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Meaning / Definition of

Coupon Rate

Categories: Bonds and Treasuries, Investing and Trading, Stocks,

The coupon rate is the interest rate that the issuer of a bond or other debt security promises to pay during the term of a loan. For example, a bond that is paying 6% annual interest has a coupon rate of 6%.The term is derived from the practice, now discontinued, of issuing bonds with detachable coupons. To collect a scheduled interest payment, you presented a coupon to the issuer or the issuer's agent. Today, coupon bonds are no longer issued. Most bonds are registered, and interest is paid by check or, increasingly, by electronic transfer.

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Definition / Meaning of

Target Date Fund

Categories: Finance,

A target date fund is a fund of funds that allows you to link your investment portfolio to a particular time horizon, typically your expected retirement date. In fact, a target date fund characteristically has a date in its name, such as a 2015 Fund or a 2030 Fund. A target fund aiming at a date in the somewhat distant future tends to have a fairly aggressive asset allocation, with a focus on growth. As the target date approaches, the fund is designed to become more conservative to preserve the assets that have accumulated and eventually to provide income. Each fund company formulates its own approach to risk, so that the allocation of one 2025 Fund may be noticeably different from the allocation of a 2025 Fund from a different company. You can find model portfolios and statements of investment strategy in the fund's prospectus. Each mutual fund company that offers target date funds tends to offer a series, with dates five or ten years apart. Most companies populate their funds of funds with individual funds from their fund family, though some companies add mutual funds or exchange traded funds from other investment companies.Like other funds of funds, the fees you pay for a target date fund may be higher than you would pay to own each of the individual funds separately. However, these fees pay for an additional level of professional oversight.

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