Hanson FS

Term of The Day - Retail Investor

A retail investor, also known as an individual investor, is a non-professional investor who buys and sells securities or funds that contain a basket of securities such as mutual funds and exchange traded funds (ETFs).

Retail investors execute their trades through traditional or online brokerage firms or other types of investment accounts.

Retail investors purchase securities for their own personal accounts and often trade in dramatically smaller amounts as compared to institutional investors.

Retail investors usually buy and sell trades in the equity and bond markets and tend to invest much smaller amounts than large institutional investors. However, wealthier retail investors can now access alternative investment classes like private equity and hedge funds.

Because of their small purchasing power, most retail investors may have to pay higher fees or commissions for their trades, although many brokers have eliminated fees for online trades.

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Term of The Day - Hybrid Security

A hybrid security is a single financial security that combines two or more different financial instruments.

Hybrid securities, often referred to as "hybrids," generally combine both debt and equity characteristics.

The most common type of hybrid security is a convertible bond that has features of an ordinary bond but is heavily influenced by the price movements of the stock into which it is convertible.

Hybrid securities are bought and sold on an exchange or through a brokerage.

Hybrids may give investors a fixed or floating rate of return and may pay returns as interest or as dividends. Some hybrids return their face value to the holder when they mature and some have tax advantages. Hybrid securities can be viewed as a form of esoteric debt and may be difficult to sell due to their complexity.

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Term of The Day - Investment Grade

An investment grade is a rating that signifies that a municipal or corporate bond presents a relatively low risk of default.

Bond rating firms like Standard & Poor’s and Moody's use different designations, consisting of the upper- and lower-case letters "A" and "B," to identify a bond's credit quality rating.

"AAA" and "AA" (high credit quality) and "A" and "BBB" (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ("BB," "B," "CCC," etc.) are considered low credit quality, and are commonly referred to as "junk bonds."

Credit ratings are important as they convey the risk associated with buying a certain bond.

An investment-grade credit rating indicates a low risk of a credit default, making it an attractive investment vehicle—especially to conservative investors.

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Term of The Day - Benchmark

A benchmark is a standard against which the performance of a security, mutual fund, or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose.

Identifying and setting a benchmark can be an important aspect of investing for individual investors. In addition to traditional benchmarks representing broad market characteristics such as large-cap, mid-cap, small-cap, growth, and value, investors will also find indexes based on fundamental characteristics, sectors, dividends, market trends, and much more.

Having an understanding or interest in a specific type of investment will help an investor identify appropriate investment funds and also allow them to better communicate their investment goals and expectations to a financial advisor.

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