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Investing Glossary

Exclusively at StocksAndMutualFunds.com

10-K an annual report of revenues, expenses, profits, assets, liagbilities and equity filed by a company with the SEC.
10-Q a quarterly report filed by a company with the SEC.
12-B a fee that some mutual funds may charge for marketing expenses.
12b-1 Fee an annual fee deducted from some mutual funds to pay for the marketing and distribution of the fund. Many funds are not charged this fee, so there is usually a better investment if it can be avoided.
401(k) a tax-deferred account set up by an employer for its employees retirement, managed by the employee; investments are pretax deductions from the employee's paycheck; withdrawals are taxed as ordinary income but may be penalized if withdrawal happens before retirement age.
403(b) a tax-deferred account, usually offered by government or nonprofit employers that is similar to a 401(k) plan but typically offers annuities as the primary investment.
52 Week High the highest trading price of an individual stock over the last year; for mutual funds, the highest day-end NAV of the past year.
52 Week Low the lowest trading price of an individual stock over the last year; for mutual funds, the lowest day-end NAV of the past year.
8-K a form filed with the SEC that indicates a major event relating to the company or fund; it may disclose a change in assets, options granted to or sold by officers, a personnel change at the executive level (usually including compensation information such as salary or severance packages).
After Hours any trading of a security which happens outside of the normal trading time for a particular security; it is frequently riskier than trading during normal business hours because of the reduced volume of trades. Anyone can partake through a broker that offers the service, usually for a premium.
Aggressive Growth an investment strategy which focuses on high-risk investments on the speculation that it will generate high returns.
Alpha a measure of an investment's past returns relative to its risk (volatility); a high alpha means that the fund's returns have been high compared to an investment with similar risk.
Analyst a financial professional who usually works for an investment bank; the analyst's job is to scrutinize the filings, operations and current products and releases of a company to determine its financial health and, ultimately, whether its stock is a worthwhile investment. An analayst will typically specialize in a particular sector, evaluating the health of rival companies.
Analyst Rating an analyst's determination of whether a particular company is a worthwhile investment compared to its peers; typically a Buy, Hold or Sell.
Annual Report a typically glossier version of a company's 10-k which is distributed to investors and is usually available at its website.
Annuity an investment (usually with an insurance company) which earns tax-deferred interest over a fixed amount of time and offers a guaranteed minimum payout at retirement. Annuities can be purchased at a fixed or variable rate of return.
Annualized Return a measure of the average return over a tewelve month period for a fixed period in time, accounting for compounding.
Ask the lowest price a holder of a security is willing to sell it for.
Asset a holding, which may be a commodity, option, stock, bond, or cash.
Assets Under Management (AUM) a fund's size, usually expressed in its base currency, which includes the combined value of securities and cash
AUM see Assets Under Management
Average Maturity the average length of time it takes for a bond in a bond fund to reach maturity
Balanced a fund which divides its holdings between multiple asset classes; balanced will typically refer to a fund which invests in both stocks and bonds, though it may refer to a stock fund which invests in both growth and value stocks, or stocks across all market caps; ultimately, the prospectus is the only clear indicator of what a balanced fund invests in
Base Currency the currency a mutual fund uses to make its transactions and calculate its performance
Basis Point .01% - one one-hundredth of one percent
Bear, Bearish the opposite of a bull is a bear: a market condition in which an asset class is experiencing losses or stagnant growth; one is bearish if he or she predicts poor market conditions ahead. Bonds endured a long bear market through the 1950s until the 1980s.
Below Investment Grade describes a bond carrying a rating below BB (by S&P) or below Ba (by Moody's); typically will carry a high yield due to the higher default risk
Bench see Benchmark
Benchmark the index (or indexes in the case of a fund which holds multiple asset classes) a mutual fund uses for performance comparison; the benchmark should accurately reflect the investment style of the fund
Beta a measure of an investment's volatility relative to its benchmark; generally, a higher beta means that a fund is more volatile than a similar fund; a beta lower than 1 usually means that the fund is less volatile than its benchmark.
Bid the highest price a buyer of a security is willing to buy it for.
Blue Chip a descriptive term used for a company or stock which has consistently outperformed its peers and has grown to become a leader in its field; most often used to refer to the stocks that make up the Dow Jones Industrial Average;
Bond a debt obligation, in which the issuer agrees to pay the bond-holder (investor) principal and interest over a set period of time (maturity)
Bond Rating a measure of a concern's credit worthiness, as determined by an independent agency, usually Standard an Poors and Moody's
Book Value a company's total assets minus its liabilities; usually used by value investors to determine the attractiveness of a stock
Bottom-Up Approach an investment strategy which focuses on individual companies and invests based on the company's valuation, fundamentals and growth prospects; contrasted with Top-Down Approach
Broker a professional licensed to buy and sell securities.
Bull, Bullish the opposite of a bear is a bull: a market condition in which an asset class is experiencing significant gains; one is bullish if he or she predicts excellent market conditions ahead. Technology stocks enjoyed a strong bull market in the late 1990s.
Buyback a situation where a company buys shares of its own stock, typically to add value to its own holdings or decrease its exposure to outside influence.
Cash Equivalents any short-term low-risk low-return holdings which may be readily converted to cash.
Cash Flow a company's cash before investment or financing is included; since financing is not included, it is often a clearer indicator of a company's health than earnings or income.
Corporate Bond debt issued by a private company to finance future expenditures. Bonds may be issued to develop new business or to invest further in current business. Corporate bonds typically carry a higher interest rate than government bonds, but corporations may leverage assets (such as stock, in the case of convertible bonds), to achieve a lower interest rate.
Deferred Load a charge imposed when shares of a fund are sold. A fund's deferred load generally lowers over time, so that after a certain holding period the load may diminish to zero.
Diluted EPS (Earnings Per Share) the portion of a company's profit allocated to each outstanding share of stock, including all potential common shares that could be redeemed (from convertible bonds, unexercised stock options, etc.).
Dividend Yield the percentage of a stock's (or fund's) current price that was realized through dividend distributions over the previous 12-month period.
DJIA the Dow Jones Industrial Average is an index of the stock values of 30 companies chosen by the Wall Street Journal; believed to be good indicator of the overall health of the stock market
Duration the time a bond takes to yield face value; duration will be shorter than maturity, except in the case of zero-coupon bonds, which have a maturity which equals duration.
Earnings a company's net income after accounting for expenses and taxes.
Earnings per Share a company's earnings divided by the total number of outstanding shares. Also see diluted EPS.
EPS earnings per share - a company's profits (or losses, if negative) divided by the number of shares of stock outstanding
Fund Size the total value of the net assets of a mutual fund, typically calculated monthly. Small fund size, also called Assets Under Management (AUM), is very important for funds that invest in smaller securities.
Large Cap typically refers to companies with a market cap over $10 billion.
LBAG the Lehman Brothers Aggregate Bond Index - an index used to track investment grade bonds.
Market a term used to describe the investment community. Generally, it is specific to a particular asset class, so one will refer to the long-term bond market or the developed global equities market.
Market Cap the total value of a company's outstanding equity; the number of shares outstanding multiplied by the price per share
Medium-Term a term used to describe bonds with maturity of 6-10 years.
Mid Cap typically refers to companies with a market cap between $2 and $10 billion.
Minimum Investment the minimum amount required to invest in a fund. An initial investment can be as small as $250, depending on the fund company, and will frequently be lower for IRA accounts.
Moody's a corporate credit reporting agency, like Standard and Poors.
Move the Market a term used to describe what happens when bulk purchases or sales happen to a single security. If a mutual fund, for example, wants to purchase a large quantity of a particular stock, that stock's price will rise as the purchase is mad, thus moving the market for that stock.
Municipal Bond a debt instrument available to local and county governments in the United States. Proceeds are generally tax-deductible for state and local tax purposes; sometimes they are also deductible from federal income taxes.
Mutual Fund a corporation, or a product offering of a corporation, which invests the collective money of multiple individuals in a group of securities larger than the individuals could themselves invest in. Regulated by the SEC.
NASDAQ one of the major stock exchanges in North America, which contains most technology stocks. NASDAQ is completely electronic: there is no trading floor.
NAV see Net Asset Value
Net Asset Value the value of a single share of a mutual fund, as calculated at the end of each trading day. It is calculated by dividing the total value of all securities held by the fund by the total number of outstanding shares of the fund.
Net Cash & Equivalents any holding which is easily converted to cash; short term floating rate notes, currency, etc.
No-load means that a mutual fund does not have a front-end load; it does not mean that the fund will have no expenses.
NYSE New York Stock Exchange
Online Broker a company licensed to trade on any of the major stock exchanges and carries out its transactions with customers in an online interface. While some online brokers will offer full service sup[port, advice, etc, others will only execute buy or sell orders.
Operating Expenses any costs associated with the regular business of a company. Operating expenses include the cost of raw materials, production, employee compensation, facility leases and management among other expenses.
Option a security which gives its holder the right to buy another security or commodity at a fixed price up until a fixed point in time in the future, at which point the option expires.
OTC stands for Over-the-counter; OTC stocks are traded on an OTCBB (over the counter bulletin board) not an exchange, usually because the company has not yet met the requirements necessary to be included on one of the major exchanges. They are regulated by the SEC.
Outperform an analyst's rating meaning that the security is expected to perform better than its peers.
Overweight to hold more of a given security in relation to other securities in a portfolio, in expectation that it will perform well; some analysts use Overweight, which means buy.
P/E Price to Earnings ratio - the price of one share of a company's stock divided by the company's earnings per share; a measure frequently used to determine how attractively priced a stock is. A stock trading at $20 with a P/E ratio of 10 had profits of $2 per share in the last twelve months
Peer any security that is comparable. Stocks in the same industry of similar market cap are peers; mutual funds that invest in the same sector, market cap and region are peers.
Portfolio Manager an individual or group which oversees a mutual fund and ultimately decides what to buy and when to buy it as well as what to sell and when to sell it
Price Target an analyst's determination of what a stock's price should be at a given point in time, usually 12-months forward.
Price to Earnings P/E is the price of one share of a company's stock divided by the company's earnings per share; a measure frequently used to determine how attractively priced a stock is. A stock trading at $20 with a price to earnings ratio of 10 had profits of $2 per share in the last twelve months
Prospectus a document required by the SEC of mutual funds that outlines in detail the investment philosophy, objective and strategy the fund will employ to attain those goals. It includes detailed information about the fund's past performance, its fees, and how fees have affected performance.
Quarterly Report also known as the 10-Q. It is a document required by the SEC which outlines a company or fund's revenues, costs and profits of the previous three months and offers a comparison of that period to the previous three months, as well as the same three months in the previous period. It also includes a detail of the company's balance sheet. A quarterly report, like all other SEC filings, is a snapshot in time of a company's financial health on a single day.
Real Estate Investment Trust an investment in the proceeds derived from real estate investments; typically a REIT will distribute gains from land use fees (sharing mine or oil field profits with a mining company or drilling company) or proceeds from direct leases.
REIT see Real Estate Investment Trust.
Risk the likelihood of losing all or part of the principle invested. Also called volatility, it usually refers to the standard deviation of an investment.
Risk-Adjusted a measure of an investment's performance relative to the performance of a risk-free investment
Roth 401(k) a hybrid account, which has all of the features of a 401(k) except, like the Roth IRA, the initial investment is after tax dollars and distributions are not taxed if done within the guidelines.
Roth IRA an Individual Retirement Account which is funded with after-tax dollars; any returns are not taxed upon withdrawal, but will be subject to an early withdrawal penalty unless certain criteria are met.
S&P Standard and Poors, a credit rating stock market index publisher.
S&P 500 a commonly used index of the 500 largest publicly traded U.S. companies
SEC Securities Exchange Commission - the government agency charged with regulating the stock market and securities trading
Sector Allocation a fund's exposure to a single sector or industry, expressed as a percent (i.e. Healthcare Sector Allocation of 25%, means that 25% of a fund's assets are invested in healthcare securities).
Securities and Exchange Commission SEC - the government agency charged with regulating the stock market and securities trading
Shares Outstanding the total number of shares of a company's stock that are available on the open market; can be determined by dividing a company's market cap by its share price
Sharpe Ratio a measure of risk-adjusted performance. It is calculated by dividing a fund's annualized return in excess of the risk-free rate of return by its annualized standard deviation over a fixed period of time (usually 3 years). The higher the sharpe ratio, the better its performance has been, considering the amount of risk it has assumed.
Short, Shorting selling a security you do not own on margin in speculation that the share price will drop, allowing one to purchase later at a profit
Small Cap typically refers to companies with a market cap under $2 billion.
Standard Deviation a measurement of how variable a fund's returns have been over a fixed period of time (usually 3 years), expressed as a percentage.
Stock Buyback a situation where a company buys shares of its own stock, typically to add value to its own holdings or decrease its exposure to outside influence.
Stock Split a situation where a company decides to divide its number of shares outstanding (typically each stock becomes two stocks) in order to make it an easier for new investors to attain the holding because the share price is reduced (if each stock becomes two, the individual share price is reduced by 50%)
Stock Tip a dubious suggestion that a stock will go up or down that should only be evaluated if it is given from a trusted source and should never be followed without first investigating.
Strategy a particular's approach to investing, based on his or her tolerance for risk and the returns he or she expects to earn.
Target an analyst's determination of the price a stock is expected to reach at a particular date in time in the future.
T-Bills Treasury Bills - Short-term bonds issued by the United States Treasury; a type of Treasury Bond
Term the amount of time it takes for a bond to mature; maturity
Ticker a unique letter code which is an individual identifier of a stock or mutual fund
T-Note Treasury Note - an medium-term bond (2 to 10 years) issued by the United States Treasury
Top-Down Approach an investment strategy which looks at the greater economy as a whole to determine which sectors or markets should perform well, then investigates individual companies within those sectors or markets perceived as favorable; contrasted with Bottom-Up Approach
Tracking Error the difference between an investment's return and the return of its benchmark over a set period of time; if tracking error is negative it has outperformed its benchmark
Trade a purchase or sale of a security
Traditional IRA a retirement account which allows U.S. investors to deduct their investment from their current taxes; withdrawals from an IRA are taxed as income and are penalized an additional 10% if investors withdraw before they reach a set age (currently 59.5 years), which makes it a highly illiquid long-term investment
Treasury Bills T-Bills - Short-term bonds issued by the United States Treasury; a type of Treasury Bond
Treasury Bonds or T-Bonds are Bonds issued by the United States Treasury
Treasury Notes T-Note - a medium-term bond (2 to 10 years) issued by the United States Treasury
Underperform an analyst rating that indicates that the analyst expects a company's stock returns to compare unfavorably with those of its peers
Underweight to decrease holdings relative to other holdings in a portfolio. Also, an analyst rating that indicates that the analyst recommends decreasing exposure to a security;
Valuation a measure of a security's future worth; a favorable valuation is one that estimates that the security should be worth more than it is currently priced.
Value an investment strategy which seeks to invest in undervalued stocks which will eventually become appropriately valued by the market, thereby generating a return.
Volatility an investment's risk, typically synonymous with Standard Deviation.
Volume the number of shares of an individual stock traded on a particular day.
Yield to Maturity the expected total return of a bond held to maturity; both a bond's interest rate and its expected capital gain or loss are considered







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