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Meaning / Definition of

Structured Product

Categories: Stocks, Investing and Trading,

financial institutions create investment products, known generically as structured products, that trade on a stock exchange and link the return on an investor's principal to the performance of an underlying security, such as a stock or basket of stocks or to a derivative, such as a stock index.For example, the return on debt securities known as structured notes is determined by the performance of a stock index such as the Standard & Poor's 500 (s&p 500) rather than the market interest rate. The objective is to provide the potential for higher returns than are available through a conventional investment.Each product has a distinctive name, often expressed as an acronym, and its terms and conditions vary somewhat from those offered by its competitors. For example, in some cases the principal is protected and in others it isn't. But some features are characteristic of these complex investments - their value always involves an underlying financial instrument and they require investors to commit a minimum investment amount for a specific term, such as three years.

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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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