Interest payments occur when you lend someone money and they pay back more than they borrowed.� For example, when you deposit money into a high interest savings account, then the bank will give you interest payments for lending them the money.� (Note: interest payments also occur when you borrow money, but then you pay interest […]
November 2008
An index fund is a mutual fund that invests in the same stocks that are contained in a stock market index, in the same proportion as the stock index. Imagine a stock index – let’s call it the ABC index – that contains 2 stocks:- American Express and Kraft.� Let’s say that the ABC index […]
Your investment time horizon is the length of time until you need to sell your investment. This is an important concept when trying to decide what kind of investments you should have in your portfolio. An investor who doesn�t need their money for decades can own a riskier portfolio compared to someone who needs the […]
Target retirement funds are mutual funds that are geared toward investors that have a specific target retirement date.� The idea behind these funds is they change their asset allocation over time to meet the needs of the investor. If your planned retirement date is far away (say 25 years) then the fund will have a […]
A bull market is basically a stock market index that is trending upwards for a decent length of time.� There is no exact definition for how much the market has to go up or how long the upward movement should last for a bull market to occur but usually when most investors are feeling �happy� […]
Timing the market or market timing occurs when an investor or fund manager makes a decision to buy or sell an investment in anticipation of that investment going up or down in value.� This can occur on a broad scale where a fund manager might alter the ratio of stocks to bonds in his fund […]
Investment diversification means that an investor should buy investments that are not concentrated into one company, industry, country or even asset class. You have undoubtedly heard the saying �Don�t put all your eggs in one basket�?� The same principle applies to investing � put your investments into different baskets.� If some of the baskets should […]
Many mutual funds invest mostly in stocks or bonds.� Balanced,asset allocation, and target retirement funds invest in stocks, bonds and cash. Reasons behind these funds One stop shopping � Rather than an investor buying an stock fund and a fixed income fund, they can just buy one balanced fund which will simplify their portfolio. Manage […]
