June 28, 2008
Types of Unit Trusts
Unit trusts are considered good instruments for medium- to long-term financial plans. However, it is important that you choose the appropriate fund depending on your risk profile and investment objectives. Listed here are the types of unit trusts currently available in the market:
Income funds: Invest in fixed income securities and huge dividend-yielding shares with the view to pay out most of the returns. Suitable for investors seeking income and some level of growth at low risks.
Capital growth funds: Invest primarily in shares with the view to maximise capital growth over the long-term (i.e. through a higher unit price). Appeal to high-risk investors keen on capital accumulation.
Aggressive growth funds: Similar to capital growth funds but with investments in aggressive, fast track shares that promise high returns - with higher risk. Generally suitable for high-risk investors.
Balanced funds: Have three objectives: income, moderate capital appreciation and capital preservation. Invest across a broad spread of asset categories including shares, fixed income securities and cash. Well-diversified and suitable for investors looking for reasonably safe investments where the risks are lower and which produce average returns.
Index funds: Invest in a basket of shares that tracks a selected stock market index.
Bond funds: Invest only in fixed income securities such as bonds and short-term money-market instruments. All bond funds are subject to interest rate risk and most to credit or default risk of the issuers.
Money market funds: Invest only in short-term money market instruments such as treasury bills, negotiable certificates of deposit and bankers acceptances, with maturity of less than 90 days. Since the funds invest in money market instruments, the returns, while small, are generally more attractive compared to saving deposits. Good for investors looking for liquidity, and perhaps a temporary place to park their funds before they commit to other funds.
Islamic funds: Managed according to Syariah principles; invest in shares and fixed income securities which excludes non-halal shares and interest-bearing money market instruments.
State funds: Managed by the state development corporations for investors from the respective states.
May 28, 2008
July 3, 2007
Best Bid
The highest quoted bid for a particular stock among all those offered by competing market makers.
Simply put, this is the highest price someone is willing to pay for an asset.
July 2, 2007
Ben Bernanke
The chairman of the Board of Governors of the U.S. Federal Reserve who took over the helm from Alan Greenspan on February 1, 2006, ending 18 years of Greenspan’s leadership at the Fed. A former Fed governor, Bernanke was chairman of the U.S. President’s Council of Economic Advisers prior to being nominated as Greenspan’s successor in late 2005.
Born Benjamin Shalom Bernanke on December 13, 1953, he was the son of a pharmacist and a schoolteacher, and raised in southeastern United States. A high-achieving student, Bernanke completed his undergrad summa cum laude at Harvard University, then went on to complete his Ph.D. at MIT in 1979 by the age of 26. He taught economics at Stanford and then Princeton University until 2002, leaving his academic work for public service.
June 28, 2007
Bear Trap
A false signal that the rising trend of a stock or index has reversed when it has not.
This can occur during a bear market reversal when short sellers believe the markets will sink back to its declining ways. If the market continues to rise, the short sellers get trapped and are forced to cover their positions at higher prices.
June 27, 2007
Assets Under Management - AUM
In general, the market value of assets an investment company manages on behalf of investors.
There are widely differing views on what the term means. Some financial institutions include bank deposits, mutual funds and institutional money in their calculations. Others limit it to funds under discretionary management where the client delegates responsibility to the company.
June 26, 2007
Arm’s Length Transaction
A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm’s length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party.
The concept of an arm’s length transaction commonly comes into play in the real estate market. When determining the fair market value of a piece of property, the price for the property must be obtained through a potential buyer and seller operating through an arm’s length transaction, otherwise, the agreed-upon price will likely differ from the actual fair market value of the property.
For example, if two strangers are involved in the sale and purchase of a house, it is likely that the final agreed-upon price will be close to market value (assuming that both parties have equal bargaining power and equal information about the situation). This is because the seller would want a price that is as high as possible and the buyer would want a price that is as low as possible.
This contrasts with a situation in which the two parties are not strangers. For example, it is unlikely that the same transaction involving a father and his son would yield the same result, because the father may choose to give his son a discount.
June 25, 2007
Alternative Asset
A term referring to any non-traditional asset with potential economic value that would not be found in a standard investment portfolio. Due to the unconventional nature of some of these investment assets, valuation may be a problem.
For most people, examples of alternative assets would include art and antiques, precious metals, fine wines, rare stamps and coins, and other collectibles such as sports cards. However, to the very wealthy, hedge funds, venture capital-related projects and infrastructure could be alternative assets. In either case, alternative assets tend to be less liquid than traditional investments. Thus, investors who favor alternative assets will have to consider a very long investment horizon.
June 24, 2007
A shares: companies incorporated in mainland China and are traded in the mainland A-share markets. The prices of A shares are quoted in Renminbi, and currently only mainlanders and selected foreign institutional investors are allowed to trade A shares.
B shares: companies incorporated in mainland China and are traded in the mainland B-share markets (Shanghai and Shenzhen). B shares are quoted in foreign currencies. In the past, only foreigners were allowed to trade B shares. Starting from March 2001, mainlanders can trade B shares as well. However, they must trade with legal foreign currency accounts.
H shares: companies incorporated in mainland China and are listed on the Hong Kong Stock Exchange and other foreign stock exchanges.
June 22, 2007
Zero-Coupon Bond
A debt security that doesn’t pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.
Also known as an “accrual bond”.
Some zero-coupon bonds are issued as such, while others are bonds that have been stripped of their coupons by a financial institution and then repackaged as zero-coupon bonds. Because they offer the entire payment at maturity, zero-coupon bonds tend to fluctuate in price much more than coupon bonds.