Accrued interest

Interest which accumulates on a fund's investments, but has not yet been paid to the shareholder. This interest is paid throughout the life of the fund as part of any interest and principal distributions.

Acid test

A stern measure of a company's ability to pay its short-term debts, in that stock is excluded from asset value. Also referred to as the quick ratio.

Active management

An investment process that attempts to outperform the average or benchmark return in an asset class at a specific level of risk through the use of superior information and judgment in portfolio construction. Active management may be based on some combination of traditional security analysis and research, technical analysis, macroeconomic forecasts and application of various fundamental quantitative tools.

Active manager

A portfolio manager who takes an active role in any aspect of the investment process, including asset allocation, style exposures, security selection, and risk management in an attempt to improve a portfolio's risk-adjusted return.

Active Share

A measure of the percentage of stock holdings in a manager's portfolio that differ from the benchmark index. It is calculated by taking the sum of the absolute value of the differences of the weight of each holding in the manager's portfolio versus the weight of each holding in the benchmark index and dividing by two.

Actively Managed ETF

An actively managed ETF is a form of exchange-traded fund that has a manager or team making decisions on the underlying portfolio allocation, otherwise not adhering to a passive investment strategy. It will have a benchmark index, but managers may change sector allocations, market-time trades, or deviate from the index as they see fit. This produces investment returns that do not perfectly mirror the underlying index.

An actively managed ETF features many of the same benefits of a traditional exchange-traded fund like price transparency, liquidity, and tax efficiency, but with a fund manager that can adapt the fund to changing market conditions. The combination of active management and an ETF provides investors with an innovative solution to asset management.

Adjustable-rate instrument

Any of a wide variety of fixed principal obligations whose periodic payout is set relative to a reference index rate (such as LIBOR) to create a longer-term fixed principal obligation with a floating-rate interim cost.

Adjusted funds from operations (AFFO)

A financial performance measure primarily used in the analysis of real estate investment trusts (REITs). The AFFO of a REIT, though subject to varying methods of computation, is generally equal to the trust's funds from operations (FFO) with adjustments made for recurring capital expenditures used to maintain the quality of the REIT's underlying assets. The calculation takes in the adjustment to GAAP straight-lining of rent, leasing costs and other material factors.


(1) An organisation employed by a mutual fund's board to give professional advice on the fund's investments and asset management practices. (2) An individual or organisation that provides advice and information to investors.

Advisory fee

The amount a mutual fund pays to its investment advisor for the investment management associated with overseeing the fund's portfolio. Also referred to as management fee.

After-tax return

The return from an investment after all income taxes have been deducted. By comparing after-tax returns an investor can determine which investment makes the most sense based on his or her tax bracket.


The market for a security after an initial public offering. The after-market or secondary market may be over-the-counter or on an exchange after-tax contribution. Investment in a retirement plan from the taxed portion of an employee's pay. These contributions are treated differently from the more common pre-tax contribution when they are distributed. All contributions to Roth IRAs are aftertax contributions.

Aggressive growth fund

A mutual fund that seeks maximum long-term capital gains. Such funds often invest in stocks of small and mid-sized companies, though company size is not always a selection criterion.

Agnostic to

Taking an agnostic approach to your investment style means not advocating for one style only at the exclusion of the others.


The return of a fund in excess of the return of its benchmark. A positive alpha of 1.0 means the fund has outperformed its benchmark by 1%. Correspondingly, an alpha of -1.0 would indicate underperformance of 1%.


Actively Managed Certificate. Sometimes referred to as an ETN.

American Stock Exchange (AMEX)

A stock exchange located in downtown Manhattan. Companies that trade on the AMEX are generally smaller than those traded on the New York Stock Exchange. The AMEX is the principal listing exchange for exchange-traded funds (ETFs).

Ankle biter

This phrase — used outside the world of finance to describe small children who are so little that they, metaphorically at least, barely reach an adult's ankles — can also be used to describe a small cap investment. Small cap just means a company with a relatively low value, or market capitalization — usually somewhere between $300 million and $2 billion.

Annual report

A legally required document that every fund sends to its shareholders within 60 days after the end of the fund's fiscal year. The annual report describes the fund's financial condition and performance and includes a list of portfolio securities and an audited financial statement.

Annual yield

The percentage of return that an investment yields each year, usually expressed in terms of dividends or interest.

Annualised rate of return

The average return over a stated number of years, taking into account the effect of compounding. For example, a 100% return over five years is equivalent to an annualised rate of return of 14.87% per year.

Below is an example explaining the difference between annual return and compounded annual return rates:

                                                                                             Non-Compounded Annual Return       Compounded Annual Return

  Value % Return Value % Return
Original Investment 100 - 100 -
Year 1 120 20% 115 14.87%
Year 2 140 20% 132 14.87%
Year 3 160 20% 152 14.87%
Year 4 180 20% 174 14.87%
Year 5 200 20% 200 14.87%
Total Return over 5 years   100%   100%

Please also refer to the term "compounding" in the Glossary


The implementation of purchases in one market against equivalent sales in a closely related market, because the price relationship between the two is viewed to be out of line.


Traders who specialise in arbitrage. Arbitrageurs seek to make small profits from temporary distortions in the price relationship between related markets, as opposed to attempting to profit from correct projections of market direction.

Asset allocation

(1) Dividing investment funds among markets to achieve diversification and/or a combination of expected return and risk consistent with the investor's objectives. (2) A value-oriented investment strategy that attempts to take long positions in markets or market sectors where prices appear to be low and to reduce positions, or take short positions in markets or market sectors where prices appear to be high. Tactical (TAA) or strategic (SAA) asset allocation advocates and value-seeking portfolio managers often use similar techniques and policies. In contrast to momentum investors who accentuate market trends, most asset allocators' trades tend to offset destabilising market movements and counteract price and rate fluctuations. The asset allocator tends to buy when prices decline and sell when prices rise.

Asset allocation fund

A fund that invests its assets in a wide variety of investments that may include domestic and foreign stocks and bonds, government securities, gold or other precious metals, and real estate. Some asset allocation funds keep the proportions allocated between different investments relatively constant, while others alter the mix as market conditions change.

Asset turnover

A measure of operational efficiency. It shows the amount of revenue produced per unit of currency of assets available to the business.


Anything owned by the company that has a monetary value e.g., fixed assets such as buildings, machinery, vehicles (only if owned and not rented) and potentially including intangibles such as trademarks and brand names, and current assets such as stock, debtors and cash.

Average weight/median market capitalisation

The market capitalisation of a company is equal to the number of the company’s common shares outstanding multiplied by the current price of the company’s stock. The average market capitalisation and the median capitalisation of a mutual fund’s portfolio give a measure of the size of the companies in which the fund invests.

Balanced fund

A fund that seeks to provide current income and long-term growth of principal and income from a combination of stocks, bonds, and cash reserves.

Bank debt (or bank loans)

Loans made by banks to corporations, partnerships, and other entities. Such loans may finance leveraged buyouts or merger and acquisition activity, as well as general corporate activities.

Base (expense) year

The first year of lease, during which time the landlord determines the actual taxes and operating expenses associated with a tenant's occupying their space. After the base year, the landlord agrees to pay an expense amount based on base year expenses, and the tenant pays any increases in expenses over the base amount.

Base rent

The minimum rent due to a landlord, as defined in a lease.

Basis point

A measure used to quote bond yields. One one-hundredth of one percentage point, or 0.01%. For example, 25 basis points equals 0.25%.


A set of related instruments whose prices or rates are used to create a synthetic composite instrument that trades as a unit or serves as the underlying for a derivative instrument.


Someone who believes prices will decline.

Bear market

A prolonged period of declining stock prices, typically defined as a decline of 20% or more from the market high.

Before-tax contribution

The portion of an employee's salary contributed to a retirement plan before federal income taxes are deducted. This contribution reduces the taxpayer's gross income for federal tax purposes.


A standard, often an unmanaged index, used for comparative purposes in assessing an investment's performance.

Benchmark agnostic

The benchmark is not used as a starting point to build a portfolio, but rather to measure relative performance over time. This in effect means that the portfolio can look very different to its benchmark from time to time.

Beneficial owner

The person or firm that will benefit from owning an asset even though they may not be registered as a shareholder.


A recipient of proceeds from a qualified retirement plan, also from a will or trust, or insurance policy upon the death of the registered owner.


A measure of the variability of a fund's share price or unit investment trust's unit price in relation to an index. Securities with betas higher than 1.0 have been, and are expected to be, more volatile than the index; securities with betas lower than 1.0 have been, and are expected to be, less volatile than the index.

Bid price

(1) The price at which a trader is willing to buy a security. (2) The price at which you can sell (redeem) a fund's shares, determined by deducting any applicable contingent deferred sales charge from the net asset value (NAV) per unit/share. Also known as the redemption price.

Big uglies

Big, older companies, usually in "dirty" industrial sectors like mining or steel. Though they can be solid investments with good, steady returns, many investors ignore them for "cleaner," trendier stocks.


A type of IOU issued by corporations, governments, or government agencies. The issuer makes regular interest payments on the bond and promises to pay back, or redeem, the face value of the bond at a specified point in the future, called the maturity date.

Book value

The net worth, or liquidation value, of a business. Calculated by subtracting from total assets all liabilities, including debt and preferred stocks, and dividing by the number of shares of common stock outstanding.

Bottom-up approach

An investment strategy that emphasises finding outstanding individual companies before considering broad economic trends.


A price movement beyond a previous high (or low) or outside the boundaries of a preceding price consolidation.

Broad-based index

An index designed to reflect the movement of the entire market or all stocks in a specific capitalisation range.


(1) Noun: an amount of money that is planned to spend on a particular activity or resource, usually over a trading year, although budgets apply to shorter and longer periods. (2) Verb: to calculate and set a budget. In a looser context it also means to be careful with money and find reductions (effectively by setting a lower budgeted level of expenditure). The word budget can also be used to indicate the whole plan e.g., a government’s annual plan is called The Budget. In certain contexts, a forecast means the same as a budget – either a planned individual activity/resource cost, or a whole business/ corporate/organisational plan. A forecast more commonly means a prediction of performance especially when it is made during the trading period, and normally after the plan or budget has been approved.


Someone who believes that prices will rise.

Bull market

A prolonged period of rising security prices. While the general trend of prices is positive, prices on any given day will fluctuate and may decline.

Business cycle

The regular ebb and flow of economic conditions over time, characterised by fluctuating employment levels, industrial productivity, and interest rates.

Call feature

A term in a bond indenture that gives the issuer the right to call the bond for redemption at certain prices and at certain times.

Call option

A contract that gives the buyer the right - but not the obligation - to purchase the underlying financial instrument or commodity at a specified price for a given period of time.

Call protection

A provision in a bond's indenture setting a certain period during which the bond cannot be redeemed by the issuer.

Capital appreciation

See capital growth.

Capital appreciation fund

A fund that seeks maximum capital appreciation by investing primarily in stocks with greater than average risk.

Capital employed

The value of all resources available to the company, typically comprising share capital, retained profits and reserves, long-term loans and deferred taxation. It is usually presented as total assets less current liabilities.

Capital expenses

GAAP requires that certain expenditures be classified as capital expenses rather than operating expenses. There are two primary classifications of capital expenses, or "capex":

1. Recurring capex is money spent on improvements to a property that facilitate its leasing but that are nonstructural. Examples of such expenditures include leasing commissions and tenant improvement paid to lease a space, both of which are capitalised and then amortised over the life of the lease.

2. Nonrecurring capex is money invested in structural improvements that extend the life of a property, such as constructing a parking deck. Because they involve structural enhancements, nonrecurring capex dollars are not expensed; instead they are capitalised into the basis of a property. So if a property was worth $25 million and the landlord builds a $5 million parking deck , all else being equal, the new basis of the property would be $30 million.

Capital gain distribution

A payment to fund shareholders of net capital gains realised on the sale of the fund's securities. The net asset value of the fund is reduced by the amount of the distribution. These amounts are usually paid out once a year, in December.

Capital gain/(loss)

The difference between the sales price of a capital asset, such as an exchangetraded fund, mutual fund, stock, or bond, and the cost basis of the asset. If the sales price is higher than the cost basis, there is a capital gain. If the sales price is lower than the cost basis, there is a capital loss. Short-term capital gain refers to a gain on assets owned for one year or less. Long-term capital gain generally refers to a gain on assets owned for more than one year. Net capital gains generated by a fund from the sale of securities in its portfolio are distributed to shareholders, usually once a year in December.

Capital growth

A rise in the value of a fund's securities, reflected by the appreciation of its net asset value per share.


The market value of a company's outstanding securities, excluding current liabilities. Under $250 million is generally considered small cap; $250 million to $10 billion is mid cap; and over $10 billion is large cap.

Capitalisation rate (cap rate)

Is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value.

Accounting definition: Cap rate = Property yield = Forward NOI/Property value*

*Property value could be cost or current market value.

Stock market application: Forward NOI/applied cap rate** = Justified REIT fair value

**Applied cap rate is estimated by adjusting for management quality and location of properties, and then used to estimate the justified fair value of a REIT.

Better management and superior locations mean lower cap rates i.e. higher justified property values.

Cash available for distribution (CAD)

Cash available for distribution better approximates a REIT's free cash flow than AFFO and, therefore, is a more meaningful denominator for determining a REIT's dividend safety. CAD is calculated by subtracting the following items from AFFO: capitalised interest expense and monthly principal and interest payments due on secured debt (excluding maturities).

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 virtually as good as cash.

Cash NOI

Cash NOI adjusts the NOI calculated from a REIT's statement of operations (income statement) to exclude the effects of straight-lined rent.

Census Replication - Indexing Approach

An indication of whether the strategy aims to fully replicate a stock index borrowing from any of the methods used in census replication.

Closed-end fund

A closed-end fund is a collective investment scheme that has a fixed number of shares. Unlike unit trusts, new units in a closed-end fund are not created by managers to meet demand from investors. Instead, the shares can be purchased (and sold) only in the marke


Assets or property pledged by a borrower to secure a loan. The asset or property may be seized by the lender if the borrower defaults.

Commercial Mortgage-Backed Securities (CMBS)

A type of mortgage-backed security that is secured by the loan on a commercial property. A CMBS can provide liquidity to real estate investors and to commercial lenders. As with other types of MBS, the increased use of CMBS can be attributable to the rapid rise in real estate prices over the years.

Commercial paper

Corporate promissory notes issued to provide short-term financing, sold at a discount and redeemed at face value.

Common area maintenance (CAM)

"Common areas" are areas within a property that are used by all tenants, such as an office buildings lobby, sidewalks, landscaping, parking lot lighting, etc. Certain lease structures allow a landlord to charge tenants for their proportionate shares of the additional cost to maintain a property's common areas. CAM charges therefore are additional rent charged for maintenance that benfit all tenants.

Compound Annual Growth Rate (CAGR)

is the year-over-year growth rate of an investment over a specified period of time.


The growth that comes from investment income and gains on both the original principal and the previously reinvested income and capital gains of an investment.


A price pattern characterised by extended sideways movement.

Consumer Price Index (CPI)

The change in consumer prices determined monthly by the U.S. Bureau of Labor Statistics, often cited as a general measure of inflation.


One who trades on contrary opinion.

Contrary opinion

The general theory that one can profit by doing the opposite of the majority of the traders. The basic concept is that if a large majority of traders are bullish, it implies that most market participants who believe prices are going higher are already long, and hence the path of least resistance is down. An analogous line of reasoning would apply when most traders are bearish. Contrary opinion numbers are provided by various services that survey traders, market letters, or trading advisors.


A relatively short-term drop in stock prices, usually defined as a decline of 10% or more from the market's high.


a quantitative way to show how much two securities move in the same direction. For example, if the correlation between stock ABC and the S&P 500 is 1, then that means (on average) every time the S&P rises (or falls) a certain percentage, stock ABC will rise (or fall) the same percentage (on average).

Cost basis

The cost of an investment, used as the basis for calculating and reporting capital gains or losses. It is adjusted for stock splits, distributions, and return of capital.

Cost of capital

Is the cost a company bears to have a form of equity and debt capital issued and outstanding. The cost of common stock generally is considered to include the dividend rate paid to shareholders plus investors' expected equity growth rate, the two of which typically total between 8 and 12 percent annually. The cost of preferred stock equals the dividend or "coupon" payment associated with each preferred share. The cost of debt capital is the interest rate associated with each type of debt (e.g. mortgage loan or senior note) issued by a company.

Cost of debt ratio (average cost of debt ratio)

The interest expense over a given period as a percentage of the average outstanding debt over the same period, i.e., cost of interest divided by average outstanding debt.


(1) The nominal annual rate of interest on a bond or note, usually expressed as a percentage of the face value. (2) A piece of paper detached from a bearer bond and exchanged for a quarterly, semi-annual, or annual interest payment.

Creation unit

The minimum module for issue or redemption of shares in an open exchange-traded fund (ETF), usually between 25,000 and 300,000 fund shares, depending on the fund's policy. Existing ETFs issue their shares in return for portfolio deposits of securities in multiples of the creation unit basket specified by the fund's advisor. With minor exceptions related primarily to accrued dividend payments and cash balancing amounts, creations and redemptions are in kind, not in cash. ETF trading on the secondary market on the exchange is in the individual fund shares issued in the creation, not in creation units.

Credit rating

An evaluation of the creditworthiness of a debt security by an independent rating service.

Credit risk

The potential for default by an issuer on its obligation to pay interest or principal on debt securities. Most US government securities are considered to have very little credit risk.

Current liabilities

Money owed by the business that is generally due for payment within 12 months of balance sheet date e.g., creditors, bank overdraft, taxation.

Current ratio (liquidity ratio)

The relationship between current assets and current liabilities, indicating the liquidity of a business, i.e., its ability to meet its short-term obligations.

Current yield

Annual dividend or interest divided by the current price of a stock or bond.


The bank or trust that holds a fund's assets (stocks, bonds, cash, and other securities) and handles payments and receipts for the fund's securities transactions.

Cyclical stocks

Stocks of companies whose main business experiences regular ebbs and flows in activity due to changes in the economy. The auto, chemical, paper, and steel industries, for example, are considered cyclical since their earnings tend to fall when the economy slows. Food and drug stocks are generally considered to be non-cyclical, since food and medical care needs continue no matter what economic conditions are.

Dead cat bounce

A small rally after a sharp decline on Wall Street. It could refer to a stock with a plummeting share price or a market trend. An old investment saying goes: "Even a dead cat will bounce if it is dropped from high enough."


A decline in the prices of goods and services. The opposite of inflation.


The apportionment of cost of a large (in most cases) capital item over an agreed period, based on life expectancy or obsolescence.


A financial security or arrangement whose value is based on, or derived from, a traditional security, asset, or market index

Derivative Based - Indexing Approach

Index tracking portfolios using derivative-based replication, primarily hold cash and exchange-traded derivatives to achieve their objective. These include products that track an index composed of exchange-traded derivatives,   such as those tracking futures-based commodity indices Products using   indirect replication of a hedge fund index through derivative exposures, as   well as some optimized replication techniques using significant derivatives (OTC or exchange-traded) exposures (in addition to the physical securities) are also considered derivative based.


A slowing of the rate at which prices are increasing. This is different to deflation, when prices actually drop.


A dividend income payment, principal payment or capital gain payment. Exchange-traded funds and mutual funds automatically reinvest distributions in additional fund shares or units unless a unit holder/shareholder elects to receive them in cash.

Distribution schedule

The schedule describing when throughout the year a closed-end fund, exchange-trade fund or preferred share makes income, principal, dividend and/or capital gains distributions.

Distribution yield

is calculated by taking the most recent distribution, annualising it, and dividing by the NAV of the Fund at the period end.


The receipt of underlying stocks at redemption or termination of ownership in a fund, instead of receiving cash


The failure of a market or indicator to follow suit when a related market or indicator sets a new high or low. Some analysts look for divergences as signals of impending market tops and bottoms. 


A strategy of spreading investments among many different securities or sectors to reduce the risk of owning any single investment.

Diversified common stock fund

A mutual fund that invests its assets in a wide range of common stocks. The fund's objectives can be growth, income or a combination.

Dividend drag

A disadvantage of the dividend structure of unit trust exchange-traded funds (ETFs) that results from rules that stipulate that passively managed ETFs cannot reinvest dividends back into the portfolio. ETFs must instead accumulate the dividends in cash and pay them to holders at periodic intervals. During periods of rising markets, the dividends would be better served being reinvested in securities rather than held in cash. This leads the ETF to lag a portfolio that would be able to reinvest.

Dividend rate

The most recent rate at which a fund is distributing dividend and interest income earned on the fund's investment portfolio, expressed in cents per share.

Dividend yield

The most recent rate at which a fund is distributing dividend and interest income earned on the fund's investment portfolio, expressed as an annualised percentage of the fund's offering price per share.

Earnings Before Interest & Taxes (EBIT) or operating income

Is a measure of a firm’s profitability that excludes interest and income tax expenses.

Earnings Before Interest, Taxes, Depreciation & Amortisation (EBITDA)

Is essentially Net Income with interest, taxes, depreciation, and amortization added back to it. EBITDA can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions. However, this is a non-GAAP measure that allows a greater amount of discretion as to what is (and is not) included in the calculation. This also means that companies often change the items included in their EBITDA calculation from one reporting period to the next.

Earnings growth rate

The average annual rate of growth in earnings per share over the past five years for the stocks in a fund's portfolio.

Earnings per share (EPS)

A measure of a company's financial performance, calculated by dividing a company's earnings by the number of common shares outstanding. This is an important figure for investors who are looking for stocks they consider to be undervalued in price.

Economic cycle

The natural fluctuation of an economy between periods of expansion (growth) and contraction (recession).

Economic indicator

A piece of economic data, such as the weekly employment report, used by investors to interpret the overall health of the economy.

Elliot Wave analysis

A method of market analysis based on the theories of Ralph Nelson Elliot. Although relatively complex, the basic theory is based on the concept that markets move in waves, forming a general pattern of five waves (or market legs) in the direction of the main trend, followed by three corrective waves in the opposite direction. One aspect of the theory is that each of these waves can be broken down into five or three smaller waves and is itself still a segment of a still larger wave.

Emerging market

Any country determined to have an emerging markets economy, considering factors such as whether the country has a low-to middle-income economy, according to the World Bank or its related organisations; the country's credit rating; its political and economic stability and the development of its financial and capital markets. These countries generally include countries located in Latin America, the Caribbean, Asia, Africa, the Middle East and Eastern and Central Europe.

Enterprise value

A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Equity market capitalisation (EMC)

A company's equity market capitalisation is calculated by multiplying the stock price times the number of common shares outstanding. If the REIT is an UPREIT or has a DownREIT structure, the number of operating partnership (OP) units outstanding should be added to the common share count before multiplying by the stock price.

Equity security

A type of security representing ownership in a corporation. Common stock, preferred stock, and convertible securities are all equity securities. (Debt securities do not represent ownership.)

Escalation clauses

Provisions in a lease that allow a landlord to pass through increases in operating expenses subject to the first- or "base" -year expense levels. Rent escalations usually occur on an annual basis and tend to be tied to increases in the Consumer Price Index or are expressed as fixed periodic increases. 


Exchange Traded Note. Sometimes referred to as an AMC.


The status of shares during the time between the ex-dividend date and the payment date of a fund dividend or capital gains distribution. When a fund is trading ex-dividend, a purchaser is not entitled to the distribution.

Ex-dividend date

The date on which a fund's net asset value (NAV) drops by an amount equal to the dividend and/or capital gains distribution (although market movements may alter somewhat the actual change in the fund's closing NAV). Most publications that list closing NAVs place an X or XD after a fund's name on its ex-dividend date.

Exchange-traded fund (ETF)

An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock. An ETF is called an exchange traded fund since it's traded on an exchange just like stocks. The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market. This is unlike mutual funds, which are not traded on an exchange, and trade only once per day after the markets close.

An actively managed ETF is a form of exchange-traded fund that has a manager or team making decisions on the underlying portfolio allocation, otherwise not adhering to a passive investment strategy. An actively managed ETF will have a benchmark index, but managers may change sector allocations, market-time trades, or deviate from the index as they see fit. This produces investment returns that do not perfectly mirror the underlying index.

Expense ratio

For a mutual fund or other investment company, the charge to fund assets for investment management, marketing, custody, administration and other related costs but not for unusual outlays for law suits or for trading expenses like brokerage commissions. Usually expressed in basis points or as a percentage of net assets.

Face value

The nominal value of a security stated by the issuer. For stocks, it is the original cost of the stock shown on the certificate. For bonds, it is the amount paid to the holder at maturity. Also known as par value or simply par.

Factor Investing

Factor investing is an investment approach that involves targeting specific drivers of return across asset classes. There are two main types of factors: macroeconomic and style. Investing in factors can help improve portfolio outcomes, reduce volatility and enhance diversification.Some common macroeconomic factors include; credit, inflation, and liquidity, whereas style factors embrace style, value, and momentum.

Fair value

Fair value is the sale price agreed upon by a willing buyer and seller, assuming both parties enter the transaction freely and knowledgeably. Many investments have a fair value determined by a market where the security is traded. Fair value also represents the value of a company's assets and liabilities when a subsidiary company's financial statements are consolidated with a parent company.

Fannie Mae

The Federal National Mortgage Association (commonly known as Fannie Mae) was established as a federal agency in 1938. in 1968 Congress chartered Fannie Mae as a private shareholder-owned company. Fannie Mae is a government sponsored enterprise that operates in the U.S. secondary mortgage market, rather than making home loans directly to consumers.

Fee simple interest

Also referred to as "fee simple absolute" and "fee simple estate". Fee simple interest in a property indicates the owner has absolute ownership of a property and the unconditional right to dispose of it. For example, most homeowners have a fee simple interest in their homes and can sell the property at their convenience or transfer ownership to an heir upon their deaths.

Fibonacci retracements

The concept that retracements of prior trends will often approximate 38.2 percent and 61.8 percent - numbers derived from the Fibonacci sequence.

Fibonacci sequence

A sequence of numbers that begins with 1, 1 and progress to infinity, with each number in the sequence equal to the sum of the preceding two numbers. Thus, the initial numbers in the sequence would be 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc. The ratio of consecutive numbers in the sequence converges to 0.618 as the numbers get larger. The ratio of alternate numbers in the sequence (for example 21 and 55) converges to 0.382 as the numbers get larger. These two ratios - 0.618 and 0.382 - are commonly used to project retracements of prior price swings.

Fiscal year

An accounting period of 365 days (366 in leap years) for which a fund prepares financial statements and performance data. Not necessarily the same as the calendar year (January 1 through December 31).

Fixed assets

Assets held for use by the business rather than for sale or conversion into cash, e.g., fixtures and fittings, equipment, buildings.

Fixed cost

A cost that does not vary with changing sales or production volumes, e.g., building lease costs, permanent staff wages, rates, and depreciation of capital items.

Fixed-income fund

A fund whose objective is to provide current income by investing in fixed-income securities.

Fixed-income security

A security that pays an unchanging or periodically reset rate of interest or dividends. Fixed-income securities include bonds, money market instruments, and preferred stock.

Floating rate securities

Bonds whose coupon rates adjust periodically based on a specified reset mechanism.

Forward commitment

A purchase or sale of a security at a specified price with delivery and cash settlement at a specified future date.

Forward earnings

A company’s forecasted, or estimated, earnings made by analysts or by the company itself. Forward earnings differ from trailing earnings (which is the figure that is quoted more often) in that they are a projection and not a fact.

Forward yield

Forward yield = forward dividend per share/REIT stock market price

Freddie Mac

Created in 1970, the Federal Home Loan Mortgage Corporation (commonly known as Freddie Mac) is similar to Fannie Mae in that it is a government-sponsored enterprise whose mission is to provide liquidity to the secondary mortgage market. Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market.

Free cash flow

A measure of financial performance calculated as operating cash flow minus capital expenditures.  Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value.

Front-end load

See up-front sales charge.

Full-service lease

A lease in which the tenant pays the landlord a fixed monthly rent that includes an expense stop calculated off a base year. The landlord then pays all the monthly expenses associated with operating the property, including utilities, water, taxes, and so forth. The tenant gets "full service" in exchange for the monthly rent and does not have to contract with service providers directly.

Fund abbreviation

An abbreviation of a fund's name, commonly used in newspaper listings.

Fund net assets

The total value of a fund's securities, cash, and other holdings, minus any outstanding debts.

Fund of funds

A financial intermediary organised as a corporation, business trust, or partnership that accepts equity investments and buys shares of other funds that, in turn, hold securities or commodities.

Fundamental analysis

The study of a company's business and financial condition to help forecast future movements in its stock price. Analysts consider the company's past record of earnings and sales as well as company assets, management, and markets to predict trends that could affect a company's stock.

Funds from Operations (FFO)

A figure calculated by adding depreciation and amortisation expenses to earnings. It is used by real estate investment trusts (REITs) to define the cash flow from their operations. Sometimes quoted on a per share basis.


A good or asset's interchangeability with other individual goods/assets of the same type. Assets possessing this property simplify the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same. Cross-listed stocks are considered fungible as well because it doesn't matter if you purchased a share of XYZ stock in its home country or in a foreign country; it should be accepted at either location as XYZ stock.

Future contracts

Exchange-traded, standardised agreements to buy or sell specific amounts of financial instruments or physical commodities for an agreed upon price at a specified time in the future.


The ratio of debt to equity. Usually the relationship between long-term borrowings and shareholders' funds.

Generally Accepted Accounting Principles (GAAP)

The set of rules considered standard and acceptable by Certified Public Accountants.

Global Industry Classification Standard (GICS)

Is a four-tiered industry classification system that originally consisted of 10 investment sectors, 24 industry groups, 67 industries, and 156 subindustries. On September 1, 2016, Real Estate became the 11th GICS sector.


Any surplus money paid to acquire a company that exceeds its net tangible assets value.

Gross absorption

The absorption rate is the rate at which rentable space is filled. Gross absorption is a measure of the total square feet leased over a specified period with no consideration given to space vacated in the same geographic area during the same time period. 

Gross lease

A lease wherein the tenant pays a fixed monthly rent to the landlord; the landlord pays the property expenses, which includes insurance, utilities, and repairs, and usually property taxes.

Gross profit (gross profit margin)

Sales less cost of goods or services sold. See net profit.


An investment focus on companies with above average expected growth in earnings or revenues

Growth and income fund

A fund that seeks a combination of long-term growth of capital and current dividend income.

Growth at a reasonable price (GARP)

An equity investment strategy that seeks to combine tenets of both growth investing and value investing to find individual stocks. GARP investors look for companies that are showing consistent earnings growth above broad market levels (a tenet of growth investing) while excluding companies that have very high valuations (value investing). The overarching goal is to avoid the extremes of either growth or value investing; this typically leads GARP investors to growth-oriented stocks with relatively low price/earnings (P/E) multiples in normal market conditions.

Growth fund

A fund that holds stocks of companies with above-average prospects for growth and, usually, low-dividend yields.

Growth investing

A style of equity investing that emphasises stocks with above-average price-to-book ratios and sales and earnings growth, but below-average dividend yields.

Harmonic P/E ratio

The harmonic average is the inverse of the average of the inverse of each data point. In other words, it is the reciprocal of the average of the reciprocals. Data points with a value of zero and NA are excluded from the calculation. The P/E ratio is arrived at by dividing the stock or share price by the earnings per share (profit after tax and interest divided by the number of ordinary shares in issue).


A strategy used to manage investment risk. In investing, hedging involves the purchase of an offsetting position, such as a put option or futures contract, to guard against the risk of a market decline.

High yield bonds

Bonds that are rated below Baa, the lowest investment grade bond rating.

Implied cap rate

Implied cap rate = Forward NOI/REIT stock market price

This is the cap rate implied by the REIT's stock market price.

This shows what cap rate the stock market is awarding the REIT.

Higher REIT stock market prices mean lower implied cap rates. The implied cap rate changes as the REIT's listed market price changes.

Implied volatility

The markets expectation of future price volatility as implied by prevailing option prices.


See distribution-in-kind

Income dividend

Payments to fund shareholders of dividends and interest earned by securities held by a fund. Income dividends are paid after deducting operating expenses.

Income fund

A fund that seeks current income rather than growth of capital. Income funds typically invest in bonds and/or high-yielding stocks.

Income risk

The possibility that the income provided by a fund will fluctuate due to changing interest rates. Money market funds and short-term bond funds are most subject to income risk.


Indexing is broadly known in the investment industry as a passive investment strategy for gaining targeted exposure to a specified market segment. The majority of active investment managers typically do not consistently beat index benchmarks. Moreover, investing in a targeted segment of the market for capital appreciation or as a long-term investment can be expensive given the trading costs associated with buying individual securities. Therefore, indexing is a popular option for many investors.


An investor can achieve the same risk and return of a target index by investing in an index fund. Most index funds have low expense ratios and work well in a passively managed portfolio. Index funds can be constructed using individual stocks and bonds to replicate the target indices. They can also be managed as a fund of funds with mutual funds or exchange-traded funds as their base holdings.


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

Information ratio

The excess return of the portfolio over the benchmark relative to the variability of that excess return.

Initial offering date

The date a portfolio is first available for sale.

Initial public offering (IPO)

A company's first public offering of common stock.

Initial sales charge

The sales charge paid by the investor at the time of purchase.

Institutional investor

An organisation that trades large volumes of securities e.g., mutual funds, insurance companies, pension funds.

Interest rate risk

The risk that a security or fund will decline in price because of changes in market interest rates.

Interest-only obligation (IO obligations)

A tranche of mortgage-backed securities whose owner receives only the interest (or a portion of the interest) on the underlying mortgages. During a period of falling interest rates, rapid repayments of principal by mortgage holders reduces the value of the interest-only obligations.

Internal rate of return (IRR)

The rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR) or simply the rate of return (ROR). In the context of savings and loans the IRR is also called the effective interest rate. The term internal refers to the fact that its calculation does not incorporate environmental factors (e.g., the interest rate or inflation).

Intrinsic value

Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, using fundamental analysis. Also called the true value, the intrinsic value may or may not be the same as the current market value. Additionally, intrinsic value is also used in options pricing to indicate the amount that an option is "in the money."

Invesment objective

Formally, a provision in the prospectus of a fund that states the principal requirements and limitations that constrain the investment advisor's range of action in management of the fund portfolio. Investment objectives are generally stated in broad terms such as growth of capital or investment income, but they are occasionally highly specific, particularly when they pertain to restrictions on investment flexibility.

Investment advisor

An individual or organisation that manages a portfolio and makes day-to-day investment decisions regarding the purchase or sale of securities.

Investment grade

Bonds whose issuers are judged by an independent rating service such as Standard & Poor's or Moody's Investors Service to be very able to pay interest and repay principal. Standard & Poor's and Moody's Investors Service designate bonds in their top four categories (AAA/Aaa, AA/Aa, A, and BBB/Baa) as investment grade.

Investment horizon

The length of time an investor expects to keep a sum of money invested.

Investment style

A broad indicator of a fund's investment emphasis. For stock funds, the investment style indicates whether a fund emphasises stocks of large-, medium, or small-capitalisation companies and whether it emphasises stocks with growth or value characteristics or a blend of these characteristics.



Large capitalisation stocks

The stocks of companies whose market value is more than $10 billion.


A lease is a legal agreement between a landlord (the lessor) and a tenant (the lessee) whereby the tenant agrees to pay a monthly sum for a defined period of time (rent) in exchange for the right to occupy the landlord's space.


An investment or operating position subject to a multiplied effect on profit or position value from a small change in sales quantity or price. Leverage can come from high fixed costs relative to revenues in an operating situation, or from debt or an option structure in a financial context.

Limited partnership (LP) interests

A partnership between at least two partners, one of whom is passive and whose liability in the venture is limited to his own amount invested, and the active partner, whose liability in the venture extends beyond his monetary investment.


The ability to easily turn assets into cash. An investor should be able to sell a liquid asset quickly with little effect on the price.

Liquidity ratio (current ratio)

Indicates the company's ability to pay its short-term debts, by measuring the relationship between current assets (i.e., those which can be turned into cash) against the short-term debt value – current assets/current liabilities.


A position established with a buy order, which profits in a rising price market. The term is also used to refer to the person or entity holding such a position

Long-term capital gain

A profit on the sale of a security or fund share that has been held for more than one year. Long-term capital gains are usually taxed at a lower rate than regular income. This is done to encourage entrepreneurship and investment in the economy.

Long-term investment strategy

A strategy that looks past the day-to day fluctuations of the stock and bond markets and responds to fundamental changes in the financial markets or the economy.

Managed distribution policy

A fund that adopts a managed distribution policy undertakes to pay periodic (typically monthly or quarterly) distributions to common shareholders of either a statistic amount per common share, or a statistic percentage of some recent common share net asset value (NAV) or a trailing average of common shares’ NAV. The goal of a fund’s managed distribution programme is to provide common shareholders with relatively consistent and predictable cash flow by systematically converting its expected long-term return potential into regular distributions. As a result, regular distributions throughout the year will likely include a portion of unexpected long-term and short-term gains (both realised and unrealised),along with net investment income, and may from time to time also include a return on capital. Often, a fund seeks to establish a relatively stable managed distribution rate that roughly corresponds to the projected net total return from its investment strategy over an extended period of time. However, one should not draw any conclusions about a fund’s past or future investment performance from its current distribution rate. Funds that pay distributions that include elements such as capital gains or returns of capital are required by law to provide contemporaneous notice containing a description of their extent to which distributions are compromised of such elements.

Management company

The firm that organises, manages, and administers a fund.

Management fee

The amount a mutual fund pays to its investment advisor for the investment management associated with overseeing the fund's portfolio.

Mark to the market

The valuation of open positions at prevailing settlement prices. In other words, if a position is marked to the market, there is no distinction between realised and unrealised losses (or gains).

Market maker

The term market maker refers to a firm or individual who actively quotes two-sided markets in a particular security, providing bids and offers (known as asks) along with the market size of each. Market makers provide liquidity and depth to markets and profit from the difference in the bid-ask spread. They may also make trades for their own accounts, which are known as principal trades.

Market rent

The rate a landlord could charge a tenant to occupy space, based on the competing spaces and current market conditions.

Market risk

The possibility that stock or bond prices will fluctuate.

Market timing

An investment strategy based on predicting market trends. The goal is to anticipate trends, buying before the market goes up and selling before the market goes down.

Maturity date (or maturity)

The date on which the face value of a bond must be repaid.

Modified gross lease

A lease in which the tenant pays rent plus the propertyu taxes and insurance, and any increases in these items over the base year.

Mortgage REIT

A REIT that makes or owns loans and other obligations that are secured by real estate collateral.

Mutual fund

A diversified, professionally managed portfolio of securities that pools the assets of individuals and organisations to invest toward a common objective such as current income or long-term growth.

National Association of Real Estate Investment Trusts (NAREIT)

NAREIT is made up of a community of industry professionals, academics and companies that work together to promote the real estate industry and REITs. Through NAREIT, individuals are able to access comprehensive industry data on the overall real estate industry and the performance of member REITs. See for more information.

Net absorption

Calculated as the amount of occupied square feet at the end of a period, less the amount of square feet leased at the beginning of the period. Net absorption measures the square feet leased in a specific geographic area over a fixed period of time, after taking in to account any space vacated in the same area during the same period.

Net asset value (NAV)

The price an asset would fetch in the market place.

Net asset value (NAV) per share of a fund

The market value of one share of a closed-end, exchange-traded, or preferred fund. The NAV is calculated daily by taking the fund's total assets (securities, cash, and accrued earnings), subtracting the fund's liabilities, and dividing by the number of shares outstanding. The NAV does not include the sales charge. The official NAV is calculated once a day by most US funds at 4:00pm Eastern Time. Partly in response to the growth of open-end exchange-traded funds, some conventional funds have begun calculating a NAV several times a day or, in a few cases, hourly. The more frequent values calculated for exchange-traded funds are not ‘official’ NAVs.

Net asset value (NAV) per share of a REIT

The NAV attempts to replace the book value of a Reits property portfolio with a better estimate of market value. The market value is the price the asset would fetch in the market place. In theory, the quoted share price should not stray too far from the NAV per share.

Net income

A company's total earnings (or profit). Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. The measure is also used to calculate earnings per share.

Net operating income (NOI)

The owner's rental revenues from property less all property operating expenses, including taxes and insurance. The term ignores depreciation and amortisation expenses as well as interest on loans incurred to finance the property.

Net present value (NPV)

A significant measurement in business investment decisions, NPV is essentially a measurement of all future cashflow (revenues minus costs) that will be derived from a particular investment, minus the cost of the investment. If a proposition has a positive NPV it is profitable and worthy of consideration. NPV provides a consistent method of comparing propositions and investment opportunities from a simple capital/investment/profit perspective.

Net, double-net, and triple-net lease

There are three levels of "net" when referencing lease structures wherein expenses are paid by the tenant as part of total rent:

(1) maintenance, which includes items like utilities, water, janitorial, trash collection, and landscaping;

(2) insurance; and

(3) taxes

  • A net lease generally implies that the tenant pays rent and the costs of maintaining the property; the landlord pays the insurance and taxes.
  • In a double-net lease, the tenant pays rent, including the taxes and insurance; the landlord pays the maintenance costs.
  • In a triple-net lease, the tenant pays rent to the landlord and pays all costs associated with maintenance, insurance, and taxes. The landlord essentially collects monthly "coupon" payments, as if he owned a bond.

Offer to bid

The rate of return for a unit investment trust which shows total return to date. This return assumes payment of all sales charges at the time units are purchased and excludes any unpaid deferred sales charges.

Offering price

See asked price.

Open-end investment company

Technically, a mutual fund that constantly offers new shares for sale and undertakes to redeem outstanding shares on any business day at their net asset value (NAV). Participants can buy and sell shares on any business day and the size of the fund is not limited. Most open-end exchange-traded funds are a variant of the traditional open-end company, but their shares are not individually redeemable.

Open-end mutual fund

A fund that continues to sell in its portfolio and that will redeem those shares at the funds net asset value (NAV) at any time.

Operating partnership unit (OP unit)

Units of ownership in a REIT that generally can be exchanged on a one-for-one basis into common stock of the REIT but that are not publicly traded.


The right to buy or sell a given security within a particular time at a specified price. The right to buy is a call; the right to sell is a put. Unlike a futures contract, an option does not obligate the investor to perform the transaction; the obligation is only on the part of the seller.

Over the counter (OTC)

A market, regulated by the NASD, for securities that are not traded on a national stock exchange, as well as some listed securities traded off those exchanges. Most government, municipal, and corporate bonds are also traded over the counter. The trades take place by telephone or by computer network.

Pattern recognition

A price-forecasting method that uses historical chart patterns to draw analogies to current situations.

Percentage rents

Additional rent payable to the landlord, based on a percentage of the volume of tenant sales generated on a property. The percentage is usually based on base year sales volume. For example, a retailer's lease may require contractual rent plus percentage rents equal to 1 percent of sales revenue that exceed sales revenue achieved in the first year of operations.

Physical Full - Indexing Approach

An index-tracking product employing full physical replication will own all of the securities (not including derivatives) and physical commodities of the underlying index in proportion to the weights within the index. Funds with minimal exposure to cash, and very small exposures to derivatives tracking the index of the portfolio, may also be treated as products using full physical replication.

Physical Sample - Indexing Approach

An index-tracking product employing sampling, or optimized, physical replication will own a representative set of index components in order to achieve the objective of tracking the stated benchmark. These portfolios can contain a limited number of securities outside of the index and small but material exposures gained through derivatives.

Portfolio allocation

The proportion of a fund's assets invested in stocks, bonds and cash equivalents, respectively.

Portfolio diversification

See diversification.

Portfolio turnover

A measure of the trading activity in a fund's portfolio of investments i.e., how often securities are bought and sold by the fund.

Positive spread investing

The ability to raise capital at a cost significantly less than the initial returns that can be obtained on real estate transactions.


(1) The amount by which a bond's market price exceeds its par value. (2) The amount by which an exchange-traded fund's market price exceeds its net asset value (NAV).

Price/earnings ratio (P/E ratio)

The ratio of a stock's current price to its per-share earnings (P/E) over the past year. For a fund, the ratio is the weighted average P/E of the stocks in the fund's portfolio. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company's future growth in earnings.

Property cycle

A sequence of recurrent and predictable events reflected in demographic , economic, and emotional factors that affect supply and demand for property.

Put option

A contract that provides the buyer with the right - but not the obligation - to sell the underlying financial instrument or commodity at a specified price for a fixed period of time.

Put/call ratio

The volume of put options divided by the volume of call options. A put/call ratio is one example of a contrary opinion or overbought/oversold measure. The basic premise is that a high ratio, which reflects more puts being purchased than calls, implies that too many traders are bearish and is hence considered bullish. Analogously, a low put/call ratio would be considered bearish.

Quick ratio

Same as the acid test. The relationship between current assets readily convertible into cash (usually current assets less stock) and current liabilities. A sterner test of liquidity.

R&D property

Industrial buildings in which research and development (R&D) processes are performed, including any assembly, manufacturing, or office space required to support them. R&D buildings typically have a parking ratio of at least three parking spaces per 1 000 square feet, are one to two stories high, and feature interior clear heights of less than 18 feet.


R-squared measures the strength of the linear relationship between the fund and its benchmark. R-squared at 100 implies perfect linear relationship and zero implies no relationship exists.

Real Estate Investment Trust (REIT)

A REIT is essentially a corporation or business trust that combines the capital of many investors to own or provide financing for all forms of investment real estate. A REIT is generally not required to pay corporate income tax if it distributes at least 90 percent of its taxable income to shareholders each year.

Real Estate Investment Trust Act of 1960

The U.S. Congress passed this federal law in 1960, which officially authorised REITs. Its purpose was to allow small investors to pool their investments in real estate in order to get the same benefits as might be obtained by direct ownership, while also diversifying their risks and obtaining professional management.

Real rate of return

The return on an investment after it is adjusted for the effects of inflation.

Record date

The date that determines which unit holders or shareholders will be paid the dividend, capital gain or other distribution. Only unit holders or shareholders who are invested in the fund on the record date will receive the distribution on the payment date.


1) Mutual fund shares are redeemed at net asset value (NAV) when a shareholder's holdings are liquidated. (2) Repayment of a debt security or preferred stock issue, at or before maturity, at par or at a premium price.

Redemption price

The price at which a holder can sell (redeem) a fund's shares, determined by deducting any applicable sales charge from the net asset value (NAV) per unit/share.

Relative strength

In the stock market, a measure of a given stock's price strength relative to a broad index of stocks. The term can also be used in a more general sense to refer to an overbought/oversold type of indicator.

Residual Return

Residual return is return independent of the benchmark. The residual return is the return relative to beta times the benchmark return. To be exact, an asset's residual return equals its excess return minus beta times the benchmark excess return.

Residual Risk

Residual risk is company-specific risks, such as strikes, outcomes of legal proceedings or natural disasters. This risk is known as diversifiable risk, since it can be eliminated by sufficiently diversifying a portfolio. There isn't a formula for calculating residual risk; instead, it must be extrapolated by subtracting the systematic risk from the total risk.


In technical analysis, a price area at which a rising market is expected to encounter increased selling pressure sufficient to stall or reverse the advance.


A price movement counter to a preceding trend. For example, in a rising market, a 60 percent retracement would indicate a price decline equal to 60 percent of the prior advance.

Return on Equity

The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.

Revenue per available room (RevPAR)

The product of a hotel's average daily room rate (ADR) and its daily occupancy rate.

Risk/reward ratio

The ratio of the estimated potential loss of a trade to the estimated potential gain. Although, theoretically, the probability of a gain or loss should also be incorporated in any calculation, the ratio is frequently based naively on the magnitudes of the estimated gain or loss alone.

Sandwich generation

It sounds like a fun term, but the sandwich generation actually refers to the age group sandwiched between their aging parents and young kids. These adults are typically tasked with financially supporting both their older and younger dependents while trying to save for their own retirements. The sandwich gen may eat actual sandwiches, but probably only as a way to save money (or to stress-binge).

Sarbanes-Oxley Act of 2002

Also known as the U.S. Public Company Accounting Reform and Investor Protection Act. A law passed in the wake of major corporate and accounting scandals at prominent companies in the U.S. which is aimed at improving companies’ accountability to shareholders. Named after sponsors, Senator Paul Sarbanes (D-MD) and Rep. Michael G. Oxley (R-OH), among other requirements, it sets standards for various aspects of corporate governance, financial disclosure, and auditing.

SEC yield (standardised yield)

A standard yield calculation developed by the Securities and Exchange Commission (SEC) that allows for fairer comparisons of bond funds. Based on the most recent 30-day period covered by the fund's filings with the SEC, the yield figure reflects the dividends and interest earned during the period, after the deduction of the fund's expenses.

Sector diversification

Indicates the percentage of a portfolio's total net assets invested in major industry classifications that comprise the market in which the fund invests.

Sector fund

A specialised fund that invests exclusively in a related group of industries, seeking better opportunities for capital appreciation. Sector funds are often more volatile than funds which invest in a more diversified range of industries.

Securities and Exchange Commission (SEC)

A government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the United States. The SEC is composed of five commissioners appointed by the U.S. President and approved by the Senate.

Securitisation (or securitised)

A security is a transferable ownership interest in some underlying asset. This includes investments such as stocks and bonds. Securitisation is a process by which pooled assets or obligations (such as a mortgage or credit card debt) are converted into securities that can be traded by various retail and institutional investors. This process allows for the transference of risks and cash flows from the obligation originator to a new set of investors. This generally increases the liquidity and ownership interests of these securities, while distributing risk among a larger set of investors.

Senior loan

Senior loans hold the most senior position in the capital structure of the borrower, are usually secured with specific collateral, and have a claim on the assets of the borrower that comes before other lenders to and holders of securities of the borrower, such as holders of subordinated debt, preferred stock or common stock. However, senior loans typically are below investment grade quality and have speculative characteristics. The secondary market for senior loan securities may not be as liquid as the secondary market for more highly rated securities.

Sentiment indicator

A measure of the balance between bullish and bearish opinions. Sentiment indicators are used for contrary opinion trading. The put/call ratio is one example of a sentiment indicator.

Settlement date

(1)The date on which the exchange of cash, securities, and paperwork involved in a transaction is completed. Usually one day after the trade date (T+1) in conventional funds and fixed-income markets and three days after the trade date (T+3) in exchange-traded funds and equity markets. (2) The date when payment for a wire-order purchase or a wire-order redemption is received. Funds purchased through a dealer firm are normally settled three business days after the trade date. Funds purchased directly by an investor settle on the day payment is due.

Share capital

The balance sheet nominal value paid into the company by shareholders at the time(s) shares were issued.

Shareholders’ funds

A measure of the shareholders' total interest in the company represented by the total share capital plus reserves.

Sharpe ratio

Sharpe ratio is a risk-adjusted measure, calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance.


A position implemented with a sale, which profits from a declining price market. The term also refers to a trader or entity holding such a position.

Short-term capital gain

A profit on the sale of a security or fund share held for one year or less.

Sleeping beauty

A profitable company — usually a start-up — with impressive assets but bad management. These companies are great candidates for takeovers.

Smart Beta

A smart Beta ETF is a type of exchange-traded fund (ETF) that uses a rules-based system for selecting investments to be included in the fund portfolio. An exchange-traded fund or ETF is a type of fund that tracks an index such as the S&P 500. Smart beta ETFs build on traditional ETFs
and tailor the components of the fund's holdings based on predetermined financial metrics.

Sortino ratio

A measure of risk-adjusted performance that compares the portfolio’s excess returns to its risk , with risk measured by the downside deviation of returns.

Sovereign debt

Debt issued by a country’s national government, often in a foreign currency

Standard & Poors 500 Index

A daily measure of stock market performance, based on the performance of 500 major companies. Though it does not include transaction or management costs, the S&P 500 is often used as a yardstick for equity fund performance.

Standard deviation

A measure of the degree to which a fund's return varied from its average return over a certain period. The smaller the difference, the lower the standard deviation will be – and the greater the degree of stability the fund provided over the period.

Straight-lined rent

in compliance with GAAP, REITs "straight line" the rental income they receive by reporting the average annual rent to be received over the life of a lease instead of the actual cash received. The straight-lined rent adjustment REITs report is the amount to be added to or subtracted from GAAP rents to arrive at cash rents received.

Stratified Sampling - Indexing Approach

An indication of whether the strategy aims to make improvements to index fund management, possibly using active management. Also known as enhanced indexing.

Structured - Indexing Approach

An indication of whether the strategy aims to make improvements to index fund management, possibly using active management. Also known as enhanced indexing.


An agreement between two parties to exchange a stream of periodic payments. A currency swap is an agreement to exchange the cash flow from one currency to another at a specified forward exchange rate. An interest rate swap is an agreement to exchange a series of fixed interest rate cash flows for a series of floating interest rate cash flows (which can be tied to a specific index rate). Investors may enter into swap agreements to minimise the risk associated with fluctuating currency or interest rates, although swaps can be customised between counterparties.


Often used to refer to investments that are underwritten, sold or distributed by multiple securities dealers, where a group of firms (i.e., a syndicate) guarantees the sale of an issue/loan by purchasing it for subsequent resale to investors at a higher price.

Synthetic Replication - Indexing Approach

Portfolios using synthetic replication enter into one or more over-the-counter derivatives to gain direct exposure to the index that the product is tracking. The OTC derivative(s) deliver the return of the index less certain fees or premiums. The portfolios of funds using synthetic replication report the OTC derivative(s) (generally a swap, forward agreement, or access product) and collateral within financial statements in certain situations. The collateral holdings of products using synthetic replication will frequently contain securities unrelated to the return of the index. Please note: While the term synthetic exposure denotes economic exposures gained through derivative contracts, the term synthetic replication only connotes index tracking products gaining economic exposure through OTC derivatives.

Tax Reform Act of 1986

The federal law that substantially altered the real estate investment landscape by permitting REITs not only to own but also to operate and manage most types of income-producing commercial properties. It also eliminated real estate tax shelters that had attracted capital from investors based on the amount of losses that could be created.

Tax year

The 12-month period used by an individual to report income for income tax purposes. For most individuals, their tax year is the calendar year.

Taxable REIT subsidiary (TRS)

Taxable REIT subsidiaries are stand-alone corporations for tax purposes that are owned directly or indirectly by a REIT. Created as part of the REIT Modernization Act of 1999, TRSs allow REITs to compete more effectively with other landlords by enabling REITs to provide nontraditional services to tenants or provide traditional real estate managemnet services to third parties. TRSs also allow REITs the (limited) ability to invest in and derive income from nonrental real estate assets.

Technical analysis

Analysis of the supply and demand for securities using charts and graphs to identify price trends that may forecast future price movements.

Top-down approach

An approach to investing in which the investor first looks at general trends in the economy and then chooses specific industries and particular companies that will benefit from these broad trends.

Total expense ratio

A measure of the total costs associated with managing and operating an investment fund such as a mutual fund. These costs consist primarily of management fees and additional expenses such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fund is divided by the fund's total assets to arrive at a percentage amount, which represents the TER.

Total market capitalisation

The sum of a REIT's equity market capitalisation, plus the liquidation value of any preferred stock outstanding, and the principal amounts of debt outstanding.

Total return

The return on one’s investment which takes into account the change in price plus dividends and interest received, less administration and management expenses. The total return for a fund reflects changes in net asset value (NAV) and reinvestment of all distributions in additional shares of the fund.

Tracking error

The amount by which the performance of the portfolio differed from that of the benchmark.

Tracking Error

Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level.

Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future. 

Trade date

The actual date on which an investor's shares are purchased or sold.


Corporate transparency describes the extent to which a corporation's actions are observable by outsiders.

Treasury inflation-protected securities (TIPS)

First issued by the U.S. government in 1997, TIPS are a treasury security that is indexed to inflation. TIPS are like most other bonds in that they are issued with a fixed coupon interest rate and a fixed maturity date. Unlike traditional bonds, TIPS have a principal value that the Treasury raises (or lowers) each month to keep pace with inflation. As a result, the semiannual coupon payments to investors also change, because they are derived by applying the fixed coupon rate to an inflation-adjusted principal amount.


The tendency of prices to move in a given general direction (up or down).

Trend-following system

A system that generates buy and sell signals in the direction of a newly defined trend, based on the assumption that a trend, once established, will tend to continue.

Turnover ratio

Turnover is a measure of a fund’s trading activity during its previous fiscal year, expressed as a percentage of its average total assets.  A turnover ratio of 100% or more does not necessarily suggest that all securities in the portfolio have been traded. In practical terms, the resulting percentage loosely represents the percentage of the portfolio's holdings that have changed over the past year.  There is no assurance that a fund will maintain at its current level of turnover.

Unit investment trust (UIT)

A portfolio of securities that remains fixed, except under certain circumstances, for the life of the trust. Shares of this portfolio are offered to individual investors and called units. Also called Defined Portfolio. Other UITs serve as the structure for some early exchange-traded funds (ETFs).

Unrated securities

Typically, fixed income securities are rated for credit worthiness and repayment risk by independent ratings services such as Standard & Poor's or Moody's Investor Services. However, not all securities are rated by these services, perhaps due to the size of the security issue, or perhaps because the issuing company is not able to provide the prerequisite information to the ratings services.

Up/Down capture ratio

The Up Capture Ratio measures the manager’s overall performance to the benchmark’s overall performance, considering only quarters that are positive in the benchmark. An Up Capture Ratio of more than 1.0 indicates a manager who outperforms the relative benchmark in the benchmark’s positive quarters. The Down capture ratio is the ratio of the manager’s overall performance to the benchmark’s overall performance, considering only quarters that are negative in the benchmark. A Down Capture Ratio of less than 1.0 indicates a manager who outperforms the relative benchmark in the benchmark’s negative quarters and protects more of a portfolio’s value during down markets.


Umbrella partnership real estate investment trust.

Value investing

A strategy for equity investing that emphasises stocks with below-average price-to-book ratios, but above-average dividend yields.

Value stocks

Stocks that have relatively high dividend yields and that sell at relatively low prices in relation to their earnings or book value

Variable cost

A cost that varies with sales or operational volumes, e.g., materials, fuel, commission payments.

Variable Rate Demand Note (VRDN)

A debt instrument that represents borrowed funds that are payable on demand and accrue interest based on a prevailing money market rate, such as the prime rate. The interest rate applicable to the borrowed funds is specified from the outset of the debt, and is typically equal to the specified money market rate plus an extra margin.

VIX index

Chicago Board Options Exchange SPX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide range of strikes.


The fluctuations in market value of a fund or other security. The greater a fund's volatility, the wider the fluctuations between its high and low prices.

Weighted average capitalization

A criteria to weight the market capitalization of each stock in an  index or group. In such groups of stocks, larger companies account for a greater portion of the index or group.  Indexes such as the S&P 500 are an example of weighted average capitalization.

Weighted average effective duration

Provides a measure of a fund’s interest-rate sensitivity. The longer a fund’s duration, the more sensitive the fund is to shifts in interest rates.

Weighted average life

The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, WAL tells how many years it will take to pay half of the outstanding principal.

Weighted average market capitalization

Represents the total dollar value of all outstanding shares of each company owned by a mutual fund, adjusted by the percentage composition of the fund’s portfolio as of the period end.

Weighted median capitalization

The weighted median is calculated by first ranking all of the companies in the specified universe in ascending order based on the specified formula. All of the weights for the companies are summed, then the function steps through the sorted list while keeping a running total of the weights. The value returned by the function as the weighted median


A price pattern charecterised by repeated, abrupt reversals in trend. The term is often used to describe losses resulting from the application of a trend-following system to a choppy or trendless market. In such markets, trend-following systems will tend to generate buy signals just before downside price reversals and sell signals just before upside price reversals.

Working capital

Current assets less current liabilities, representing the required investment, continually circulating, to finance stock, debtors, and work in progress.



See dividend yield and SEC yield.

Yield curve

A graph or ‘curve’ that depicts the yields of bonds of varying maturities, from short-term to long-term. The graph shows the relationship between short- and long-term interest rates.

Yield spread

The variation between yields on different types of debt securities; generally a function of supply and demand, credit quality, and expected interest-rate fluctuations. Treasury bonds, for example, because they are so safe, will normally yield less than corporate bonds. Yields may also differ on similar securities with different maturities. Long-term debt, for example, carries more risk of market changes and issuer defaults than shorter-term debt and thus usually yields more.