Open-End Fund
An open-end fund is an investment company that can issue an unlimited number of shares. As per its name, this vehicle is open and liquid. Therefore, investors can can buy or sell their units at any time based on net asset value. Most mutual funds are open end, as are hedge funds and exchange-traded funds.
Personal Finance
Personal Finance is the process of evaluating, planning, and managing a household’s monetary needs, goals, strategies, and activities. The discipline covers budgeting, saving, credit, and debt. It further encompasses education, insurance, investment, tax, retirement, and estate planning. The term often refers to the segment of the financial services industry that advises individuals and families.
Qualified Retirement Plan
A qualified retirement plan is an employer-sponsored plan that meets the requirements of Section 401(a) of the Internal Revenue Code. Thus, such plans are eligible for certain Internal Revenue Service (IRS) tax benefits. Examples of qualified retirement plans include 401(k), 403(b), and profit-sharing plans.
Rebalancing
The process of realigning the weightings of different types of securities in an investment portfolio. Rebalancing involves systematically buying and selling securities to maintain the portfolio's optimum asset allocation percentages and risk levels.
Risk Tolerance
Risk tolerance refers to an investor’s willingness to lose principal in exchange for potentially greater return. Intrinsically, risk tolerance is subjective. Thus, it varies according to a number of factors—like age, affluence, and sophistication. For example, the younger, wealthier, and savvier the investor, the higher is their tolerance for risk. As such, an aggressive investor with high risk tolerance may prefer small-company stocks, emerging market equities, and gold. By contrast, a conservative investor with low risk tolerance might opt for money-market funds, certificates of deposit, and Treasuries.
Stock
A stock (or an equity) is a financial security that grants the investor a share of ownership in a company. As a result, the individual owners have claims to the company’s assets and earnings proportionate to their number of shares. In addition, these shareholders have a right to vote for the board of directors.
Treasury Bill
A Treasury Bill (T-Bill) is a short-term debt obligation of the United States government. These securities have a maturity period of one year or less and sell at a discount from face value. Given their backing by the U.S. Department of the Treasury, investors generally regard T-Bills as low-risk and secure.
Underwriting
Underwriting is the process through which an individual or institution evaluates and assumes a financial risk. Generally, such risk involves insurance, investments, or loans. Thus, insurance companies indemnify against future loss, damage, or liability. Investment bankers guarantee the purchase of entire issues of stocks or bonds. And lending institutions provide capital for mortgages. The term “underwrite” dates back to the marine insurance market in 17th century. At famed insurer Lloyd's of London, each financial backer would write his name under the amount of maritime risk he was willing to assume for a specified premium.
Volatility
Volatility is a measure of risk based on an asset’s price fluctuation over time. Investors and traders calculate a security or index’s volatility according to its standard deviation of returns. Generally, the higher the volatility, the riskier the asset.