Fund of funds is a mutual fund in which the investment strategy is to invest in other mutual funds schemes rather than investing directly into stocks. It can be better understood with a real life example suppose a group of 10 friends decide to go for a movie, than instead of each of them buying movie ticket they all give money to one of them so that he or she can buy on behalf of them. Similarly is the case of fund of funds which in simple words is an indirect investment into the stock markets as it invests into other mutual funds which are investing into the stock markets.
Finance Questions and Answers
20
Feb 12
What is ISIN
ISIN is the acronym for International Securities Identification Number; it is a 12 digit alpha numeric code which represents a security which can be stock, bond or any financial instrument. ISIN number helps in identifying a security and therefore it is of great help, the first 2 digits of ISIN represent the country code which is unique for every country, while the rest 9 digits are for identifying the issuer, type of security and company and last digit is check digit.
5
Feb 12
What is Price Ceiling
Price ceiling refers to fixation of maximum price for a product or service, it is that price beyond which it is not allowed to rise. Price ceiling is usually imposed by the government when it feels that price of a good or service has reached unrealistic level. Price ceiling is used rarely by the governments because it distorts the basic premise of economics, which is price should be determined by demand and supply and not otherwise.
12
Jan 12
What is Earnest Money
Earnest money is a term which you will hear when you go for real estate investment. Earnest money is often paid by the buyer at the time of entering the contract with the seller. Earnest money forms a small percentage of total value of the purchase price of the real estate. Earnest money in a way gives assurance to both buyer and seller that the other party will not back out of the deal.
3
Jan 12
What is Time Value of Option
Time value of option refers to the difference between the premium paid for the option and intrinsic value of option, where intrinsic value of option refers to the amount which an option holder will get if he or she exercise the option today. The longer the option the more the time value of option, and as the time to expiration gets closer the time value of option begins to decline reaching 0 on the day of expiration of the option.