Rating or Credit Rating
"Credit rating is an analysis of the credit risks associated with a financial instrument or a financial entity. It is a rating given to a particular entity based on the credentials and the extent to which the financial statements of the entity are sound, in terms of borrowing and lending that has been done in the past.
Usually, is in the form of a detailed report based on the financial history of borrowing or lending and credit worthiness of the entity or the person obtained from the statements of its assets and liabilities with an aim to determine their ability to meet the debt obligations. It helps in assessment of the solvency of the particular entity. These ratings based on detailed analysis are published by various credit rating agencies like Standard & Poor's, Moody's Investors Service, and ICRA, to name a few."
Real estate investment trust (REIT)
"REITs are publicly traded companies that pool investors' capital to invest in a variety of real estate ventures, such as apartment and office buildings, shopping centers, medical facilities, industrial buildings, and hotels. After an REIT has raised its investment capital, it trades on a stock market just as a closed-end mutual fund does.
There are three types of REITs: Equity REITs buy properties that produce income. Mortgage REITs invest in real estate loans. Hybrid REITs usually make both types of investments. "
Red herring
When a security is offered to the public for the first time, the underwriter prepares a preliminary prospectus, called a red herring. While the name may refer to the parts of the document printed in red ink, the implication is that the document has been written to present the company in the best possible light.
Reinvestment risk
"Reinvestment risk occurs when you have money from a maturing fixed-income investment, such as a certificate of deposit (CD) or a bond, and want to make a new investment of the same type. The risk is that you will not be able to find the same rate of return on your new investment as you were realizing on the old one. In fact, the return could be significantly lower, based on what's happening in the economy at large, though it could also be higher.
For example, if a bond paying 6% interest matures when the current rate is 4%, you must settle for a lower return if you buy a new bond unless you're willing to buy one of lower quality. "
Return on equity
Return on equity (ROE) measures how much a company earns within a specific period in relation to the amount that's invested in its common stock. It is calculated by dividing the company's net income before common stock dividends are paid by the company's net worth, which is the stockholders' equity. If the ROE is higher than the company's return on assets, it may be a sign that management is using leverage to increase profits and profit margins. In general, it's considered a sign of good management when a company's performance over time is at least as good as the average return on equity for other companies in the same industry.
Reverse mortgage
A reverse mortgage is a loan available to a homeowner 62 or older who may be eligible to borrow against the equity in his or her home.Generally with a reverse mortgage, you receive money from a lender while you stay in your home. You don’t have to pay the money back for as long as you live there and keep the property in good repair, but the loan must be repaid when you die, sell your home, or move to a different primary residence.The amount you can borrow depends on your age, your home’s value, your equity in it, and current interest rates. You can access the money as a lump sum, a line of credit, or a combination of these methods. All reverse mortgages require closing costs, much like a regular mortgage, and they can charge fixed or variable interest rates. The fees can make a reverse mortgage an expensive way to borrow.More than 90% of reverse mortgages, officially known as Home Equity Conversion Mortgages (HECMs), are insured by the US government’s Federal Housing Administration (FHA). The FHA caps the size of reverse mortgages depending on the county in which your home is located and guarantees that you will receive the full amount of your loan.Private alternatives to HECMs, called proprietary reverse mortgages, often offer higher limits. These loans may have higher costs, however.
Rider
A rider is a modification to an insurance policy that typically adds a new coverage or higher coverage in return for higher premiums. For example, you might add a rider to your life insurance policy to provide coverage for your spouse, or a rider to your homeowner’s policy to provide additional liability insurance for a specific event /cause /cover.
Risk
"Risk implies future uncertainty about deviation from expected earnings or expected outcome. Risk measures the uncertainty that an investor is willing to take to realize a gain from an investment. Risks are of different types and originate from different situations. Different levels of risk come attached with different categories of asset classes. We have liquidity risk, sovereign risk, insurance risk, business risk, default risk, etc. Various risks originate due to the uncertainty arising out of various factors that influence an investment or a situation.
In the world of finance, risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the risk. When an entity makes an investment decision, it exposes itself to a number of financial risks. The quantum of such risks depends on the type of financial instrument. So, in order to minimize and control the exposure of investment to such risks, fund managers and investors practice risk management. "
Risk tolerance
Risk tolerance is the extent to which you as an investor are comfortable with the risk of losing money on an investment. If you’re unwilling to take the chance that an investment that might drop in price, you have little or no risk tolerance. On the other hand, if you’re willing to take some risk by making investments that fluctuate in value, you have greater risk tolerance. The probable consequence of limiting investment risk is that you are vulnerable to inflation risk, or loss of buying power.
Risk-adjusted performance
"When you evaluate an investment's risk-adjusted performance, you aren't looking simply at its straight performance figures but at those figures in relation to how much risk you'd be taking to get the potential return the investment could produce. One method is to investigate the investment's price volatility over various periods of time, including different market environments.
In general, the greater the volatility, the greater the risk. However, many analysts believe that looking exclusively at past performance can be deceptive in evaluating the risk you are taking in making a certain investment, since it can't predict what will happen in the future. "
Risk-free return
"Risk-free interest rate is the theoretical rate of return of an investment with no risk of financial loss. One interpretation is that the risk-free rate represents the interest that an investor would expect from an absolutely risk-free investment over a given period of time.
In theory, the risk-free rate is the minimum return an investor should expect for any investment, as any amount of risk would not be tolerated unless the expected rate of return was greater than the risk-free rate. In practice, however, the risk-free rate does not technically exist; even the safest investments does carry a very small amount of risk. Thus, investors commonly use the interest rate on a three-month Treasury bill as a proxy for the risk-free rate because short-term government-issued securities have virtually zero risk of default. "
No comments:
Post a Comment