What is a Mutual Fund
What is a Mutual Fund by Tarun Jaswani
The core of the money market consists of banks borrowing and lending to each other, using commercial paper, repurchase agreements and similar instruments. These instruments are often bench marked (i.e. priced over and above) to the London Interbank Offered Rate (LIBOR).
Finance companies, such as GMAC, typically fund themselves by issuing large amounts of asset-backed commercial paper (ABCP) which is secured by the pledge of eligible assets into an ABCP conduit. Examples of eligible assets include auto loans, credit card receivables, residential/commercial mortgage loans, mortgage-backed securities and similar financial assets. Certain large corporations with strong credit ratings, such as General Electric, issue commercial paper on their own credit. Other large corporations arrange for banks to issue commercial paper on their behalf via commercial paper lines.
Financial institutions provide a service as intermediaries of the capital and debt markets. They are responsible for transferring funds from investors to companies, in need of those funds. The presence of financial institutions facilitates the flow of monies through the economy. To do so, savings are pooled to mitigate the risk brough to vide funds for loans. Such is the primary means for depository institutions to develop revenue. Should the yield curve become inverse, firms in this arena will offer additional fee-generating services including securities underwriting, and prime brokerage.
Money market funds, also known as principal stability funds, seek to limit exposure to losses due to credit, market, and liquidity risks.Money market funds in the United States are regulated by the Securities and Exchange Commission's (SEC) Investment Company Act of 1940. Rule 2a-7 of the act restricts investments in money market funds by quality, maturity and diversity. Under this act, a money fund mainly buys the highest rated debt which matures in under 13 months.
The portfolio must maintain a Weighted Average Maturity (WAM) of 90 days or less and not invest more than 5% in any one issuer, except for government and repurchase agreement securities. Eligible money market securities include commercial paper, repurchase agreements, short-term bonds or other money funds. Money market securities must be highly liquid, and have a stable value.
The International Monetary Fund (IMF) is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It also offers financial and technical assistance to its members, making it an international lender of last resort. Its headquarters are located in Washington, D.C., USA.
A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. Payments are typically made monthly over the lifetime of the underlying loans. However not all securities backed by mortgages are considered mortgage-backed security (MBS).
Housing Bonds (Mortgage Revenue Bonds) are backed by the mortgages which they fund, but aren't classified as mortgage-backed security (MBS).
In the United States, a municipal bond (or muni) is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds include cities, counties, redevelopment agencies, school districts, publicly owned airports and seaports, and any other governmental entity (or group of governments) below the state level. Municipal bonds may be general obligations of the issuer or secured by specified revenues.
Interest income received by holders of municipal bonds is often exempt from the federal income tax and from the income tax of the state in which they are issued, although municipal bonds issued for certain purposes may not be tax exempt.
In the United States, a money market deposit account is a deposit account that is considered a savings account for some purposes, but upon which checks can typically be written, subject to certain restrictions. Like a Negotiable Order of Withdrawal account, it is structured to comply with Regulation Q, which forbids paying interest on checking accounts. Thus money market deposit accounts are accounts that bear interest, and on which checks can be written, but, due to various restrictions, are not legally checking accounts, and thus do not run afoul of Regulation .
Typical restrictions are that a fairly high minimum balance must be maintained in order to avoid fees. With the advent of online banking, many banks are able to pay a high interest rate on a low balance, sometimes as low as $1. A debit card is often issued for making withdrawals. In theory, the restrictions allow the bank to invest the money with more discretion, allowing a higher return. The return is often competitive with money market mutual funds, although nothing requires a bank to invest deposits in these types of accounts into the money market.
Residential mortgages in the United States have the option to pay more than the required monthly payment (curtailment) or to pay off the loan in its entirety (prepayment). Because curtailment and prepayment affect the remaining loan principal, the monthly cash flow of an MBS is not known in advance, and therefore presents an additional risk to MBS investors.
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The core of the money market consists of banks borrowing and lending to each other, using commercial paper, repurchase agreements and similar instruments. These instruments are often bench marked (i.e. priced over and above) to the London Interbank Offered Rate (LIBOR).
Finance companies, such as GMAC, typically fund themselves by issuing large amounts of asset-backed commercial paper (ABCP) which is secured by the pledge of eligible assets into an ABCP conduit. Examples of eligible assets include auto loans, credit card receivables, residential/commercial mortgage loans, mortgage-backed securities and similar financial assets. Certain large corporations with strong credit ratings, such as General Electric, issue commercial paper on their own credit. Other large corporations arrange for banks to issue commercial paper on their behalf via commercial paper lines.
Financial institutions provide a service as intermediaries of the capital and debt markets. They are responsible for transferring funds from investors to companies, in need of those funds. The presence of financial institutions facilitates the flow of monies through the economy. To do so, savings are pooled to mitigate the risk brough to vide funds for loans. Such is the primary means for depository institutions to develop revenue. Should the yield curve become inverse, firms in this arena will offer additional fee-generating services including securities underwriting, and prime brokerage.
Money market funds, also known as principal stability funds, seek to limit exposure to losses due to credit, market, and liquidity risks.Money market funds in the United States are regulated by the Securities and Exchange Commission's (SEC) Investment Company Act of 1940. Rule 2a-7 of the act restricts investments in money market funds by quality, maturity and diversity. Under this act, a money fund mainly buys the highest rated debt which matures in under 13 months.
The portfolio must maintain a Weighted Average Maturity (WAM) of 90 days or less and not invest more than 5% in any one issuer, except for government and repurchase agreement securities. Eligible money market securities include commercial paper, repurchase agreements, short-term bonds or other money funds. Money market securities must be highly liquid, and have a stable value.
The International Monetary Fund (IMF) is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It also offers financial and technical assistance to its members, making it an international lender of last resort. Its headquarters are located in Washington, D.C., USA.
A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. Payments are typically made monthly over the lifetime of the underlying loans. However not all securities backed by mortgages are considered mortgage-backed security (MBS).
Housing Bonds (Mortgage Revenue Bonds) are backed by the mortgages which they fund, but aren't classified as mortgage-backed security (MBS).
In the United States, a municipal bond (or muni) is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds include cities, counties, redevelopment agencies, school districts, publicly owned airports and seaports, and any other governmental entity (or group of governments) below the state level. Municipal bonds may be general obligations of the issuer or secured by specified revenues.
Interest income received by holders of municipal bonds is often exempt from the federal income tax and from the income tax of the state in which they are issued, although municipal bonds issued for certain purposes may not be tax exempt.
In the United States, a money market deposit account is a deposit account that is considered a savings account for some purposes, but upon which checks can typically be written, subject to certain restrictions. Like a Negotiable Order of Withdrawal account, it is structured to comply with Regulation Q, which forbids paying interest on checking accounts. Thus money market deposit accounts are accounts that bear interest, and on which checks can be written, but, due to various restrictions, are not legally checking accounts, and thus do not run afoul of Regulation .
Typical restrictions are that a fairly high minimum balance must be maintained in order to avoid fees. With the advent of online banking, many banks are able to pay a high interest rate on a low balance, sometimes as low as $1. A debit card is often issued for making withdrawals. In theory, the restrictions allow the bank to invest the money with more discretion, allowing a higher return. The return is often competitive with money market mutual funds, although nothing requires a bank to invest deposits in these types of accounts into the money market.
Residential mortgages in the United States have the option to pay more than the required monthly payment (curtailment) or to pay off the loan in its entirety (prepayment). Because curtailment and prepayment affect the remaining loan principal, the monthly cash flow of an MBS is not known in advance, and therefore presents an additional risk to MBS investors.
Get Share Tips
Use Mutual Fund
Article Source: http://articles.directorygold.com
For more articles on Stocks And Mutual Funds visit the DirectoryGold Article Directory
For links to sites on Mutual Funds visit the DirectoryGold Web Directory
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