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Meaning / Definition of

Circuit Breaker

Categories: Investing and Trading,

After the stock market crash of 1987, stock and commodities exchanges established a system of trigger-point rules known as circuit breakers. They temporarily restrict trading in stocks, stock options, and stock index futures when prices fall too far, too fast.Currently, trading on the new york stock exchange (NYSE) is halted when the dow jones industrial average (DJIA) drops 10% any time before 2:30 p.m., sooner if the drop is 20%. But trading could resume, depending on the time of day the loss occurs. However, if the DJIA drops 30% at any point in the day, trading ends for the day. The actual number of points the DJIA would need to drop to hit the trigger is set four times a year, at the end of each quarter, based on the average value of the DJIA in the previous month.The only time the circuit breakers have been triggered was on October 27, 1997, when the DJIA fell 554 points, or 7.2%, and the shut-down level was lower. In fact, the DJIA has dropped as much as 10% in a single day only three times in its history.

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Definition / Meaning of

Family Of Funds

Categories: Mutual Funds, Investing and Trading, Stocks,

Many large mutual fund companies offer a variety of stock, bond, and money market funds with different investment strategies and objectives. Together, these funds make up a family of funds.If you own one fund in a family, you can usually transfer assets to another fund in the same family without sales charges. The transaction is known as an exchange. But unless the funds are in a tax-deferred or tax-free retirement or education savings plan, you'll owe capital gains taxes on increases in value of the fund you're selling.Investing in a family of funds can make diversification and asset allocation easier, provided there are funds within the family that meet your investment criteria. Investing in a family of funds can also simplify recordkeeping. However, the advantages of consolidating your assets within one fund family are being challenged by the proliferation of fund networks. fund networks, sometimes called fund supermarkets, make it easy to spread your investments among several fund families.

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