Bond Funds Explained
What is a Bond Fund?
Income funds or bond funds are terms used to describe a particular type of investment company—primarily mutual funds, unit investment trusts, or closed-funds—that invest solely in bonds or other types of debt-laden securities.
Depending on the company’s investment policy and objective, a bond fund may concentrate its strategy in a particular type of debt or bond security. For example, bond funds may allocate the majority of their capital towards the investment of municipal bonds, corporate bonds, mortgage-backed securities, government bonds, zero-coupon bonds, or fixed-rate bonds. Additionally, bond funds may develop a portfolio to combine or mix any of the aforementioned debt securities.
The types of debt securities that bond funds will possess will vary in regards to the risk, duration, return, volatility, and other features associated with the debt securities.
What is the risk Associated with investing in a Bond Fund?
A bond fund’s prospectus will disclose the aforementioned risks and all other risks associated with the fund’s investment strategy. Before investing in any bond fund, an individual or entity should carefully review and read all of the available information, including the prospectus and the most recent shareholder report issued by the bond fund.
Credit Risk: The risk that the issuers of the bonds owned in a bond fund’s portfolio may default—meaning the bonds fail to pay the debt they owe on the bonds that have already been issued. The credit risk may be minimal for funds that primarily invest in U.S. Government bonds.
Interest Rate Risk: The risk that the market value of the bonds owned by a bond fund will fluctuate as interest rates rise and fall. For example, when interest rates rise, the market value of bonds owned by bond funds will generally decrease. Typically, all bond funds are subject to this type of risk, but bond funds holding bonds with longer maturities are subject to this form of risk than funds that hold bonds with shorter maturities. As a result of this type of risk an individual can lose money in a bond fund, including those individuals who invest only in government bonds or insured bonds.
Prepayment Risk: Risk that the issuers of the bonds owned by a fund will prepay them at a time when interest rates decline. As a result of interest rates declining, the fund may reinvest the proceeds in bonds with lower interest rates, which can reduce the fund’s overall return.
Tax advantages Associated with Municipal Funds?
Amortization Calculator At A Glance
What is an Amortization Calculator?
An amortization calculator is a fundamental resource used by individuals or entities that are indebted to a mortgage company or financial institution. The amortization calculator will display (subsequent to the satisfaction of a few variables) the remaining payments left on their particular loan or mortgage. By revealing this information, the individual or entity who took out the loan can observe the expected payments until maturity and thus develop an appropriate budget to ensure that they meet such obligations.
An amortization calculator is a free resource offered by the majority of lending institutions in the United States. The resource is free and easy to use and requires only the basic information attached to the particular loan or mortgage.
The loans associated with an amortization schedule typically possess a maturity date of 20-30 years. As a result of this long-term nature, the payments made towards both the principle and the interest would be difficult to evaluate without the inclusion of an amortization calculator.
In addition to revealing the expected monthly or periodic payments, the amortization calculator will reveal the percentage and total amount of the payments as they coordinate to paying off the interest and principal of the loan. Following the input of the required information, the amortization calculator will reveal the expected payments to maturity in an easy to follow and easy to understand table. The table, which effectively is known as the amortization table, will deliver each month’s payment and reveal how each payment is used to satisfy the interest and principal obligations of the loan.
In addition to this generic information, some amortization calculators will offer the user optional information, such as: the monthly additional principal prepayment amount, the one-time prepayment amount, and the annual principal prepayment amount of the loan.
When the above information is entered into the calculator (amortization calculators are typically offered on lending websites) the resource will construct a table that is unique to the user based on the loan information given.
National Finance Center
What is the National Finance Center?
Knowing The Banking Regulations
What are Banking Regulations?
Banking regulations are a form of government regulation which place certain restrictions and requirements, and guidelines on individual banks. Banking regulations are instituted to effectively restrict financial institutions from engaging in predatory lending techniques or fraudulent techniques aimed to take advantage of customers or businesses who conduct transactions with the underlying bank
o Banking Regulations are placed on financial institutions to reduce the level of risk that bank creditors will be exposed to. These prudential regulations are imposed to protect individuals and business entities who deposit funds into banks; over-leveraging or an increased exposure to a shaky credit market could result in massive defaults.
• Although banking regulations will vary widely across countries and jurisdictions, there are general principles of bank regulations that exist throughout the world
Your Guide to Understanding FOREX
What is FOREX?
FOREX is the abbreviation commonly used for the term ‘Foreign Exchange’, which is the financial instrument facilitated in the trading and exchange of foreign currency for other forms of currency. Within the realm of trading FOREX, an activity undertaken within the FOREX Market – also known as the Foreign Exchange Market – a variety of factors exist within the dynamic of FOREX, exchange rates, monetary systems, economics, and financial circulation.
When is FOREX Used?
Travel-Based FOREX
Tesla Sales Eclipse Majority of Luxury Automobiles
The Tesla Model S, which is priced at a substantial $70,000, is now the hottest electric car on the market. In fact, in the first quarter of this year, sales of the Tesla Model S outpaced similar gasoline models from the top three German luxury models. Roughly 5,000 consumers purchased the Model S while a shade over 3,000 purchased Mercedes’ top-flight sedan.
Sales figures; however, are by no means a perfect comparison as actual selling price for the S-class Mercedes start toward the high-end of the Tesla Model S price Range. Moreover, buyers do not receive the $7,500 federal tax credit for buying a luxury gasoline model.
That said, the Tesla Model S is faring quite well, particularly for a start-up auto maker with a limited network.
Last week, Tesla announced a profit that crushed Wall Street estimates; the relatively young automaker also raised its Model S sales forecasts for 2013 to 21,000 from 20,000.
To continue the positive momentum, Consumer Reports on Thursday called the Tesla Model S the best automobile that it ever tested. The vehicle’s overall performance was off the charts, according to the publication’s head of auto testing. The vehicle earned an almost perfect score of 99 out of a possible 100 points; 1 point was deducted from the vehicle’s score because it cannot be driven long distances without recharging.
Despite early struggles, including a feud with the New York Times over the vehicle’s “super charger” network and delays sparked by traditional car sellers over the sales strategy, the new Tesla model seems to be thriving in this green-friendly market.
Sales: whitehouse.gov
President Obama Says He Will Not Tolerate Wrongdoing at IRS
Does Obamacare Help the Female Population?
With Mother’s Day behind us, President Obama spoke to a group of women—including a number of moms—about the ways the new Affordable Care Act is already providing aid to millions of Americans like them.
“The female population in particular has more control today over their own care than ever before,” the President of the United States said. “I am pleased to be joined today by many women who contacted us to describe what the Affordable Care Act does for them.”
Carol was just one of the women who contacted President Obama, and today, she introduced him in the East Room. Carol’s son, a recent college graduate and survivor of a traumatic brain injury, was able to stay on his family’s health care policy instead of being removed off the plan this year. Procuring coverage on his own would have been virtually impossible, as Carol mentioned to the President. “Given my son’s history, he would be uninsurable under the archaic set of laws. Instead of finishing law school, my resources and my son’s resources would have been channeled into somehow finding an insurance policy that would cover him.”
Carol and her son, according to the Whitehouse, are why the new Affordable Care Act lets you people stay on their parent’s healthcare plan until they reach the age of 26, President Obama said.
Another woman named Alycia also spoke about the benefits the new laws bring to her family. “Alycia is the mother of Avey, who is a 3-year-old girl who is battling Leukemia,” President Obama explained. “Imagine what this is like for a parent. While you are just figuring out how to take care of a baby, you have to figure out how you are going to pay for expensive treatment that could save your baby’s life. This is why the Affordable Care Act made it illegal for unscrupulous individuals in the insurance industry to discriminate against children like Avey.”
President Obama mentioned a few more ways the Affordable Care Act is helping people throughout the United States. “Insurance companies can no longer impose lifetime limits on the amount of care you undertake, or drop you from coverage if you get sick, or discriminate against your children who have preexisting conditions,” President Obama said. “And women are now given access to free preventive care like mammograms, checkups, and cancer screenings, so you can evaluate and catch preventable illness on the front end. Because of this Act, seniors on Medicare can now receive free checkups and preventive care with zero deductibles or co-pay. These individuals also receive discounts on prescription drugs, which have already saved over 6 million seniors more than $700 each.”
Source: whitehouse.gov
SEC Issues Alert on Settlement Income or Pension Streams
The United States Securities and Exchange Commission, along with the Financial Industry Regulatory Authority issued an investor alert for Pension or Settlement Income Stream Investments.
This alert informs investors about the risks involved when selling rights to an income stream or when investing in another entity’s income stream. The alert cautions investors who are considering an investment in settlement income streams or pensions to proceed with extreme caution.
Any individual receiving regular distributions form a settlement following a personal injury suit or a monthly pension may be targeted by corrupt salespeople who offer an immediate lump sum in exchange for rights to some or all of the payments you would be entitled to receiving in the future. Typically, recipients of a structured settlement or a pension will sign over said rights to some or all of their monthly payments to a factoring institution in return for a lump-sum figure; this figure is typically much lower than the present value of the future income stream.
“Investors must always educate themselves before making an investment decision, and this is of course true with respect to investing in a structured settlement product or a pension,” said the Director of the SEC’s Investor Education and Advocacy Division. “This alert intends to help investors understand the risks and costs associated with these transactions.”
The investor alert is equipped with a checklist of questions that you should go over before selling away an income stream:
·Is the transaction I’m about to undertake legal?
·Is the transaction worth the cost? You should locate the discount rate that the factoring company has applied to the income stream and compare the rate to alternatives such as a bank loan.
·What is the reputation of the institution offer the lump sum?
·Will the underlying factoring company require life insurance?
· What are the tax consequences if you undertake this transaction? The lump-sum payout offered by the factoring company may be taxable.