Common and Preferred Stocks
Common and preferred stocks represent ownership in the issuing companies. Priority of dividends is the main difference between them. Preferred shares have priority on dividend payments and many dividends are accumulated when the company is temporarily unable to pay. Mercantil CIS offers direct access to the most important stock markets in the world.

ADR
ADR (American Depositary Receipts) are securities representing packages of common stock ownership. ADRs are traded on the U.S. stock market but its concept is repeated in similar instruments in other markets (DR, GDR).

Banklink NOW
Banklink NOW is an interest bearing bank account that allows customers to consolidate balances not invested in the investment account at Mercantil Commercebank. Should it be required, available balances in the bank accounts are transferred to the investment account.

Corporate Bonds
Corporate Bonds are issued by private companies. Some Corporate Bonds offer investors the option of converting them into issuer shares, offering the potential to improve its profitability. This option usually gives a slightly lower yield at the time of issue.

Agency Bonds
Agencies include public and private enterprises of high social impact created by direct mandate of the U.S. government. Main agency issuers are: Federal Home Loan Bank, Freddie Mac, Fannie Mae, Sallie Mae and Ginnie Mae, this last one being the only one backed by the U.S. Government.

Treasury Bonds
Treasury Bonds are a United States Government obligation. Coupons usually are fixed and paid semiannually. Treasury Bonds with maturities up to 10 years are called notes.

Municipal Bonds
Municipal Bonds are issued by local Governments and agencies assigned to them. There are two types: general obligation bonds and revenue bonds. Some issues are guaranteed by third parties, improving their credit quality. On income from Municipal Bonds, federal and local tax exemptions are their most relevant feature.

Redeemable bonds
Redeemable bonds are unique in providing the issuer a full or partial call option before maturity. At the time of issue this option usually gives a slightly higher yield than a bond without the early call option.

Sovereign Bonds
A sovereign bond is a bond issued by a national government or public agency. Fundamental difference between issuers is the credit quality.

Broker CD
Negotiable Certificates of Deposit issued by U.S. banks that in many cases are protected by the FDIC.

Callable Bond
(refer to Reedemable Bond)

Enhanced CD
(refer to Structured Products)

ETF (Exchange-Traded Fund)
An ETF is similar to a closed fund but with a limited investment objective to replicate a reference index. For that reason the cost of operation is much lower.

ETN (Exchange-Traded Note)
ETN is a structured note listed on the stock exchange to replicate the performance of an underlying asset. The difficulty of investing in the underlying asset favors the use of derivative instruments to obtain that exposure.

Commodities
Direct exposure to commodities is complicated due to logistical problems associated with their storage and transportation. For exposure to commodities it is preferable to use indirect vehicles such as Mutual Funds, Futures, Hedge Funds, ETNs or ETFs.

Fund of Funds (See Hedge Funds)

Closed-end Funds
Closed-end Funds are similar to Mutual Funds except for two aspects:

a. Trade on organized exchanges
b. Do not issue shares continuously

Close-end Funds tend to invest in less liquid markets like municipal bonds, exotic markets, etc.

Hedge Funds
Hedge Funds have the same basic characteristics as Mutual Funds but their main difference is their objective and method of investing. Hedge Funds generally seek absolute returns and do not relate to a reference index. Their investments possibilities are broader and allow leverage, short sales and derivates usage.

A fund whose underlying are Hedge Funds is known as a Fund of Funds.

Montary Market Funds
Monetary Market Funds are Mutual Funds that invest in very short term instruments. Their value tends to be stable and their liquidity is daily.

Mutual Funds
Mutual Funds are a legal structure which aims to invest shareholders/investors capital through a portfolio with certain pre-established guidelines. Their capital is open, providing the ability to continuously issue and redeem shares. Mutual Funds invest in stocks, bonds and real estate. In each type of asset, the fund may specialize in a sub-segment of the asset class, or issuers of certain regions. There are also asset allocation funds and balanced  funds.

Treasury Bills
Treasury bills are short-term obligations at 30, 60 and 180 days issued at a discount by the U.S. Treasury Department.

Margin
Margin or Margin Account means financial facility to purchase negotiable securities, using previous negotiable securities purchased with your own money or cash account as collateral. Margin is also used for short sales.

Metals (see Commodoties)

Money Market Fund (see Monetary Market Fund)

Treasury Notes (refer to Treasury Bonds)

Structured Notes (refer to Structured Products)

Commercial Paper
Commercial paper is a short term financial instrument issued by a corporation. They are issued at a discount and with a maximum maturity of 270 days.

Collateralized Loans
Collateralized loans offer the ability to obtain general purpose finance using negotiable instruments as guarantee.

Variable Annuities
Variable Annuities allow you to invest in a variety of funds. They are established under a trust and incorporate capital guarantees in case of loss of value at principal holder’s death. Some variable annuities also offer capital guarantees at certain pre-established periods.

Structured Products
Structured products are negotiable instruments whose issuer promises to provide a return linked to the performance of some underlying asset. Underlying assets can be of different types, but all should have easily identifiable market prices. Structured products can be issued as Notes or Certificate of Deposit (CD).