- What Is Key Rate Duration and How Do You Calculate It?
Key rate duration measures a bond’s sensitivity to shifts in interest rates at specific maturity points along the yield curve. Unlike traditional duration metrics, which assume parallel interest rate movements, key rate duration isolates changes at different maturities to assess their impact on a bond’s price. This metric is particularly useful for evaluating exposure to… read more…
- How Does a Real Estate Investment Group (REIG) Work?
Investing in real estate can be lucrative, but not every investor wants to deal with the complexities of property management. A real estate investment group (REIG) offers a more hands-off approach, allowing investors to pool resources and collectively invest in real estate. These groups provide a structured way to gain exposure to real estate while… read more…
- Retention Ratio: What It Is and What It Tells Investors
The retention ratio measures the percentage of a company’s earnings that are reinvested rather than distributed as dividends. Investors use the retention ratio to assess how much profit a business retains for growth, debt reduction or operational improvements. A higher ratio suggests a focus on expansion, while a lower one indicates a commitment to returning… read more…
- Baby Bonds: Definition, Pros and Cons, Examples
Baby bonds are fixed-income securities issued by government entities and corporations, offering regular interest payments and a predictable return backed by the issuing authority. Often available in denominations under $1,000, these bonds are accessible to a wider range of investors. In the U.S., the term “baby bonds” sometimes also refers to publicly funded savings accounts… read more…
- How to Use a Bull Put Spread Strategy
A bull put spread is an options strategy where you sell a put option at a higher price and buy one at a lower price for the same asset and expiration date. This helps generate income and limits losses, making it good for traders expecting small price increases or stable prices. The most you can… read more…
- How to Use Buy Limit Orders When Investing
A buy limit order is a stock market order where investors set a maximum price for buying a security. This method lets investors control their purchase price and avoid paying too much in volatile markets. Unlike market orders that execute at the current best price, buy limit orders only fill if the stock’s price reaches… read more…
- How to Use a Bear Call Spread Strategy
A bear call spread is an options strategy where you sell a call option at one strike price and buy another at a higher strike price for the same stock and expiration. This approach caps both potential profit and loss, and provides upfront credit. Traders use this method when they expect the stock price to… read more…
- What Is a Trust Indenture in Bond Investing?
A trust indenture is a legal agreement between a bond issuer and a trustee, such as a bank, that outlines the terms of a bond issue. It details the issuer’s responsibilities, the rights of the bondholders and how the trustee monitors the issuer’s compliance. This document helps maintain transparency and protect investors from potential defaults.… read more…
- How to Use a Bull Call Spread Strategy
A bull call spread is an options strategy used to profit from moderate increases in the underlying asset’s price while limiting risk. It involves buying a call option at a lower strike price and selling another at a higher strike price, both expiring on the same date. The cost to enter this trade is the… read more…
- What Are Sovereign Bonds and How Can You Invest in One?
Sovereign bonds are debt securities issued by national governments and are typically seen as safe investments, especially those from economically stable countries. They provide fixed income returns, making them attractive for conservative investors looking to diversify their portfolios. If you’re considering sovereign bonds, a financial advisor can help you choose options that align with your… read more…
- What Is Retracement and How Is It Used in Investing?
A retracement in investing refers to a temporary reversal in the direction of an asset’s price that occurs within a larger trend. It represents a short-term dip or pullback before the asset resumes its previous trajectory. Traders use retracements to identify potential entry points, often relying on technical analysis tools like Fibonacci retracement levels to… read more…
- Money Market Yield: What It Is and How to Calculate It
Money market yield measures the annualized return on short-term, low-risk investments like Treasury bills and commercial paper. It helps investors compare the earnings potential of different money market instruments while accounting for the impact of compounding. The calculation involves adjusting the discount rate of a security to reflect a 360-day year, making it useful for… read more…
- What Is Call Protection and How Does It Work?
Call protection is a bond feature that prevents the issuer from buying back the bond for a certain period. This guarantees that investors receive steady interest payments during this time, regardless of changes in market conditions or interest rates. The duration and specific terms of call protection are specified in the bond’s agreement and vary… read more…
- How Bearer Bonds Work and How to Invest in Them
Bearer bonds are a type of unregistered fixed-income securities that provide ownership rights to whoever physically holds them. Unlike traditional bonds, bearer bonds do not require the holder to be listed in any records, making them transferable through simple possession. These bonds were popular in the past because they provided anonymity. Nowadays, they are rare… read more…
- How Investors Use Economies of Scale to Evaluate Companies
Investors can evaluate economies of scale to determine if a company can increase profitability and stay competitive as it grows. This happens when a company reduces production costs by producing more units, which can spread fixed costs or enhance operational efficiencies. Understanding how companies scale operations helps investors assess their growth potential and competitive position.… read more…
- What Is an Open-End Fund?
An open-end fund is a type of mutual fund that allows investors to buy and sell shares on demand. This makes open-end funds highly accessible and flexible for investors seeking to diversify their portfolios. Commonly managed by professional fund managers, open-end funds pool money from multiple investors and can serve a range of investment goals.… read more…
- How to Use Autocorrelation to Evaluate Investments
Autocorrelation, a statistical measure that evaluates the relationship between a variable’s past and present values, can provide insights into patterns and guide investment decisions. By analyzing how a financial instrument’s returns correlate with its previous performance, investors can identify potential trends or repetitive behaviors that might otherwise have gone unnoticed. This technique is often used… read more…
- What Is a Bullet Bond?
A bullet bond is a type of debt security that does not make any principal payments until its maturity date. This means that, unlike other bonds that may offer periodic principal repayments, a bullet bond pays the entire principal amount back to the investor in one lump sum at the end of its term. This… read more…
- How Investors Can Calculate Year-Over-Year (YOY) Growth
Year-over-year (YOY) growth is a performance indicator often used by investors to measure financial progress and compare results from one period to another. The measurement, which looks at change across two comparable periods of time, can provide valuable information about trends, risks and opportunities. Investors can then use this information to evaluate the performance and… read more…
- What Is a Defensive Investment Strategy?
A defensive investment strategy is designed to protect a portfolio from losing money during market downturns. This approach prioritizes stability over high returns and as a result earnings can be expected to lag behind during rising markets. A defensive strategy could help you preserve capital while still providing modest growth. A defensive portfolio is likely… read more…
- Can a Financial Advisor Help Me Invest in Private Companies?
Most individual investors cannot invest in private companies that have issued shares of stock without registering the shares with the Securities and Exchange Commission. The exception is someone who meets the income, net worth or financial sophistication requirements to be an accredited investor. Many financial advisors qualify as accredited investors because of their professional training,… read more…
- How ETF Discounts Work
Exchange traded funds (ETFs) are portfolio-based assets typically organized around a specific investment goal. Investors invest in ETFs by purchasing shares of the portfolio on public exchanges. When the listed share price of an ETF dips significantly below the portfolio’s net asset value (NAV), the fund is at a “discount.” This is generally a good… read more…
- How Easement in Gross Works in Real Estate
An easement in gross is a legal right that allows an individual or entity to use another person’s property for a specific purpose without owning it. Unlike easement appurtenant, which is tied to the land itself, an easement in gross benefits a person or organization rather than a parcel of property. Common examples include utility… read more…
- How and Where to Invest Your Cash
If you’re starting to invest or refining your strategies, there are many options available based on your financial goals, risk tolerance and investment timeline. Common investments could range from safe, traditional savings accounts and CDs to riskier stocks, bonds and mutual funds. Each investment carries specific benefits and drawbacks. So diversifying your portfolio across these… read more…
- What Does It Mean to Be Risk Neutral as an Investor?
Investors differ in how they approach risk, and these approaches influence their decision-making and portfolio strategies. Risk-neutral investors focus solely on the potential returns of an investment, ignoring the level of risk involved. This theoretical perspective, which differs from risk-averse and risk-seeking behavior, can offer valuable insights, particularly in financial modeling and investment analysis. A… read more…