Author: ArtErnst

What is an exchange traded fund? Similar to mutual funds, exchange traded funds (ETFs) are companies through which assets of shareholders are pooled to achieve pro-rata ownership of a diversified portfolio. Usually an ETF will seek to replicate the performance of a…

What is a fund of funds? Most mutual funds build diversified portfolios of individual stocks, bonds, and other securities. A mutual fund of funds instead invests in other funds. Usually, a fund of funds is created to implement a particular asset allocation…

What is a bond mutual fund? Bond mutual funds are mutual funds invested in fixed income instruments. Usually bond funds will focus on a particular segment of the market, such as short-term government bonds, high yield corporate bonds, municipal bonds, and so…

What is an annuity? An annuity is a contract through which you pay money now to receive a stream of income in the future. While some begin payments shortly after the contract is signed and paid for, most pay only after much…

What is a bear market fund? A bear market fund is a mutual fund whose goal is to go up when the market goes down. At worst, these funds aim to outperform the market during declines, perhaps falling as well but by…

What is a derivative? Derivative is a catchall term for an instrument that is not like a stock or bond itself but rather a contract with rights to purchase or sell something of value at some point in the future. Some derivatives obligate…

What is a commodity? Briefly put, a commodity is stuff. More precisely, it is a contract for the future delivery of stuff. Rarely do investors take delivery of cattle or piles of wheat. Contract prices move up and down according to market…

What is a brokerage wrap account? In a standard brokerage account, fees are generated every time there is a transaction. Brokers with clients in such accounts have the incentive to come up with reasons to trade. Notorious practitioners often churn client accounts,…

What is art? As an investment, art is simply an object with perceived value. If the perception improves, the value will rise. Increased interest in the artist or style can help. Supply and demand factors are also important, especially if an artist…

What is an alternative investment? “Alternatives” are investments that are not stocks, bonds, cash instruments, or funds made up of those things. Common ones include gold and other commodities, options and other derivatives, hedge funds, and real estate. The chief attribute sought…