What are Real Estate Funds?
Real estate mutual funds invest in publicly-traded companies in the real estate industry, and are slightly different than REITs. A real estate mutual fund invests in companies in the real estate industry. These companies will include real estate brokerage companies in the commercial, residential, or raw land sector, as well as the lending institutions that are involved in such transactions, among other holdings. Continue reading...
What is the “Riskless” (or Risk-Free) Rate of Return?
For comparisons of the risk/return ratio of an investment, one must start with a benchmark of a risk-free rate of return in the current market. Since U.S. Treasury bills are backed by the full faith, credit, and taxing power of the U.S. Government, they are considered “riskless,” or as close to riskless as we can get. The current yield on a 10-year Treasury note is generally considered the risk-free rate of return. Continue reading...
What Happens to My Annuity After I Die?
Annuities allow you to designate beneficiaries, but the payouts or benefits they receive depend on the wording in the contract, and can vary greatly. Annuities, even if they are designated as Individual IRAs or qualified accounts, can have joint annuitants. This way, if an income stream has been elected that is joint-life, then your beneficiary, whether a spouse or even a younger family member, will continue to receive payments for life. These options can all be elected at purchase. Continue reading...
What is the Law of Supply?
All other things being equal, if the price of a good increases, the supply of that good will increase, and this is known as the Law of Supply. The Supply Curve is plotted on a graph with a y-axis being price and an x-axis being quantity. The relationship is positive and the line will climb up to the right. The is the opposite direction of the Demand Curve, and the place where the two intersect is considered to be the point of market equilibrium. The curves can be shifted by variables not present on the graph, such as changes in levels of income and other factors, but the slopes will remain the same, theoretically. Continue reading...
A-/A3 — credit rating
A- — S&P / Fitch A3 — Moody’s Rating institutions assign various levels of credit ratings to signify the chance of default; the A-/A3 rating is considered Investment Grade, but it is getting closer to the Junk Bond range. If a company or debt issue has a rating of A-/A3, it means that S&P and Fitch have given it an A- and Moody’s has given it an A3 rating. They have their own symbology for their ratings system but these are at the same level on both scales: these ratings are at the 6th or 7th degree from the top possible ratings, which is AAA/Aaa. Continue reading...
What is an Account Executive?
An account executive is an individual who has executive responsibility of the maintenance of client account. In certain businesses, some client accounts have a high degree of importance and priority with regards to sales and operations, perhaps because they generate significant revenue for the company. Examples of such businesses might be advertising, office products, and investment services. The title of account executive is especially fitting if there is a staff which supports the lead account executive in maintenance of the client relationship and account service, but a staff is not required to hold this title. In other businesses this position might be called an account manager. Continue reading...
What is alpha in investing?
Alpha is a risk ratio which measures gains or losses relative to a benchmark, indicating whether an investor is being compensated with a return greater than the volatility risk being taken. Alpha’s counterpart, the Beta figure, measures how closely an investment follows movements in the market as a whole or, when examining mutual funds, how similarly the funds move to their relevant indexes. Alpha is expressed as integers, which can be translated into percentage points above or below a benchmark for a time period. Investors are interested in higher Alpha figures: the larger the positive Alpha, the more the fund in question has outperformed its benchmark. An Alpha of 2 indicates a performance 2% greater than its benchmark; inversely, a -2 Alpha would denote 2% underperformance. Continue reading...
What is the Ladder Strategy for Structuring My Bond Portfolio?
The ladder provides the bondholder with a degree of freedom and some liquidity to take part in possibly improved interest rates in the future. The ladder strategy distributes your funds uniformly among bonds with various durations. For example, if you have $10,000, you buy one bond with a duration of one year, one bond with a duration of two years, etc. If the interest rates go up when the shorter-duration bonds expire, you will be able to reinvest this money with a higher coupon rate (of course, keep in mind that your longer-duration bonds would have fallen in price). Continue reading...
What is standard deviation?
Standard Deviation is a measurement of how far from the average (mean) the majority of a data set lies. Standard Deviation is a measure of variability, and it is on a different scale for each data set being measured; there is no “standard” standard deviation. It is possible to normalize it for comparison to other data sets using measurements like r-squared and the sharpe ratio. The number arrived at when computing standard deviation is going to reveal the distance, in terms of one of the quantifiable variables being observed, from the average, in either a positive or negative direction, within which 68% of the data set falls. Continue reading...
What does 'call option' mean?
If you own a Call Option, you have the right (not the obligation) to purchase a security at an agreed-upon price from the seller of the option. Buying a call option means you are bullish on the security. For example, an investor may buy an August 2017 call on stock XYZ for $50/share (strike price). This means that the owner of this call option has the ability to buy XYZ on the expiration date (August) for $50/share. Continue reading...