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What Is A Reserve Currency? A reserve currency is a currency that is widely accepted around the world as a method of payment between countries for goods and services. Reserve currencies are also widely held by governments and central banks as foreign exchange reserves and to settle international debt obligations. Past And Current Reserve Currencies The U.S. dollar (USD) has been the primary reserve currency since the end of World…
What Is A Target Date Fund? A target date fund is a mutual fund designed for retirement that automatically rebalances the fund's assets as the investors in the fund draw closer to retirement age. In the years prior to retirement, the fund is more aggressive and heavily invested in growth stocks, but as the holders near retirement the fund becomes more conservative. At this point, its allocation shifts to include…
The Glass-Steagall Act was a 1933 U.S. law signed by President Franklin Roosevelt shortly after he took office that effectively separated commercial banking from investment banking. The act is named for its sponsors, Sen. Carter Glass, D-Virginia, a former Treasury secretary, and Rep. Henry Steagall, D-Alabama, the chairman of what was then called the House Banking and Currency Committee. Glass-Steagall was largely repealed in 1999 by the Gramm-Leach-Bliley Act, which…
What Is Keynesian Economics? Keynesian economics is an economic theory that argues that governments should spend heavily on infrastructure projects and unemployment benefits during economic downturns in order to stimulate consumer and business spending, growth and job creation. The theory was developed by British economist John Maynard Keynes in his 1936 book, The General Theory of Employment, Interest, and Money. It was published during the Great Depression, when nothing seemed…
What Is A Master Limited Partnership? Master limited partnerships (MLPs) are exchange-traded vehicles that invest primarily in energy and other natural resource projects, particularly oil and gas storage, transportation, exploration, development and pipelines. MLPs are popular with some investors for their very high yields, but they tend to track the price of oil, which means they can be volatile. Also, their share prices have been depressed in recent years, reducing…
What Are Government Bonds? Bonds are debt instruments issued by governments to the public. Essentially, when a government sells bonds, it's borrowing money to finance its activities, including infrastructure projects, health and welfare benefits, defense expenditures and the like. It also sells bonds to pay off its previously issued debt—in other words, selling new debt to retire old debt. The United States government bond market is the largest debt market…
What Is A Bear Hug? A "bear hug" is a buyout offer by one company for another that is so attractive that the target company has little choice but to accept it. Bear hug bids are usually well above the target company's prevailing market value and may include cash as an additional sweetener. While bear hugs are almost always unsolicited, they are not considered to be hostile because the offer…
What Is Venture Capital? Venture capital (VC) is a form of private equity (PE) financing in which investors buy stakes mostly in young companies in need of financing. Unlike PE funds, which typically invest in more established companies, VC firms invest mainly in startups, particularly in technology, biotechnology, financial services, payments and other businesses that show promise for growth. VC firms operate the same way as PE firms in that…
What Is A Mid-Cap Stock? Mid-cap stocks are generally considered to be those companies with a market capitalisation—the stock price multiplied by the outstanding number of shares—between US$2 billion and US$10 billion. They fall between large cap stocks, which have market caps above US$10 billion, and small caps, which are valued at between US$300 million and US$2 billion. Generally speaking, mid-cap stocks are slightly more risky than large caps, which…
What Is A Robo-Advisor? A robo-advisor is an automated, online platform that creates investment portfolios and financial plans for individuals. Roboadvisors compete with traditional human financial advisors but provide their services at a far lower cost with much lower minimum investment requirements and greater convenience. Robo-advisors have been around since 2008, but they have attracted a growing number of clients and share of assets under management. Indeed, several large traditional…
What Is A Hedge Fund? A hedge fund is a private pool of money managed by professional managers whose main goal is to maximize returns for investors as quickly as possible in both up and down markets. Hedge funds are similar to mutual funds but have some very different characteristics. For example, hedge funds are generally open only to large institutions or to "accredited" investors who must meet certain high…
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