Bonds
provide a way for a company (or government) to borrow $ without going to a bank
-a loan
-buy during bear market
-paid every 6 months
Bonds
initial amount of the bond
-company must pay this back plus interest by maturity date
Face Value
from the us gov known as treasuries
low risk
government bonds
investment that pools money of variety of securities
-someone else diversifies investments
-tend to be less risky than stocks
mutual fund
"diamonds in the rough"
stock price doesn't reflect earnings
value fund
Why invest in bonds
-diversify portfolio
-good for retirement
-if you need $ for a specific purpose
the amount of $ an investor will get back once a bond matures
Face Value/ Par Value
bonds from cities or municipalities
returns are free from federal tax
medium risk
municipal bonds
similar to savings account but interest is derived from securities, like Treasurie Bills
-least risky
money market
mix of both growth and value funds
blend fund
the date in the future on which the investor's principle will be repaid
maturity date
bond sold ABOVE face value
premium
bonds from companies
high risk
corporate bonds
invests in both (growth) stocks and (safety) bonds
getting more risky
balanced funds
invests in securities from foreign countries
-depending on economy of country may be very risky
global/international funds
what is an issuer
the company borrowing from you
bond sold BELOW face value
Discount
to match or track the componets of a market index, such as the Standard & Poor's 500 index (S&P 500)
Exchange Traded Funds (ETFs)
invests in stocks
-use a style box to decide which type of stock to invest in
-growth, value, blend
-very risky
equity funds
targeted at specific sectors in the economy
-riskiest bc there is a lack of diversification
sector funds
a system that helps investors determine a company's credit risk
bond ratings
the interest rate that is paid semi-annually
-shown as percentage of par value
(coupon decimal)(par value) = how much interest
Coupon
What is the FDIC
The FDIC insures trillions of dollars of deposits in U.S. banks and thrifts - deposits in virtually every bank and savings association in the country.
invests in stocks with above average growth in revenue or earnings
growth fund
invest in companies with strong ethical and socially responsible practices
socially responsible funds