Term of the Day... Callable Security

Callable Security

What Does Callable Security Mean?
A security with an embedded call provision that allows the issuer to repurchase or redeem the security by a specified date. Since the holder of a callable security is exposed to the risk of the security being repurchased, the callable security is generally less expensive than comparable securities that do not have a call provision.

Investopedia explains Callable Security
The conditions of the call provision are established at the time the security is issued. Callable securities are commonly found in the fixed-income markets and allow the issuer to protect itself from overpaying for debt.

For example, a bond issuer may choose to redeem a certain issue when the current market rate falls below the coupon rate of the bond by a set amount. This allows the issuer to reissue the bonds at a lower rate and avoid paying a higher interest rate.

Vary Your Options With Variable Insurance

Vary Your Options With Variable Insurance

Traditional insurance and annuity products are rapidly becoming a thing of the past. While many traditional products still have their uses, a relatively new breed of insurance products in the marketplace contain features and riders that make even their recent counterparts look like ideas from the dark ages. In other words, say goodbye to limited choices, market risk, inflexible payout options and separate policies for each kind of risk.

Term of the Day... Tax-Deferred Savings Plan

Tax-Deferred Savings Plan

What Does Tax-Deferred Savings Plan Mean?
A savings plan or account that is registered with the government and provides deferral of tax obligations. Tax-deferred savings plans may defer taxable income earned within the account either until withdrawal or until a particular date.

They are used most commonly in retirement savings accounts such as IRAs, 401(k)s and RRSPs, but are also available for education savings plans and other accounts.

Investopedia explains Tax-Deferred Savings Plan
In Canada, the Registered Retirement Savings Plan (RRSP) is an example of a tax-deferred savings plan. The RRSP shelters what would normally be taxable income earned within the account until withdrawal. All profits within the account, including interest, dividends and capital gains, are taxed as income only upon withdrawal.

Essentially, tax-deferred savings plans allow you to use the taxes which would have gone to the government for investing. In the end, the taxes are paid, but not before the funds were used to make more money.

Losing Money? Don't Blame Your Broker

Losing Money? Don't Blame Your Broker

Wall Street has been home to more than its fair share of scandals dealing with everything from accounting, research and access, and initial public offerings. Maybe you've just lost a fortune in the market. The money is gone, and it must be somebody's fault. There must be some way to get the money back. The next step seems obvious: sue your broker. Click the link to continue.

Term of the Day... Bond

Bond

What Does Bond Mean?
A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.

Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents..

Investopedia explains Bond
The indebted entity (issuer) issues a bond that states the interest rate (coupon) that will be paid and when the loaned funds (bond principal) are to be returned (maturity date). Interest on bonds is usually paid every six months (semi-annually). The main categories of bonds are corporate bonds, municipal bonds, and U.S. Treasury bonds, notes and bills, which are collectively referred to as simply "Treasuries".

Two features of a bond - credit quality and duration - are the principal determinants of a bond's interest rate. Bond maturities range from a 90-day Treasury bill to a 30-year government bond. Corporate and municipals are typically in the three to 10-year range.

Term of the Day... Mutual Fund

Mutual Fund

What Does Mutual Fund Mean?
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money mangers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

Investopedia explains Mutual Fund
One of the main advantages of mutual funds is that they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult (if not impossible) to create with a small amount of capital. Each shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or shares, are issued and can typically be purchased or redeemed as needed at the fund's current net asset value (NAV) per share, which is sometimes expressed as NAVPS.

Are You Investing Or Gambling?

Are You Investing Or Gambling?

Merriam-Webster dictionary defines gambling as:

1. a: to play a game for money or property
   b: to bet on an uncertain outcome
   
   
2. to stake something on a contingency : take a chance.