Useful links

– A –

Annual report – The yearly audited record of a company, corporation, collective investment scheme (CIS) or mutual fund’s condition and performance that is distributed to shareholders.

Annualised – A procedure where figures covering a period of less than one year are extended to cover a 12-month period.

Annualised rate of return – The average annual return over a period of years, taking into account the effect of compounding. Annualised rate of return also can be called compound growth rate.

Appreciation – The increase in value of a financial asset.

Asset allocation – The process of dividing investments among cash, income and growth buckets to optimise the balance between risk and reward based on investment needs.

Asset class – Securities with similar features. The most common asset classes are shares (also referred to as stocks or equity), bonds and cash equivalents.

At best – An instruction to a stockbroker to conduct the market transaction immediately and at the best possible price.

At par – Refers to the nominal value of a security.

Average maturity – For a bond fund, the average of the stated maturity dates of the debt securities in the portfolio. Also called average weighted maturity. In general, the longer the average maturity, the greater the fund’s sensitivity to interest-rate changes, which means greater price fluctuation. A shorter average maturity usually means a less sensitive – and consequently, less volatile – portfolio.

– B –

Balanced fund – Collective Investment Schemes / Mutual funds that seek both growth and income in a portfolio with a mix of common stock (shares), preferred stock or bonds. The companies selected are typically in different industries and different geographic regions.

Basis point – The unit of an index. The movement of an index will be described either by percentage movement or by the change in basis points.

Bear market – A prolonged period of falling stock prices, usually marked by a decline of 20% or more. A market whereby prices decline sharply against a background of widespread negative sentiment, growing unemployment or business recession. The opposite of a bull market.

Benchmark – A standard, usually an unmanaged index, used for comparative purposes in assessing performance of a portfolio or a collective investment scheme (CIS) / mutual fund.

Bid price – The price at which an individual/institution is prepared to pay for a particular security.

Bid-Offer Spread – The difference in the buying and selling price of most investments including unit trusts, and assurance funds.

Blue chip – A high-quality, relatively low-risk investment; the term usually refers to stocks of large, well-established companies that have performed well over a long period.

Bond – Acts like a loan or an IOU that is issued by a corporation, municipality or the State (Government). The issuer promises to repay the full amount of the loan on a specific date and pay a specified rate of return (dividend / coupon) for the use of the money to the investor at specific time intervals.

Bond fund – A collective investment scheme (CIS) / mutual fund that invests exclusively in bonds.

Bull market – Any market in which prices are advancing in an upward trend. In general, someone is bullish if they believe the value of a security or market will rise. The opposite of a bear market.

– C –

Capital – The funds invested in a company on a long-term basis and obtained by issuing preferred or common stock (shares), by retaining a portion of the company’s earnings from date of incorporation and by long-term borrowing.

Capital gain – The difference between a security’s purchase price and its selling price, when the difference is positive.

Capital loss – The amount by which the proceeds from a sale of a security are less than its purchase price.

Capitalisation – The market value of a company, calculated by multiplying the number of shares outstanding by the price per share.

Cash equivalent – A short-term money-market instrument, such as a Treasury bill or repurchase agreement, of such high liquidity and safety that it is easily converted into cash.

Collective Investment Scheme (CIS) – More frequently known as ‘investment funds’, ‘mutual funds’, or simply ‘funds’. They invest in assets, such as bonds, equities or cash. The collective assets owned by the fund are called a portfolio, and are managed by a professional fund manager.

Common stock – Securities that represent ownership in a company; must be issued by a company or corporation.

Corporate bond – A long-term bond issued by a company to raise outside capital.

Country breakdown – Breakdown of securities in a portfolio by country.

Custodian – A bank that holds a mutual fund’s assets, settles all portfolio trades and collects most of the valuation data required to calculate a fund’s net asset value (NAV).

Cut-off time – The time of day when a transaction can no longer be accepted for that trading day.

– D –

Default – Failure of a debtor to make timely payments of interest and principal as they come due or to meet some other provision of a bond indenture.

Diversification – The process of owning different investments that tend to perform well at different times in order to reduce the effects of volatility in a portfolio, and also increase the potential for increasing returns.

Dividend – A portion of a company’s profit paid to common and preferred shareholders. Dividends provide an incentive to own shares (stock) in stable companies even if they are not experiencing much growth. Companies are not obliged to pay dividends.

Dividend paid – Amount paid to the shareholder of record, a security or mutual fund.

Dividend yield – Annual percentage of return earned by a collective investment scheme / mutual fund. The yield is determined by dividing the amount of the annual dividends per share by the current net asset value or public offering price.

Dollar (or Euro) cost averaging – Investing the same amount of money at regular intervals over an extended period of time, regardless of the share price. By investing a fixed amount, you purchase more shares when prices are low, and fewer shares when prices are high. This may reduce your overall average cost of investing.

Dow Jones Industrial Average (Dow) – The most commonly used indicator of stock market performance, based on prices of 30 actively traded blue chip stocks, primarily major industrial companies. The Average is the sum of the current market price of 30 major industrial companies’ stocks divided by a number that has been adjusted to take into account stocks splits and changes in stock composition.

– E –

Earnings Per Share (EPS) – The portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability.

Equities – Shares issued by a company which represent ownership in it. Ownership of property, usually in the form of common stocks, as distinguished from fixed-income securities such as bonds or mortgages. Equity funds may vary depending on the fund’s investment objective.

Equity fund – A collective investment scheme / mutual fund in which the money is invested primarily in common and/or preferred stock. Equity funds may vary, depending on the fund’s investment objective.

Euro (or Dollar) cost averaging – Investing the same amount of money at regular intervals over an extended period of time, regardless of the share price. By investing a fixed amount, you purchase more shares when prices are low, and fewer shares when prices are high. This may reduce your overall average cost of investing.

Exchange rate risk – A risk caused by fluctuations in the investor’s local currency compared to the foreign-investment currency.

Ex-Dividend (Ex-div) – The interval between the announcement and the payment of the next dividend for a stock.

Ex-Dividend date – The date on which a stock goes ex-dividend. Typically about three weeks before the dividend is paid to shareholders of record.

Expense ratio – The ratio between a collective investment scheme / mutual fund’s operating expenses for the year and the average value of its net assets.

– F –

Fixed income fund – A fund or portfolio where bonds are primarily purchased as investments. There is no fixed maturity date and no repayment guarantee.

Fixed income security – A debt instrument issued by a government, company or other entity to finance and expand their operations. Fixed-income securities provide investors with a return in the form of fixed periodic payments and eventual return of principal at maturity. Treasury bonds and bills, sovereign bonds, corporate bonds, and certificates of deposit (CDs) are all examples of fixed-income securities.

Fund – A pool of money from a group of investors in order to buy securities. This pooled sum in a fund is divided into units; the number of units held by an investor represents the proportionate ownership of the fund’s overall assets, and the income and capital growth that those assets may generate. The prices of these units fluctuates because the underlying value of the assets will rise and fall.

– G –

Growth investing – Investment strategy that focuses on stocks of companies and equity funds where earnings are growing rapidly and are expected to continue growing. This strategy is suited for investors whose main objective is capital growth rather than income (growth stocks usually pay little or no dividend).

Growth stock – Typically a well-known, successful company that is experiencing rapid growth in earnings and revenue, and usually pays little or no dividend.

Growth-style funds – Growth funds focus on future gains. A growth fund manager will typically invest in stocks with earnings that outperform the current market. The manager attempts to achieve success by focusing on rapidly growing sectors of the economy and investing in leading companies with consistent earnings growth. The fund grows primarily as individual share prices climb.

– I –

Index – An investment index tracks the performance of many investments as a way of measuring the overall performance of a particular investment type or category. The S&P 500 is widely considered the benchmark for large-stock investors. It tracks the performance of 500 large U.S. company stocks.

Inflation – A rise in the prices of goods and services, often equated with loss of purchasing power.

Initial Public Offering (IPO) – The process of offering shares of a private corporation to the public in a new stock issuance, sometimes also referred to as a public flotation.

Interest rate – The fixed amount of money that an issuer agrees to pay the bondholders. It is most often a percentage of the face value of the bond. Interest rates constitute one of the self-regulating mechanisms of the market, falling in response to economic weakness and rising on strength.

Interest-rate risk – The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates.

Investment grade bonds – A bond generally considered suitable for purchase by cautious investors.

Investment objective – The goal of a mutual fund and its shareholders, e.g. income, growth, growth and income.

– J –

Junk bond – A lower-rated, usually higher-yielding bond, with a credit rating of BB or lower.

– L –

Large-cap – Companies that have a large market capitalisation. In the US, Large-caps are companies with market values greater than $10 billion.

Liquidity – The ability to have ready access to invested money. Collective Investment Schemes / Mutual funds are liquid because their shares can be redeemed for current value (which may be more or less than the original cost) on any business day.

Long-term investment strategy – A strategy that looks past the day-to-day fluctuations of the equity and bond markets and responds to fundamental changes in the financial markets or the economy.

– M –

Market price – The current price of an asset.

Market risk – The possibility that an investment will not achieve its target.

Market timing – A risky investment strategy that calls for buying and selling securities in anticipation of market conditions.

Maturity – The date specified in a note or bond on which the debt is due and payable.

Maturity distribution – The breakdown of a portfolio’s assets based on the time frame when the investments will mature.

Mid-cap – Companies whose market capitalisation falls in between small-cap and large-cap companies. In the US these are companies with market values between $3 to $10 billion.

Mutual fund – Fund operated by an investment company that raises money from shareholders and invests it in any or a combination of equities (shares), bonds, options, commodities or money market securities.

– N –

Net Asset Value per share (NAV) – The current value of a single mutual fund share; also known as share price. The fund’s NAV is calculated daily by taking the fund’s total assets, subtracting the fund’s liabilities, and dividing by the number of shares outstanding. The NAV does not include the sales charge. The process of calculating the NAV is called pricing.

Number of Holdings – Total number of individual securities in a fund or portfolio.

– P –

Par value – The amount originally paid for a bond and the amount that will be repaid at maturity.

Portfolio – A collection of investments owned by one organisation or individual, and managed as a collective whole with specific investment goals in mind.

Portfolio allocation – Amount of assets in a portfolio specifically designated for a certain type of investment.

Portfolio holdings – Investments included in a portfolio.

Portfolio manager – The person or entity responsible for making investment decisions of the portfolio to meet the specific investment objective or goal of the portfolio.

Preferred stock – A class of stock (shares) with a fixed dividend that has preference over a company’s common stock in the payment of dividends and the liquidation of assets. There are several kinds of preferred stock, among them adjustable-rate and convertible.

Premium – The amount by which a bond or stock sells above its par value.

Price-to-earnings (P/E) Ratio – The share price divided by its earnings per share, which indicates how much investors are paying for a company’s earning power.

Prospectus – A formal document that is required by and filed with the relevant Securities and Exchange Regulator that provides details about an investment offering to the public. Prospectuses are also issued by collective investment schemes (CISs) / mutual funds, containing information required by the relevant authority, such as history, background of managers, fund objectives and policies, financial statement, risks, services and fees.

Proxy – A shareholder vote on matters that require shareholders’ approval.

– R –

Ratings – Evaluations of the credit quality of companies, corporations or debt securities usually made by independent rating services. For debt securities, ratings generally measure the probability of timely repayment of principal and interest.

Recession – A downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country’s gross domestic product.

Redemption – Sale of collective investment scheme (fund) shares by a shareholder.

Relative risk and potential return – The amount of potential return from an investment as related to the amount of risk you are willing to accept.

Risk tolerance – The degree to which you can tolerate volatility in your investment values.

– S –

Sector – A group of similar securities, such as equities in a specific industry.

Sector breakdown – Breakdown of securities in a portfolio by industry categories.

Securities – Another name for investments such as shares (equity) or bonds. The name ‘securities’ comes from the documents that certify an investor’s ownership of particular bonds or shares.

Share – A unit of ownership in an investment, such as a share of a stock (equity) or a mutual fund.

Share classes – Classes represent ownership in the same fund but charge different fees. This can enable shareholders to choose the type of fee structure that best suits their particular needs.

Share split – The issue of additional shares with the aim of reducing the value of the existing shares.

Short-term investment – Asset purchased with an investment life of less than a year.

Small-cap – The market capitalisation of the shares of companies with small market values. In the US these are companies / corporations whose share capital is less than $3 billion.

Stock – A long-term, growth-oriented investment representing ownership in a company; also known as shares or equity.

Stockholder – The owner of common or preferred stock of a corporation. Also called shareholder.

– T –

Time horizon – The amount of time that you expect to stay invested in an asset or security.

Total return – Accounts for all of the dividends and interest earned before deductions for fees and expenses, in addition to any changes in the value of the principal, including share price, assuming the funds’ dividends and capital gains are reinvested. Often, this percentage is presented in a specified period of time (one, five, ten years and/or life of fund). Also, a method of calculating an investment’s return that takes share price changes and dividends into account.

Treasury bill – Negotiable short-term (one year or less) debt obligations issued by Governments.

– V –

Valuation – An estimate of the value or worth of a company; the price investors assign to an individual share / equity.

Value investing – A strategy whereby investors purchase equity securities that they believe are selling below estimated true value. The investor can profit by buying these securities then selling them once they appreciate to their real value.

Value stock – Typically an overlooked or under-priced company that is growing at slower rates.

Value-style funds – Typically hold company stocks that are undervalued in the market. Fundamentally strong companies whose stocks are inexpensive but trending upward may also be selected for value funds.

Volatility – The amount and frequency with which an investment fluctuates in value.

– Y –

Year-to-date (YTD) – Year-to-date return on an investment including appreciation and dividends or interest.

Year-to-date (YTD) total return – Year-to-date return on an investment including appreciation and dividends or interest.

Yield – Annual percentage rate of return on capital. The dividend or interest paid by a company expressed as a percentage of the current price.

Yield to call (YTC) – Refers to the return a bondholder receives if the bond is held until the call date, which occurs sometime before it reaches maturity.

Yield to maturity – Concept used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date.

Yield to maturity distribution – The average rate of return that will be earned on a bond if held to maturity.