Tutorial: Get More Out of Your Account Statement
E.K. Riley offers the highest attainable level of professional services in support of all your brokerage needs. Our brokerage services include access to an extensive array of investment alternatives to help fuel portfolio growth and diversification.
Fund Products
E.K. Riley provides access to a variety of investment products designed to help investors achieve better portfolio diversification and reduced risk. Fund-based investment products can be especially effective in this regard, particularly for individual investors, who may lack sufficient resources to otherwise attain adequate diversification.
Diversification is a defensive strategy, based on Modern Portfolio Theory, which contends that holding a basket of diverse investments helps reduce portfolio risk and price volatility. Typically, investments with low correlation to one another are used to help balance uneven performance among different asset classes during dissimilar market conditions. In other words, positive returns from some investments will offset negative returns from others, assuming the assets do not react in tandem.
While diversification can’t reduce systemic risks, such as government policies, economic vagaries, inflation and political upheaval, it can contribute to lowered portfolio risk and volatility without sacrificing expected returns.
Some of the more effective investments for achieving greater diversification are mutual funds, index funds, exchange traded funds, money market funds and unit investment trusts.
Mutual Funds
Mutual funds, in general, are professionally managed pools of money harvested from a large group of investors. The funds may invest in stocks, bonds or other investment securities. Each fund has its own investment strategy, based on its specific portfolio objectives.
Index Funds
Index funds strive to replicate the market performance of a specific financial market or index, such as the Standard & Poor's 500, Dow Jones Industrial Average or Wilshire 500. Funds are not required to track the most popular or well-known indexes; there roughly 1,000 index funds available. Unlike actively managed mutual funds, index funds represent a passive investment strategy that bypasses stock picking by the portfolio manager.
Exchange Traded Funds
Exchange Traded Funds (ETFs) are similar to index-tracking funds. They are listed on an exchange and trade like shares of stock. Shares can be bought, sold, shorted or traded on margin. ETFs can be actively or passively managed. ETFs can provide investors with portfolio diversification, tax efficiency and ease of trading. The original and most recognized ETF is the Spider (SPDR), which tracks the S&P 500 index.
Money Market Funds
Money Market Funds are mutual funds that invest in liquid financial instruments of thirteen months or less, such as CDs, U.S. Treasuries and government agency securities and short-term corporate paper.
The funds aim to preserve principal while yielding modest returns. They are available in taxable or tax-exempt forms.
Unit Investment Trusts
Unit Investment Trusts (UIT) are SEC-registered investment companies that buy and hold a fixed portfolio of securities in support of a stated investment objective.
Unlike mutual funds, the 12,000 UITs currently available in the U.S. have a fixed termination date that can vary from a few years to several decades, depending on the investments held in the portfolio. The underlying securities are not actively traded. Dividend income, paid monthly or quarterly, helps avoid short-term capital gains.
UIT investment objectives determine what types of securities will be held in the portfolio, such as equities, various bond issues, government or agency securities, and other securities.