What is Layered Fees?
Two sets of management fees that are paid by an investor for the same group of assets. This practice is found in many types of investment vehicles such as wrap funds, variable annuities, registered investment advisor client accounts and even mutual funds. Read more for examples and further explanation including related video clips and also comments
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Total Expense Ratio – TER definition explanation
What is Total Expense Ratio – TER?
A measure of the total costs associated with managing and operating an investment fund such as a mutual fund. These costs consist primarily of management fees and additional expenses such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fund is divided by the fund’s total assets to arrive at a percentage amount, which represents the TER:
More often referred to as “”expense ratio””. Read more for examples and further explanation including related video clips and also comments
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Binomial Distribution definition explanation
What is Binomial Distribution?
A probability distribution that summarizes the likelihood that a value will take one of two independent values under a given set of parameters or assumptions. The underlying assumptions of the binomial distribution are that there is only one outcome for each trial, that each trial has the same probability of success and that each trial is mutually exclusive. Read more for examples and further explanation including related video clips and also comments
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Socially Responsible Investment – SRI definition explanation
What is Socially Responsible Investment – SRI?
An investment that is considered socially responsible because of the nature of the business the company conducts. Common themes for socially responsible investments include avoiding investment in companies that produce or sell addictive substances (like alcohol, gambling and tobacco) and seeking out companies engaged in environmental sustainability and alternative energy/clean technology efforts. Socially responsible investments can be made in individual companies or through a socially conscious mutual fund or exchange-traded fund (ETF). Read more for examples and further explanation including related video clips and also comments
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Alternative Investment definition explanation
What is Alternative Investment?
An investment that is not one of the three traditional asset types (stocks, bonds and cash). Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, limited regulations and relative lack of liquidity. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts. Read more for examples and further explanation including related video clips and also comments
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Interpositioning definition explanation
What is Interpositioning?
The unlawful practice of adding an extra broker/dealer as a principal on a trade, even if no service is provided. Typically, interpositioning is done as part of a mutual benefit strategy, sending commissions to the broker/dealer in exchange for referrals or other cash profit. This type of behavior occurs at the upper levels of trade between specialists and broker/dealers, hedge funds or other institutional accounts. Read more for examples and further explanation including related video clips and also comments
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High-Yield Bond definition explanation
What is High-Yield Bond?
A high paying bond with a lower credit rating than investment-grade corporate bonds, Treasury bonds and municipal bonds. Because of the higher risk of default, these bonds pay a higher yield than investment grade bonds.
Based on the two main credit rating agencies, high-yield bonds carry a rating of ‘BBB’ or lower from S&P, and ‘Baa’ or lower from Moody’s. Bonds with ratings above these levels are considered investment grade.Credit ratings can be as low as ‘D’ (currently in default), and most bonds with ‘C’ ratings or lower carry a high risk of default; to compensate for this risk, yields will typically be very high.
Also known as “”junk bonds””. Read more for examples and further explanation including related video clips and also comments
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Automatic Bill Payment definition explanation
What is Automatic Bill Payment?
Routine, automated payments made from a banking, brokerage or mutual fund account to vendors. The automated function can be initiated either with the source of funds (the bank with the checking account) or the vendor to whom payment is owed. Automatic bill payments occur over an electronic payment system, such as the Automated Clearing House (ACH). Read more for examples and further explanation including related video clips and also comments
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