Hands-on engagement with a fund’s portfolio on the part of a manager or team of managers who conduct research, review forecasts, and make investment decisions about what to buy and sell using their own judgement.
A situation during which securities prices fall 20% or more from recent highs, usually due to negative investor sentiment. Bear markets are often associated with an overall decline in a market, usually made clear by a decline in an index such as the Dow Jones Industrial Average. However, the term can also apply to a decline of 20% or more in individual securities or commodities over a sustained period.
fixed income instrument that represents a loan an investor makes to a borrower, either corporate or government. A bond includes all the details of the loan and its terms, such as the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments. Bonds are often used by companies and governments to fund operations or special projects. Bond owners are debtholders, or creditors, of the issuer.
A situation in which market prices are on the rise. The term most often refers to the stock market, but also applies anything that can be traded, from bonds to real estate to currencies. While prices of securities go up and down within each trading session, a bull market describes an extended run of rising prices over months or years.
A formal recognition of expertise in the areas of financial planning, taxes, insurance, estate planning, and retirement. The designation is awarded by the Certified Financial Planner Board of Standards, Inc., to individuals who successfully complete the CFP Board’s initial exams, then continue ongoing education to maintain their skills and certification.
A globally recognized professional designation given by the CFA Institute that measures and certifies the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas such as economics, money management, ethics, and accounting.
A security representing ownership in a corporation. Holders of common stock have the power to elect a board of directors and vote on corporate policy. However, they are the lowest priority in terms of ownership, should a corporation liquidate. Meaning, common stock owners only have rights to a company’s assets after bondholders, preferred shareholders, and other debtholders are paid in full.
The original value of an asset noted for tax purposes. The cost basis is usually calculated by starting with the original purchase price and adjusting for stock splits, dividends, and return of capital distributions.
An indicator of a company’s profitability, EPS is a calculation determined by dividing a company’s profit figure by the outstanding shares of its common stock.
A metric used to show an investor what he or she is paying through a reduction in the investor’s rate of return. Expense ratio is a calculation of what it costs to operate an investment, expressed as a percentage of its assets or in basis points.
An individual who has a legal or ethical relationship of trust with one or more parties. For instance, one who takes care of money or other assets for another person.
A type of investment security that pays investors fixed interest payments until maturity. At its maturity date, investors are repaid the principal amount originally invested. The most common form of fixed-income products are government and corporate bonds.
Refers to a large company stock or a fund that invests in such company stocks. Companies with a large market capitalization are usually well-established companies, so their stocks typically entail less risk than smaller caps, but large-caps also tend to offer less growth potential. Large Cap Fund – A fund that invests primarily in large cap stocks.
Money borrowed from a brokerage firm to purchase an investment, expressed as the difference between the total value of securities held in an investor’s account and the loan amount from the broker. When an investor borrows money to buy securities, he or she is borrowing on margin.
A metric of how often investments are bought and sold within an investment fund during a year, typically expressed as a percentage of an investment fund’s total value.
Registered investment advisors (RIAs) are firms registered with the SEC. RIAs are held to the highest ethical standard, which is called fiduciary. That means they are required to always act in the client’s best interest. Their employees are called Investment Advisor Representatives (IARs) who are also fiduciaries.
The process of realigning a portfolio by periodically buying or selling assets contained in it to maintain a predetermined level of asset allocation or risk.
A term to classify companies with relatively small market capitalization (value). The definition varies, but is generally considered to describe a company with a market capitalization of between $300 million and $2 billion.
The idea that money available now is worth more than an identical amount in the future. The rationale for this notion is that money that’s invested has growth potential, and the longer it’s invested, the more it will appreciate. Money acquired later has less time to grow through investments, so it’s considered less valuable.
Earnings realized on an investment over a set period of time, expressed as a percentage based on the invested amount, current market value, or face value of the security. This includes interest earned or dividends received from holding a particular security.
