What Is Risk? Risk is defined in financial terms as the chance that an outcome or investment’s actual gains will differ from an expected outcome or return. Risk includes the possibility of losing some or all of an original investment. Quantifiably, risk is usually assessed by considering historical behaviors and outcomes. In finance, standard deviation
What Is a Risk-Adjusted Return? A risk-adjusted return is a calculation of the profit or potential profit from an investment that takes into account the degree of risk that must be accepted in order to achieve it. The risk is measured in comparison to that of a virtually risk-free investment—usually U.S. Treasuries. Depending on the
What Is a Reverse Stock Split? A reverse stock split is a type of corporate action that consolidates the number of existing shares of stock into fewer (higher-priced) shares. A reverse stock split divides the existing total quantity of shares by a number such as five or ten, which would then be called a 1-for-5
What Is Reverse Survivorship Bias? Reverse survivorship bias describes a situation where there is a tendency for low performers to remain in the game, while high performers are inadvertently dropped from the running. This is the opposite of survivorship bias, which occurs when only strong and successful members of a group survive and remain in the
What Is a Reverse Takeover (RTO)? A reverse takeover (RTO) is a process whereby private companies can become publicly traded companies without going through an initial public offering (IPO). To begin, a private company buys enough shares to control a publicly-traded company. The private company’s shareholder then exchanges its shares in the private company for
What Are Reversionary Annuities? The term reversionary annuity refers to a retirement income strategy that combines an insurance policy with an immediate annuity to provide for a surviving spouse. Similar to a permanent life insurance policy, the policy owner of a reversionary annuity pays a premium to guarantee a benefit to the survivor. Upon the
What Is a Revertible Bond? A revertible bond, also known as a reverse convertible bond, or simply as “revertible,” is a type of convertible bond that automatically converts to that company’s common stock if that stock’s price drops below a pre-determined price threshold. Advisor Insight A revertible bond refers to a special type of convertible corporate
What is the Revlon Rule The Revlon rule is the legal principle stating that a company’s board of directors shall make a reasonable effort to obtain the highest value for a company, when a hostile takeover is imminent. This represents somewhat of a shift in responsibility, because boards of directors are primarily tasked with preventing
What Is a Revocable Beneficiary? A revocable beneficiary does not have guaranteed rights to receive compensation from an entity such as an insurance policy or a trust fund. The policy owner reserves the right to make changes to who receives payment, change the terms of the policy, or terminate the policy without the need of revocable beneficiary consent. Most
What Is a Revocable Trust? A revocable trust is a trust whereby provisions can be altered or canceled depending on the wishes of the grantor or the originator of the trust. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries of
