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Meaning / Definition of

Convertible Bond

Categories: Stocks, Bonds and Treasuries, Investing and Trading,

convertible bonds are corporate bonds that give you the alternative of converting their value into common stock of that company or redeeming them for cash when they mature. The details governing the conversion, such as the number of shares of stock you would receive, are set when the bonds are issued. A convertible bond has a double appeal for investors: Its market value goes up if the stock price rises, but falls only to what it would be as a conventional bond if the stock prices falls. In other words, the upside potential is considered greater than the downside risk. While convertible bonds typically provide lower yields than conventional bonds from the same issuer, they may provide higher yields than the underlying stock. You can buy convertibles through a broker or choose a mutual fund that invests in them.

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Definition / Meaning of

Fund Of Funds (FOF)

Categories: Finance,

A fund of funds is a pooled investment, such as a mutual fund or a hedge fund, whose underlying investments are other funds rather than individual securities. Despite some major differences, what all funds of funds have in common is an emphasis on diversification for its potential to reduce risk without significantly reducing return. They're also designed to simplify the investment process by offering one-stop shopping.Many mutual fund FOFs are asset allocation funds and typically include both stock and bond funds in a particular combination that the FOF manager has chosen to meet a specific objective. A mutual fund FOF may select all of its funds from a single fund family or it may choose funds offered by different investment companies.A hedge fund FOF, which owns stakes in other hedge funds, allows investors to commit substantially less money to gain exposure to this investment category than it would cost to invest in even one fund.A major drawback with all funds of funds is that the fees tend to be higher than you would pay owning the underlying funds directly.

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