Collateralized mortgage obligations (CMOs)

Investor’s guide

Bonds, also known as fixed income securities, are typically intended to generate interest income each year. One type of bond available to you through Ameriprise Financial is a collateralized mortgage obligation (CMO). A CMO is a pool of mortgages which is carved up into multiple securities (known as tranches). The cash flow of the whole pool is then redirected to these individual tranches in a way to create varying maturities.  This allows for a wider range of investment timeframes to be offered from the same pool of underlying mortgages.  Principal payments and interest are distributed to different tranches based off a predetermined priority.

To help determine whether a CMO is an appropriate investment for you, refer to the Mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs) investor’s guide. This guide defines and explains various mortgage-backed securities, the interest rates and yields on these securities, and tax considerations for a CMO. The guide also provides a glossary of associated investment terms.

Take the next step

To find out more about whether including CMOs is appropriate for your investment strategy, contact your Ameriprise financial advisor or locate an advisor near you.