Tuesday, April 16, 2013

Mutual Fund Credit and Purchasing Power Risk

The credit worthiness of the bond issuer and its expected ability to pay interest and to repay its debt. A mutual fund can manage this risk by investing only in investment grade bonds.

Purchasing power risk is rate of return on an investmetn will not be greater than the rate of inflation thus diminishing the value of your money, i.e. , the value of your money in real terms will be less than the purchasing power of your original investment.

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