What Is a Roth Option? A Roth option is an option to invest retirement savings in a special Roth account and is available in some public and private retirement benefit plans. It may also be available through small business retirement plans. A Roth option allows an employee to contribute after-tax dollars to a special Roth
What Is a Routing Transit Number? A routing transit number is a nine-digit number used to identify a bank or financial institution when clearing funds for electronic transfers or processing checks in the United States. A routing transit number is also used in online banking and clearinghouses for financial transactions. Only federally chartered and state-chartered
What Is the Royal Institution of Chartered Surveyors (RICS)? The Royal Institution of Chartered Surveyors (RICS) is a global professional organization that establishes and enforces standards for valuing, operating, and developing assorted types of real estate and property. Property covered by the RICS can be in the form of land, structures, facilities, or infrastructure components.
What Is a Royalty? A royalty is a legally binding payment made to an individual or company for the ongoing use of their assets, including copyrighted works, franchises, and natural resources. An example of royalties would be payments received by musicians when their original songs are played on the radio or television, used in movies
What Is a Registered Pension Plan (RPP)? A registered pension plan is a type of trust that provides pension benefits for an employee of a company upon retirement. Registered with the Canada Revenue Agency, RPPs are retirement plans where employees and employers or employers alone contribute to the entity until the pension recipient leaves the company
What Is Risk Parity? Risk parity is a portfolio allocation strategy that uses risk to determine allocations across various components of an investment portfolio. The risk parity strategy modifies the modern portfolio theory (MPT) approach to investing through the use of leverage. MPT seeks to diversify an investment portfolio among specified assets to optimize returns
What Is Risk Participation? The term risk participation refers to an off-balance-sheet transaction in which a bank sells its exposure to a contingent obligation to another financial institution. Risk participation allows banks to reduce their exposure to delinquencies, foreclosures, bankruptcies, and company failures. Banks can transfer the exposure they have to risk on any type
What Is a Risk Profile? A risk profile is an evaluation of an individual’s willingness and ability to take risks. It can also refer to the threats to which an organization is exposed. A risk profile is important for determining a proper investment asset allocation for a portfolio. Organizations use a risk profile as a
What is Risk-Return Tradeoff? The risk-return tradeoff states that the potential return rises with an increase in risk. Using this principle, individuals associate low levels of uncertainty with low potential returns, and high levels of uncertainty or risk with high potential returns. According to the risk-return tradeoff, invested money can render higher profits only if
What Is the Risk/Reward Ratio? The risk/reward ratio marks the prospective reward an investor can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare the expected returns of an investment with the amount of risk they must undertake to earn these returns. Consider the following example: an investment
