Income and Royalty Trusts are special-purpose financing vehicles that are created to make investments in operating companies or their cash flows. Investors supply capital to a trust, a legal entity that exists to hold assets, by purchasing “trust units”. The trust then uses these funds to purchase an interest in the operating company. The trust
Category: Stocks
Holding Company Depositary Receipts (HOLDRs)
A Holding Company Depositary Receipt (HOLDR) is a fixed collection of stocks, usually 20, that is used to track some industry sector. For example, HOLDRs exist for biotech, internet, and business-to-business companies, just to pick some examples. A HOLDR is a way for an investor to gain exposure to a market sector with at a
Exchange-Traded Funds
Exchange-Traded Funds and Unit Investment Trusts An exchange-traded fund is a collection of securities such as stocks or bonds that are bundled together in a special vehicle. The legal entity, that special vehicle, happens to be a unit investment trust. Investors can buy tiny little pieces of the trust (“units”). So although an exchange-traded fund
What Causes Stock Prices to Change?
One frequently asked question is “Why did my stock in X go down/up by this large amount in the past short time? The purpose of this answer is not to discourage you from asking this question in misc.invest, although if you ask without having done any homework, you may receive a gentle barb or two. Rather, one purpose is to inform you
Dividends
A company may periodically declare cash and/or stock dividends. This article deals with cash dividends on common stock. Two paragraphs also discuss dividends on Mutual Fund shares. A separate article elsewhere in this FAQ discusses stock splits and stock dividends. The Board of Directors of a company decides if it will declare a dividend, how
Cyclical Stock
Cyclical stocks, in brief, are the stocks of those companies whose earnings are strongly tied to the business cycle. This means that the prices of the stocks move up sharply when the economy turns up, move down sharply when the economy turns down. Examples: Cyclical companies: Caterpillar (CAT), US Steel (X), General Motors (GM), International
American Depositary Receipts (ADRs)
An American Depositary Receipt (ADR) is a share of stock of an investment in shares of a non-US corporation. The shares of the non-US corporation trade on a non-US exchange, while the ADRs, perhaps somewhat obviously, trade on a US exchange. This mechanism makes it straightforward for a US investor to invest in a foreign
What is Stock?
Perhaps we should start by looking at the basics: What is stock? Why does a company issue stock? Why do investors pay good money for little pieces of paper called stock certificates? What do investors look for? What about Value Line ratings and what about dividends? To start with, if a company wants to raise