our most advanced investment insights, strategies, and tools. insights from fidelity wealth management ℠ timely news, events, and wealth strategies from top fidelity thought leaders. women talk money real talk and helpful tips about money, investing, and careers. educational webinars and events free financial education from fidelity and other leading industry professionals. done add subscriptions no, thanks. 1. erin el issa, "how the 41% of americans with a travel credit card can boost rewards," nerdwallet, march 28, 2023. 2. erin el issa, "how the 41% of americans with a travel credit card can boost rewards." 3. beverly harzog, "best travel rewards credit cards of 2024," u.s. news and world report, april 9, 2024. 4. lyle daly, "what happens if a credit card's sign-up bonus increases after you get the card," the accent: motely fool, november 14, 2024 5. you will earn 2 points per dollar in eligible net purchases (net purchases are purchases minus credits and returns) that you charge. account must be open and in good standing to earn and redeem rewards and benefits. upon approval, refer to your program rules for additional information. subject to applicable law, you may not redeem reward points, and you will immediately lose all of your reward points, if your account is closed to future transactions (including, but not limited to, due to program misuse, failure to pay, bankruptcy, or death). reward points will not expire as long as your account remains open. certain transactions are not eligible for reward points, including advances (as defined in the agreement, including wire transfers, travelers checks, money orders, foreign cash transactions, betting transactions, lottery tickets and atm disbursements), convenience checks, balance transfers, unauthorized or fraudulent charges, overdraft advances, interest charges, fees, credit insurance charges, transactions to fund certain prepaid card products, u.s. mint purchases, or transactions to purchase cash convertible items. the 2% cash back rewards value applies only to points redeemed for a deposit into an eligible fidelity ® account. the redemption value is different if you choose to redeem your points for other rewards such as travel options, merchandise, gift cards, and/or statement credit. other restrictions apply. full details appear in the program rules new card customers receive with their card. establishment or ownership of a fidelity ®  account or other relationship with fidelity investments ®  is not required to obtain a card or to be eligible to use points to obtain any rewards offered under the program other than fidelity rewards. 6. eligible accounts include most nonretirement registrations as well as traditional ira, roth ira, rollover ira, sep ira, fidelity charitable ® giving account ® , fidelity hsa ® , and fidelity ® -managed 529 college savings plan accounts. the ability to contribute to an ira or 529 college savings plan account is subject to irs rules and specific program policies, including those on eligibility and annual and maximum contribution limits. full details appear in the program guidelines new card customers receive with their card. contributions to fidelity charitable ® are generally eligible for a federal income tax charitable deduction. please consult with your tax advisor. the list of eligible registration types may change without notice at fidelity’s sole discretion. for more information about whether a particular registration is eligible, please call 1-800-fidelity (800-343-3548). the third parties mentioned herein and fidelity investments are independent entities and are not legally affiliated. the views expressed are as of the date indicated and may change based on market or other conditions. unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of fidelity investments. the third-party contributors are not employed by fidelity but are compensated for their services. the fidelity investments and pyramid design logo is a registered service mark of fmr llc. the third-party trademarks and service marks appearing herein are the property of their respective owners. fidelity brokerage services llc, member nyse, sipc , 900 salem street, smithfield, ri 02917 © 2024 fmr llc. all rights reserved. 1141513.1.0 mutual funds etfs fixed income bonds cds options active trader pro investor centers stocks online trading annuities life insurance & long term care small business retirement plans 529 plans iras retirement products retirement planning charitable giving fidsafe , (opens in a new window) finra's brokercheck , (opens in a new window) health savings account stay connected.

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