It tracks the performance of large U. Inflation - A rise in the prices of goods and services, often equated with loss of purchasing power. Interest rate - The fixed amount of money that an issuer agrees to pay the bondholders.
It is most often a percentage of the face value of the bond. Interest rates constitute one of the self-regulating mechanisms of the market, falling in response to economic weakness and rising on strength. Interest-rate risk - The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates. Investment advisor - An organization employed by a mutual fund to give professional advice on the fund's investments and asset management practices.
Investment company - A corporation, trust or partnership that invests pooled shareholder dollars in securities appropriate to the organization's objective. Mutual funds, closed-end funds and unit investment trusts are the three types of investment companies. Investment objective - The goal of a mutual fund and its shareholders, e. In exchange for signing a letter of intent, the shareholder would often qualify for reduced sales charges.
A letter of intent is not a contract and cannot be enforced, it is just a document stating serious intent to carry out certain business activities. The performance of all mutual funds is ranked quarterly and annually, by type of fund such as aggressive growth fund or income fund. Mutual fund managers try to beat the industry average as well as the other funds in their category.
Liquidity - The ability to have ready access to invested money. Mutual funds are liquid because their shares can be redeemed for current value which may be more or less than the original cost on any business day. Loads back-end, front-end and no-load - Sales charges on mutual funds. A back-end load is assessed at redemption see contingent deferred sales charge , while a front-end load is paid at the time of purchase.
No-load funds are free of sales charges. Long-term investment strategy - A strategy that looks past the day-to-day fluctuations of the stock and bond markets and responds to fundamental changes in the financial markets or the economy. Market timing - A risky investment strategy that calls for buying and selling securities in anticipation of market conditions. Maturity distribution - The breakdown of a portfolio's assets based on the time frame when the investments will mature.
Median Market Cap - The midpoint of market capitalization market price multiplied by the number of shares outstanding of the stocks in a portfolio, where half the stocks have higher market capitalization and half have lower. Money market mutual fund - A short-term investment that seeks to protect principal and generate income by investing in Treasury bills, CDs with maturities less than one year and other conservative investments.
Morningstar ratings - System for rating open- and closed-end mutual funds and annuities by Morningstar Inc. The system rates funds from one to five stars, using a risk-adjusted performance rating in which performance equals total return of the fund. Mutual fund - Fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities or money market securities.
NASDAQ is a computerized system that provides brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange listed securities. The fund's NAV is calculated daily by taking the fund's total assets, subtracting the fund's liabilities, and dividing by the number of shares outstanding. The NAV does not include the sales charge. The process of calculating the NAV is called pricing.
For a stock portfolio, the ratio is the weighted average price-to-book ratio of the stocks it holds. Par value - Par value is the amount originally paid for a bond and the amount that will be repaid at maturity. Portfolio - A collection of investments owned by one organization or individual, and managed as a collective whole with specific investment goals in mind.
Portfolio allocation - Amount of assets in a portfolio specifically designated for a certain type of investment. Portfolio manager - The person or entity responsible for making investment decisions of the portfolio to meet the specific investment objective or goal of the portfolio. Preferred stock - A class of stock with a fixed dividend that has preference over a company's common stock in the payment of dividends and the liquidation of assets.
There are several kinds of preferred stock, among them adjustable-rate and convertible. Price-to-book - The price per share of a stock divided by its book value net worth per share. Prospectus - Formal written offer to sell securities that sets forth the plan for proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision.
Prospectuses are also issued by mutual funds, containing information required by the SEC, such as history, background of managers, fund objectives and policies, financial statement, risks, services and fees. Quality distribution - The breakdown of a portfolio's assets based on quality rating of the investments.
R2 - The percentage of a fund's movements that result from movements in the index ranging from 0 to A fund with an R2 of means that percent of the fund's movement can completely be explained by movements in the fund's external index benchmark. Ratings - Evaluations of the credit quality of bonds usually made by independent rating services. Ratings generally measure the probability of timely repayment of principal and interest on debt securities.
Recession - A downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country's gross domestic product. Reinvestment option - Refers to an arrangement under which a mutual fund will apply dividends or capital gains distributions for its shareholders toward the purchase of additional shares. Relative risk and potential return - The amount of potential return from an investment as related to the amount of risk you are willing to accept.
Renewable Energy Certificates RECs - A market-based instrument that is issued when one megawatt-hour of electricity is generated and delivered to the electricity grid from a renewable energy resource. Rights of accumulation - The right to buy over a period of time. For example, this might be done by an institutional investor to avoid making a single substantial purchase that might drive up the market price, or by a retail investor who wants to reduce risk by dollar cost averaging.
Sales charge - An amount charged for the sale of some fund shares, usually those sold by brokers or other sales professionals. By regulation, a mutual fund sales charge may not exceed 8. The charge may vary depending on the amount invested and the fund chosen. A sales charge or load is reflected in the asked or offering price. See loads. Securities - Another name for investments such as stocks or bonds. The name 'securities' comes from the documents that certify an investor's ownership of particular stocks or bonds.
Securities and Exchange Commission SEC - The federal agency created by the Securities and Exchange Act of that administers the laws governing the securities industry, including the registration and distribution of mutual fund shares. Share classes - Classes represent ownership in the same fund but charge different fees. This can enable shareholders to choose the type of fee structure that best suits their particular needs.
Sharpe Ratio - A risk-adjusted measure that measures reward per unit of risk. The higher the sharpe ratio, the better. The numerator is the difference between the Fund's annualized return and the annualized return of the risk-free instrument T-Bills. Standard Deviation - A statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution.
Statement of additional information SAI - The supplementary document to a prospectus that contains more detailed information about a mutual fund; also known as 'Part B' of the prospectus. Stock - A long-term, growth-oriented investment representing ownership in a company; also known as 'equity. Stockholder - The owner of common or preferred stock of a corporation.
Also called 'shareholder. Sustainability Bonds - Bond instrument where the proceeds will be exclusively applied to finance or re-finance a combination of both Green and Social Projects. Sustainable Development Goals SDGs - A United Nations Initiative for all countries to adopt 17 goals that address global challenges including poverty, inequality, climate change, environmental degradation, and peace and justice.
Sustainable investing - A forward-looking investment approach that aims to deliver long-term sustainable financial return in a fast changing world. It encompasses a wide ranging spectrum of approaches, the core of which starts with the incorporation of ESG information. Systematic investment plan - A service option that allows investors to buy mutual fund shares on a regular schedule, usually through bank account deductions.
Tax-exempt income - Tax-exempt income is income that is exempt from income taxes. A purchaser of state municipal bonds is exempt from federal taxation on the income earned from the bonds. Top 10 long and short positions - The top 10 holdings ranked by market value in each position category long and short.
A long position is one in which an investor buys shares of stock and as an equity holder will profit if the price of the stock rises. With a short position an investor will sell shares of stock that they do not own but have borrowed. The investor in a short position will profit if the price of the stock falls. Top five detractors - Five assets in a portfolio that generated largest negative returns losses. Total return - Accounts for all of the dividends and interest earned before deductions for fees and expenses, in addition to any changes in the value of the principal, including share price, assuming the funds' dividends and capital gains are reinvested.
Also, a method of calculating an investment's return that takes share price changes and dividends into account. Tracking Error - The active risk of the portfolio. It determines the annualized standard deviation of the excess returns between the portfolio and the benchmark. Transfer agent - An agent, usually a commercial bank, appointed to monitor records of stocks, bonds and shareholders.
A transfer agent keeps a record of the name of each registered shareholder, his or her address, the number of shares owned, and sees that certificates presented for the transfer are properly canceled and new certificates are issued in the name of the new owner. Treasury bill - Negotiable short-term one year or less debt obligations issued by the U. Treasury bond - Negotiable long-term 10 years or longer debt obligations issued by the U.
Treasury note - Negotiable medium-term one year to 10 years debt obligations issued by the U. Treasury security - Securities issued by the U. Treasury Department and backed by the U. Trustee - 1. An organization or individual who has responsibility for one or more accounts. An individual who, as part of a fund's board of trustees, has ultimate responsibility for a fund's activities. United Nations-convened Net-Zero Asset Owner Alliance - An international group of institutional investors delivering on a commitment to transition investment portfolios to net-zero GHG emissions by United Nations Global Compact UNGC - Strategic policy and advocacy initiative that aim to mobilize a global movement of sustainable companies and stakeholders in the areas of human rights, labor, environment and anti-corruption.
United Nations-Supported Principles for Responsible Investment PRI - An official network of investors that works to promote sustainable investment through the incorporation of environmental, social and governance factors. Valuation - An estimate of the value or worth of a company; the price investors assign to an individual stock.
Value investing - A strategy whereby investors purchase equity securities that they believe are selling below estimated true value. The investor can profit by buying these securities then selling them once they appreciate to their real value. Value-style funds - Value-style funds typically hold company stocks that are undervalued in the market.
Fundamentally strong companies whose stocks are inexpensive but trending upward may also be selected for value funds. Market Cap - Most indexes are constructed by weighting the market capitalization of each stock on the index. In such an index, larger companies account for a greater portion of the index.
Weighted average maturity - A Fund's WAM calculates an average time to maturity of all the securities held in the portfolio, weighted by each security's percentage of net assets. The calculation takes into account the final maturity for a fixed income security and the interest rate reset date for floating rate securities held in the portfolio. This is a way to measure a fund's sensitivity to potential interest rate changes.
YTD total return - Year-to-date return on an investment including appreciation and dividends or interest. YTD Return w load - Year-to-date return on an investment including appreciation and dividends or interest, minus any applicable expenses or charges. Yield - Annual percentage rate of return on capital.
The dividend or interest paid by a company expressed as a percentage of the current price. Yield to maturity - Concept used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. Yield to maturity distribution - The average rate of return that will be earned on a bond if held to maturity.
If a fund has a 12b-1 fee, it will be disclosed in the fee table of the fund's prospectus. The day yield should be regarded as an estimate of investment income and may not equal the fund's actual income distribution rate. You are about to leave the site Close. Please review its terms, privacy and security policies to see how they apply to you. Morgan Asset Management name. Glossary of Investment Terms. LinkedIn Twitter Facebook. Appreciation - The increase in value of a financial asset.
Best-in-class - A top performing product, service or person within a category or peer group. A sustainable investment style that involves investing in companies that lead their peer groups with respect to sustainability performance. Bond fund - A mutual fund that invests exclusively in bonds. Corporate bond - A long-term bond issued by a corporation to raise outside capital. Where to Buy? March 10, 7 min read. Investment Guide. Tenure Series A to H, for tenor 3 years to 10 years, with equal quarterly redemption in each Series, with the first redemption scheduled in the 9 th quarter.
All the series are fully secured by the budgetary allocation of the Government of Uttar Pradesh. To service this debt instrument, 20 crores is escrowed everyday as electricity receivables from discoms. Cons Negative cash flow from operating activities. Fiscal Deficit of Uttar Pradesh is budgeted at High losses due to collection inefficiency. Further, the Company shall be permitted to utilise proceeds of its subsequent two privately placed issues, only after receiving final listing approval from the Stock Exchange.
Company overview Run by approximately employees, UPPCL is responsible for electricity transmission and distribution within the state of Uttar Pradesh. Financial Overview Cash flow last 2 years Cash flow refers to the movement of cash in and out of the business at a specific point in time.
It reflects the net flows of cash that are used to fund the company. Connection Load- 37, MW. Energy Sales- 55, MU per year. Strengths Backed by Government of Uttar Pradesh. Bond issuance to have additional cushion of budgetary allocation from the Govt of Uttar Pradesh covering the entire debt segment. Uttar Pradesh being the 3rd largest state, has revenue surplus revenues since Should you invest?
Related Posts. May 24, 3 min read.
Bond funds take money from many different investors and pool it all together for a fund manager to handle. Usually this means the fund manager uses the money to buy a wide assortment of individual bonds. Investing in bond funds is even safer than owning individual bonds. Bonds come in a variety of forms, each with its own set of benefits and drawbacks.
Unlike stocks , most bonds aren't traded publicly, but rather trade over the counter , which means you must use a broker. Treasury bonds, however, are an exception -- you can buy those directly from the U. The problem with this system is that, because bond transactions don't occur in a centralized location, investors have a harder time knowing whether they're getting a fair price.
A broker, for example, might sell a certain bond at a premium meaning, above its face value. Stocks are investments in a company's future success. When you invest in a company's stock, you profit along with them. The only person who can answer that question is you. Here are some scenarios to consider as you decide:. If you're the risk-averse type who truly can't bear the thought of losing money, bonds might be a more suitable investment for you than stocks.
If you're heavily invested in stocks, bonds are a good way to diversify your portfolio and protect yourself from market volatility. If you're near retirement or already retired, you may not have the time to ride out stock market downturns, in which case bonds are a safer place for your money.
In fact, most people are advised to shift away from stocks and into bonds as they get older, and it's not terrible advice, provided you don't make the mistake of dumping your stocks completely in retirement. A municipal bond is a debt issued by a state or municipality to fund public works. Like other bonds, investors lend money to the issuer for a predetermined period of time. The issuer promises to pay the investor interest over the term of the bond usually twice a year , and then return the principal back to the investor when the bond matures.
A Treasury bond is debt issued by the U. Technically speaking, every kind of debt issued by the federal government is a bond, but the U. Treasury defines the Treasury bond as the year note. Generally considered the safest investment in the world, U. Treasury securities of all lengths provide a nearly guaranteed source of income and hold their value in just about every economic environment.
A corporate bond is a debt instrument issued by a business to raise money. Unlike a stock offering, with which investors buy a stake in the company itself, a bond is a loan with a fixed term and an interest yield that investors will earn. When it matures, or reaches the end of the term, the company repays the bond holder. Why do we invest this way?
Learn More. Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of Discounted offers are only available to new members. Calculated by Time-Weighted Return since Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Premium Services.
Stock Advisor. View Our Services. Our Purpose:. Latest Stock Picks. Source: Getty Images. How do bonds work? How to make money from bonds There are two ways to make money by investing in bonds. The first is to hold those bonds until their maturity date and collect interest payments on them. Bond interest is usually paid twice a year. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy.
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This content is powered by HomeInsurance. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions such as approval for coverage, premiums, commissions and fees and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. Bonds are generally considered an essential component of a diversified investment portfolio.
They bring income and diversification to a portfolio, while typically carrying less risk than stocks. With the right approach, you can get as much yield as you would typically get from certificates of deposit CDs or savings accounts and often more , though you may have to endure the fluctuation of bond prices and some additional risk to do so.
Bonds are an agreement between an investor and the bond issuer — a company, government, or government agency — to pay the investor a certain amount of interest over a specified time frame. The payments on a bond come in two major types — fixed rate and floating rate.
On floating rate bonds, which are less common, the payment adjusts higher or lower in accord with the prevailing interest rate. A bond will typically pay interest on a regular schedule, often quarterly or semi-annually, though sometimes annually. If the price of the bond goes up, the bondholder still receives only that fixed payment.
While that makes sense in some situations, ordinary investors more frequently buy and sell bonds using one of the following methods:. For example, if you need short-term investment-grade bonds, you can simply buy an ETF with that exposure. And the same goes for long-dated or medium-term bonds, or whatever you need. You have many options. ETFs also offer the benefit of diversification through exposure to a mix of bond types, and they usually charge low fees and are tax-efficient.
Bonds can easily be bought and sold through a broker. In that case, they can be redeemed at your local bank. Most bonds purchased by ordinary investors fall into two categories: Bonds issued by governments and those issued by corporations. But government-sponsored agencies such as Fannie Mae and Freddie Mac also issue a type of bond called mortgage-backed securities.
Bonds issued by the U. They are considered a relatively low-risk investment. The U. In contrast, bonds issued by foreign governments may be considered less safe but may offer the potential for higher yields. The federal government also issues savings bonds , a kind of bond that allows individuals to save directly with the government. Savings bonds function differently from standard Treasuries, and they do not pay out the accumulated interest until you redeem the bond.
The main advantage of munis is that the returns they generate are exempt from federal taxes and, in some cases, from state and local taxes too. These are bonds issued by large companies, both domestic and foreign. They pay a wide range of interest rates depending on the creditworthiness of the borrower and maturity. Longer-term bonds typically offer a higher yield than short-term bonds. Government-sponsored enterprises such as Fannie Mae and Freddie Mac offer a special type of bond called a mortgage-backed security , or MBS.
These companies create bonds whose payments are derived from the mortgages that back them. So an MBS may have tens of thousands of homeowners supporting the payment of the bonds through their monthly home payment. Bonds issued by Fannie and Freddie are not guaranteed by the government, though bonds issued by government agency Ginnie Mae and by other firms qualified by Ginnie Mae are backed by the federal government. Bonds offer benefits that make them a valuable counterpart to stocks in most investment portfolios.
While stocks tend to offer higher returns, bonds offer other advantages:. These are a few of the most significant downsides to bonds, but the asset class has performed well in the U. While stocks usually come in one variety — the common stock — bonds from the same company can have many different terms, including the interest rate, the maturity and other items called covenants, which may limit how indebted the borrower can become or stipulate other conditions.
A bond quote incorporates some of these items as well as giving you the last traded price. A bond quote includes the name of the issuer, here Apple, as well as the coupon on the bond, 2. It includes the maturity date of the bond, August 5, The rating means that Apple is judged as having very good credit and that this bond is considered very safe. A lower rating will cost the company more in interest payments than a higher rating, all else equal. If rates rise, then the value of your bonds falls.
If rates fall, then the value of your bonds rises. But bond investors are also concerned with reinvestment risk, that is, will they be able to earn an attractive return when their bond matures? So, bond investors are constantly trying to optimize the current income from their bond portfolio versus the income that they might be able to earn in the future.
With this strategy, an investor buys bonds with staggered maturities say, bonds that mature in one year, two years, three years, four years, and five years. This strategy is useful when you want to minimize reinvestment risk without sacrificing too much return today.
This strategy allows the investor to capture the higher yields on long-term bonds while still maintaining some access to cash with a series of lower-yielding short-term bonds. However, long-dated bonds can fluctuate a lot if interest rates rise. In this strategy, the investor buys bonds over a period of time that mature at roughly the same time.
For example, if you know you have a big expense in five years, you can buy a five-year bond now, and then a four-year bond when you have more money next year. In three years, you can add a two-year bond. In each case, the strategy should reflect your anticipated needs as well as your expectations about how the market and interest rates will perform over time. Whether bonds are a good investment depends on several factors, including your risk tolerance, time horizon and investment goals.
Bonds tend to be less risky than stocks, but that means they generally come with lower average returns. That is especially true for U. Treasury bonds. In other words, bonds have lower risk, which means less potential reward.
Bonds also tend to be less volatile than stocks, which means they can help smooth the ride of a bumpy stock market. Stocks have outperformed bonds over time, but if dips in the stock market could cause you to sell your investments, bonds will help make those dips less pronounced on your portfolio overall.