If rates decrease by a percentage point, the portfolio's share price would rise by 5 percent. The average length of time until bonds held by the portfolio reach maturity and are repaid. In general, the longer the average maturity, the more a portfolio's share price will fluctuate in response to changes in market interest rates. Agencies assign credit ratings after appraising an issuer's ability to meet its obligations. A stock market decline of 20 percent or more is considered a bear market.
Bonds generally have less risk and offer lower potential returns than stocks.
The profit derived from the sales of securities sold at a higher value than the original purchase cost. A stockholder is entitled to share in the company's profits, some of which may be paid out as dividends. The possibility that a bond issuer will fail to repay interest and principal in a timely manner. Generally, when the dollar rises in value against a foreign currency, your investment in that country loses value because its currency is worth fewer U.S. dollars. On the other hand, a weaker dollar generally leads to higher returns for Americans holding foreign investments.