Automatic Reinvestment A service offered by most mutual funds whereby income dividends and capital gain distributions are automatically invested into the fund by buying additional shares and thus building up holdings through the effects of compounding. The bid or redemption price means the current net asset value per share, less any redemption fee or back-end load. A mutual fund whose portfolio consists primarily of corporate or Government bonds. These funds generally emphasize income rather than growth. Bond Rating System of evaluating the probability of whether a bond issuer will default.
Various firms analyze the financial stability of both corporate and government bond issuers.
Bonds rated BBB or below are not considered to be of investment grade. Mutual funds generally restrict their bond purchases to issues of certain quality ratings, which are specified in their prospectuses. A mutual fund that seeks maximum capital appreciation through the use of investment techniques involving greater than ordinary risk, such as borrowing money in order to provide leverage, short-selling and high portfolio turnover. Capital Growth A rise in market value of a mutual fund's securities, reflected in its net asset value per share. This is a specific long-term objective of many mutual funds.