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What are Blend Mutual Funds?

Blend mutual funds offer exposure to both growth stocks and value stocks. Blend mutual funds seek to capture the upside of growth stocks as well as the dividend yield of value stocks. P/E ratios can be used to identify a growth or value stock: where a P/E over about 25 is a growth stock and under about 15 is a value stock. Blend funds are generally considered a good core asset, but are not the same thing as a Core Fund. Continue reading...

What is Bitcoin lending?

The cryptocurrency community has opened up creative options for making money in the form of lending platforms. A few forms of lending exist for cryptocurrencies at the time of this writing. One way to do it is to make your funds available in a lending market facilitated by an exchange, such as Poloniex, where you can name your interest rate and allow other traders to use your funds for trading on margin. Continue reading...

What are Core Mutual Funds?

Core mutual funds represent the middle ground between Value and Growth, but are not the same as Blend funds. Core Mutual Funds are in between Growth and Value funds. In other words, companies in their portfolio have Price to Earnings ratios which are higher than those of Value companies but lower than those of Growth companies. This category is essentially based on the 9-box Morningstar categorization system, which separates equity funds into Small, Mid and Large Cap on the vertical axis and Value, Core, and Growth on the horizontal axis. Continue reading...

What are Value Mutual Funds?

Value mutual funds are those that invest in companies with strong fundamentals and steady earnings histories. A Value Mutual Fund’s portfolio will typically consist of stocks that are considered to be undervalued and expected to pay out dividends. The stocks held in such funds usually have P/E ratios in-line with or lower than the S&P 500 index, and such companies are usually older and well-established. Continue reading...

How Do I Find the Best Mutual Fund?

It requires a great deal of due diligence, but investors should understand that past performance is not indicative of future performance. Focus on experience. In the stock market, as with most things in life, hindsight is 20/20. There are countless lists on the internet with titles like “The Best Mutual Fund Families” and “50 Winning Mutual Funds.” It is important to understand that the names on those lists are a function of hindsight and not foresight. Continue reading...

What is Underwriting?

Underwriting is the process through which risks are accepted by an institution. Underwriting is the assessment of risk or the acceptance of risk after such assessment by a company or bank. Underwriters in insurance companies will assess a risk prior to the company accepting the risk; once the risk has been accepted the company bears the burden of covering the potential losses associated with the risk. The company is paid a premium for accepting the risk. Continue reading...

What can I find out about hedge funds?

Hedge funds have historically been very secretive. They still mainly fall under Regulation D and private-placement laws, but their reporting requirements have been slightly expanded after the Dodd-Frank Act in 2010. Now, they are a little more transparent, but not fully. Up until the Dodd-Frank Act, it was basically impossible to know what hedge funds were investing in and who was involved. Hedge fund managers and their investment banks were under no obligation to report the holdings, and they generally avoided leaking any information about their market positions for fear of damaging their advantages. Continue reading...

What is Cash Collateral?

Cash collateral is liquid cash and cash equivalents designated as collateral for loans and debts of various sorts. One frequently used example of cash collateral is cash used in short selling of securities in a brokerage account. While securities equal to significantly more than the required cash margin can be substituted for cash, the most cost-effective and least risky way to maintain margin requirements is with cash and cash equivalents. Continue reading...

Where can I find information about hedge funds and their performance?

Not all hedge funds are obligated to disclose their holdings, trades, or performance. About half of them are, however, and their performance can be found online through Morningstar and other sources. This information may not be as detailed as you would like, and you may try other means. Since the Dodd-Frank Act in 2010, more information about hedge funds is available to the public. This does not mean that all the information you seek will be readily available, however, and there are many hedge funds that do not make their information public. Continue reading...

Navigating Investment Diversification: Blend or Balanced Funds?

Investing can be as much about managing risks as it is about targeting returns. Two popular vehicles for diversification and risk management are blend funds and balanced funds. While they may sound similar, they serve different purposes in an investor's portfolio. Understanding these differences is critical for making informed investment decisions. Continue reading...

What is the Interbank Rate?

The interbank rate is the average lending rate used between banks of comparable size and creditworthiness when they borrow money from each other. The Federal Funds Rate is the benchmark in America, while LIBOR (the London Interbank Offered Rate) is more prevalent elsewhere. These are indexes which are used to determine rates and terms for other financial instruments and swaps. The Prime Rate, or the rate banks will used for their most credit-worthy customers, is tied to the interbank rate but is slightly higher of course. In America the Federal Funds Rate is so called because the Central bank participates in the lending. This is sometimes called the overnight rate when it refers to money that is lent between banks overnight. Continue reading...

What are Municipal Bond Funds?

Municipal bonds funds invest exclusively in tax-advantaged municipal bond issues. Municipal Bond Funds invest in issues of municipal debt, often with the intention of using its tax advantages. Bonds held in a ‘muni fund’ might be state or local issues of general obligation or revenue bonds. Gains on muni funds are not taxable at the federal level, and if a person resides in the state in which the bond was issued, they can most likely avoid state or local taxes on gains as well. Continue reading...

What is the Federal Housing Administration (FHA)?

The Federal Housing Administration (FHA) is to lenders what FDIC insurance is to savers; it protects lending institutions from mortgage defaults. By protecting lenders, the FHA was begun with the intention to stimulate the housing market. The FHA was established in 1934 in an effort to stimulate the construction and purchase of new homes by offering insurance protection to the institutions (banks and mortgage companies) who make mortgage loans. Continue reading...

What are Mutual Funds?

Mutual funds are managed portfolios of stocks and bonds, where the portfolio manager uses pooled investor funds to manage the portfolio. In the U.S., the first mutual fund was created in 1924 when three investors in Boston pooled their money and formed the Massachusetts Investors’ Trust. The essence behind Mutual Funds today is the same – a pool of money is collected from a number of investors and then professionally managed. Continue reading...

What are Specialty Funds?

Specialty funds may be completely unique and offer investors a strategy that they cannot find elsewhere, or they may just represent a strategy with an extremely narrow focus. There are many Specialty Funds, and their investment strategy is bounded only by the imaginations of the companies who create them. They tend to focus on markets that an investor may not have any exposure to otherwise, such as the Ultrashort Japan Fund. Continue reading...

What are Alternative Funds?

The idea with Alternative fund investing is to gain exposure to assets which are not highly correlated with the rest of your portfolio, and which use non-traditional approaches to fund management. Alternative Funds are mutual funds that invest in non-traditional asset classes such as commodities (gold, silver, oil, etc.), agricultural products (cocoa futures, orange futures, pork-belly futures), non-publicly traded companies and limited partnerships, and so on. Continue reading...

What are Balanced Funds?

Balanced funds offer a well-diversified investment that includes relatively equal exposure to stocks and bonds. Balanced funds combine stocks, bonds, and money market instruments to give investors some upside potential along with a goal of capital preservation. While they are considered to be safer, they also have more modest returns in most market environments, because, of course lower risk investments have lower potential returns. Continue reading...

What is a Distributed Ledger?

A distributed ledger is a records system in which the same information is held redundantly across many nodes in a network, and is essential to blockchain technology. Centralized databases used to be the primary way that important records of transaction histories and so forth were held.  Databases validate the identity of those requesting access to the records by asking for and retaining personally identifying information. If that office building were to lose power, was hacked, or was destroyed, it is possible for all of the information to be lost or given over to hands of bad actors. Even with cloud storage backups, the security and financial risk to any one of these storage depositories remain a problem. Continue reading...

What is a foreign fund?

A foreign fund is a mutual fund that invests solely in companies abroad and does not invest in corporations owned in the US. Owning foreign companies can be a very good diversification strategy and is considered a core holding in the portfolio of most investors. Foreign exposure means that if the US economy hits a rough patch, you may have a hedge in the foreign fund if the companies or markets in other parts of the world are not entirely correlated. Continue reading...

What is the Prime Rate

The prime rate is the lowest interest rate that banks will charge on loans at a given time, based on the Federal Funds Rate. Individual banks set their own prime rate, which they may also call their "Reference Rate" or "Base Lending Rate." It is the least they will charge for a loan at a given time, based on the creditworthiness of the customer, and the only clients whose risk of default is low enough to approach the prime rate are very large commercial clients. Continue reading...