Investment Glossary

We’ve created our investment glossary to give some insight into the myriad terms you might come across in the world of business.

Table of Contents


A measure of the return anticipated from an investment based on its inherent value.

Alternative Minimum Tax (AMT)

Federal tax, overhauled by the Tax Reform Act of 1986, designed to ensure that trusts, estates, corporations and wealthy individuals trusts pay a fair share of tax.

Annual report

A comprehensive yearly audited report of a company, corporation or mutual fund’s activities and performance distributed to shareholders to inform on financial performance.


The practice of recalculating a short-term rate of interest, inflation or return on investment to cover a 12-month period.

Annualized rate of return

An average figure demonstrating annual return over a period of years which factors in compound interest. Annualized rate of return is often also called compound growth rate.


The amount by which a financial asset increases in value.

Asset allocation

An investment strategy that looks to balance risk and reward by dividing a portfolio among cash, income and growth buckets based on an individual’s investment needs.

Asset class

A grouping of securities with similar features. Common asset classes include stocks, bonds and cash equivalents.

Average maturity

Also called average weighted maturity, average maturity is the average of the maturity dates of the entirety of the debt securities in the portfolio. Average maturity can be important when calculating the impact of interest-rate changes. It is generally true that the longer the average maturity, the greater price will fluctuate. In contrast, the shorter the average maturity, the less volatile a portfolio will be.

Balanced fund

Mutual funds that maintain a portfolio with a mix of common stocks, preferred stock or bonds as a means of promoting both growth and income. The stocks held typically span different industries and diverse geographic regions.

Bear market

The term given to a market that is experiencing a period of prolonged falling stock prices. In bear markets, prices drop sharply amid widespread investor pessimism, rising unemployment or economic recession. The opposite of a bear market is known as a bull market.


Typically, a benchmark is a standard given by an unmanaged index which is employed to compare and assess the performance of portfolios or mutual funds.


Volatility measurement used to calculate a stock’s volatility in comparison with the overall market. With beta indexes, 1 is neutral, above 1 is more volatile; and under 1 is less volatile.

Blue chip

The term used to describe a stock which is high-quality and relatively low-risk. Blue chip often refers to stocks of companies that are large, well-established and have recorded reliable performance over a long period of time. 

Board of Trustees

A group of elected or appointed individuals charged with managing the policies of an organization.


A debt security issued by a corporation, municipality or government. In exchange for issuing the bond, the bond issuer promises to repay the full amount on a certain future date as well as a specified rate of return to the investor at specific time intervals.

Bond fund

A mutual fund that invests in bonds and other debt securities.


The level at which the account balance of a mutual fund investment at which an investor qualifies for a reduced sales charge. This level can be reached via a single purchase or a number of smaller purchases.

Bull market

The term used to describe a market in which investors are confident that prices are moving in an upward trend. If someone is “bullish”, they expect prices to rise. The opposite of a bull market is a bear market.


Financial assets held in a company on a long-term basis. Capital is often raised by issuing preferred or common stock, long-term borrowing, or retaining a portion of the company’s earnings from the date of incorporation.

Capital gain

The positive difference between the purchase price of a security and its selling price.

Capital gains ex-date

The date at which a shareholder no longer qualifies for a capital gain distribution which has been announced by a security or mutual fund.

Capital gains long term

The profit made on an asset calculated by subtracting the buying price from the selling price if the asset has been held more than one year.

Capital gains reinvest NAV

The positive difference between the purchase price of an asset and its selling price that is automatically reinvested in further shares of the security or mutual fund invested at the security’s net asset value.

Capital gains short term

The positive difference between the purchase price of an asset and its selling price that was earned in a short-term period of under one year.

Capital loss

The negative difference by which capital recouped by the sale of a security is less than the security’s original purchase price.


A metric for working out the total market value of a company. To calculate a company’s capitalization, the number of shares outstanding is multiplied by the price per share.

Cash equivalent

A short-term investment security of sufficiently high liquidity and safety for it easily to be converted into cash (e.g. a Treasury Bill or repurchase agreement).

Common stock

Securities issued by a corporation that represent ownership in the corporation. Common stock entitles holders to a share of the fortunes of the company in the form of dividends.

Contingent deferred sales charge (CDSC)

A back-end sales fee, sales charge or load imposed on investors when shares are sold from a fund. CDSC typically reduces over time.

Corporate bond

A long-term debt issued by a corporation to raise external capital. In effect, a corporate bond involves an investor lending money to a company in exchange for future interest payments.

Country breakdown

An aggregated balance sheet of the securities in a portfolio by country.


A financial institution that holds the assets of a mutual fund, presides over portfolio trades and gathers the majority of the data needed to calculate the net asset value (NAV) of the fund.

Cut-off time

The precise time of day when trading can no longer take place and investment must halt.

Daily dividend factor (date)

The dividend yield of a money-market mutual fund expressed as a daily figure.


Failure of a debtor to meet the legal obligations of a loan. This typically occurs when the debtor misses interest payments or cannot meet some other condition of a bond indenture.

Distribution schedule

A schedule detailing the frequency with which a mutual fund pays dividends and capital gains to its shareholders.


The process of apportioning capital across a range of different investments in order to reduce the risk of portfolio volatility as well as increasing the chance of profit over the long term.


A portion of company profits distributed to common and preferred shareholders. Although companies are not required to pay dividends, they are often issued to provide an incentive to hold stock which is stable even when not experiencing high levels of growth. 

Dividend paid

The total in dividends paid to the shareholders of record of a security or mutual fund.

Dividend reinvest NAV

Dividends received by a shareholder of record that are then automatically reinvested in further shares of the security or mutual fund and purchased at the security’s net asset value.

Dividend yield

Sometimes known as a dividend-price ratio, this refers to the annual percentage of return accrued per share in a mutual fund. Yield is calculated by dividing the total annual dividends per share by the current public offering price or net asset value.

Dollar cost averaging

Investment strategy that involves investing the same amount of fiat currency at steady intervals over an extended period of time instead of investing the sum total of capital on one go. By investing a fixed amount regardless of the share price, the theory is that an investor will buy a greater number of shares when prices are low and fewer shares when prices are high.

Dow Jones Industrial Average (Dow)

The most popular and commonly used indicator of stock market performance. The index measures the performance of 30 of the largest blue-chip stocks, which are composed primarily of major industrial companies. The Average calculated by taking the sum of the current market price of these 30 blue-chip stocks and dividing it by a figure that has been adjusted to factor in changes in stock composition and stock splits.

Earnings Per Share (EPS)

A company’s profit divided by the outstanding shares of its common stock. EPS is commonly used as an indicator of the profitability of a company.


The same as company-issued common stocks, equities are used as a token of partial ownership in a company. As opposed to fixed-income securities such as bonds or mortgages, equities do not guarantee a fixed interest rate or income. 

Equity fund

A mutual fund which invests primarily in stocks. Also known as stock funds, equity funds can be actively or passively managed. Depending on the fund’s investment objectives, they can hold common and/or preferred stocks.


A stock that is trading having had the value of the next payment subtracted from its price. 

Ex-Dividend date

The date a stock starts trading without the value of the next dividend payment. This date typically falls around three weeks before the day that the dividend is due to be paid to shareholders.

Exchange privilege

The opportunity for shareholders of a mutual fund to exchange their investment in one mutual fund to another fund in the same fund family.

Expense ratio

An expense ratio measures how much of a fund’s assets are used for administrative and other operational costs. The ratio is calculated by dividing a fund’s operating expenses for the year by the average dollar value of its net assets under management.

Expense ratio (date)

The annual fee expressed as a percentage of total investment that mutual funds charge their shareholders for managing the fund. 

Federal Funds Rate (Fed Funds Rate)

The interest rate charged by financial institutions lend excess reserve balances to other financial institutions from one day to the next on an uncollateralized basis. Such loans are made to allow financial institutions to meet the minimum reserve requirements required by the Federal Reserve. The Fed Funds Rate is widely considered to be the most telling indicator of the direction of interest rates because it is set on a daily basis by the market. In contrast, the prime rate and the discount rate are manipulated by financial institutions and by the Federal Reserve Board.

Federal Reserve Board (The Fed)

The main governing body of the Federal Reserve System which regulates U.S. money supply by setting the discount rate and manipulating credit availability by changing interest rates.

Fixed income fund

A fund or portfolio which primarily deals in fixed-income securities like US Treasuries, corporate bonds and municipal bonds. 

Fixed income security

A debt instrument that pays a regular fixed rate of interest and offers a repayment of the principal upon maturity.


A franchise is a specific type of license that another party (franchisee) acquires or buys into to allow them to have access to a business’ (franchisor) proprietary knowledge, products, processes, and trademarks in order to allow the party to sell a specific product(s) or provide a service under the business’s name. In exchange for obtaining the franchise, the franchisee usually pays the franchisor an initial start-up fee as well as an annual fee.


A pool of money contributed by a group of investors which has been set aside to buy securities. There are two main types of funds that are available (1) mutual funds set up by companies in the securities business; and (2) collective funds set up by bank trust departments.

Growth investing

A stock-buying strategy that concentrates on company stocks and stock funds with rapidly growing earnings that are projected to continue growing.

Growth stock

A stock of an established, successful company that is recording rapid growth in earnings and revenue and has a large and sustainable cash flow. Growth stocks typically pay little or no dividend.

Growth-style funds

Mutual funds that focus on investing in stocks whose capital value is expected to grow significantly. Growth funds typically look to invest in stocks whose earnings are outperforming the stocks of similar competing companies. Targets are identified by concentrating on rapidly expanding sectors of the economy and investing in companies with reliable earnings growth. While these stocks may not have a high yield income, the fund grows primarily as a result of rises in individual share prices.


A financial index serves as a statistical measure of change in a securities market. An index tracks the performance of a broad range of different investments in order to gauge the overall performance of different investment types or categories. Probably the best-known index is the S&P 500. Tracking the performance of the stocks of the 500 largest companies in the U.S., the S&P 500 is broadly considered to be the benchmark for large-stock investors.

Individual Retirement Account (IRA)

A specialized savings account which allows one to save money in a tax-advantaged way. Individuals who qualify for an IRA are permitted to make annual contributions of up to $3,000 ($6,000 for a married couple with a single-income who are submitting a joint income tax return).


A sustained increase in the prices of goods and services in an economy. Inflation usually relates to a general loss of purchasing power.

Interest rate

The fixed amount of money charged by a bondholder for use of its assets. An interest rate is typically expressed as a percentage of the purchase price of the bond. Interest rates are most often noted on an annual basis called an annual percentage rate (APR).

Interest-rate risk

The possibility that a change in interest rates will lead to a reduction in the value of a bond or other fixed-rate investment.

Investment advisor

An organization or individual hired or employed by a mutual fund to advise on investment or conduct securities analysis as means of improving the fund’s investment strategy and asset management practices.

Investment company

A corporation, trust or partnership that is responsible for managing pooled shareholder funds by investing them in securities which are aligned with investor targets. Examples of investment companies include mutual funds, closed-end funds and unit investment trusts.

Investment grade bonds

Bonds which have a rating that signifies that they have a relatively low risk of default.

Investment objective

The overarching goal a mutual fund and its shareholders have for the fund’s portfolio. Typical investment objectives may be things like growth, growth and income, income and tax-free income. 

Junk bond – Typically a high-yielding bond which has been given a credit rating of BB or lower by a ratings agency.


Referring to the stocks of a company with a market capitalization of greater than $10 billion.

Letter of intent

A letter issued by a shareholder of a mutual fund to express an intention to invest specific sums of money at specified times in the future. While a letter of intent is not equivalent to a contract and cannot be enforced, it is welcomed as a sign of good faith by fund managers. On signing a letter of intent, the shareholder often becomes eligible for reduced sales charges. 

Lipper ratings

The Lipper Mutual Fund Industry Average is an index of the performance level for all mutual funds, as reported by Lipper Analytical Services of New York. The ratings are released quarterly and annually and are available for different types of fund.  They provide a useful barometer of progress for mutual fund managers who attempt to surpass the industry average as well as the growth figures of other funds in their category.


The ease with which an asset or security can be converted into cash with no negative impact on its market price. Mutual funds enjoy a high degree of liquidity since their shares can be sold for their current market with no obstacles value on any trading day.


(back-end, front-end and no-load) – Sales charges or commission rates associated with mutual funds. A front-end load is charged when the share is purchased, while a back-end load is charged when a share is redeemed. No-load funds do not impose sales charges.

Long-term investment strategy

An investment strategy that is not concerned with the day-to-day fluctuations of stock and bond markets, instead reacting and looking to capitalize on more profound shifts in the financial markets or the economy.

Management fee

The amount paid in exchange for services by a mutual fund to an investment advisor.

Market price

The current price of an asset in current market conditions.

Market risk 

The likelihood that an investment will not reach its objectives.

Market timing

A risky investment strategy that involves buying and selling securities based on predictions of future market conditions.


The date on which the final debt payment on a note or bond is payable.

Maturity distribution

The breakdown of the assets in a portfolio with regards to the dates on which each of its investments will mature.

Median Market Cap

The midpoint of market capitalization (market price multiplied by the number of shares outstanding) of the stocks in a portfolio. This is the point where exactly half the stocks have higher market capitalizations and half have lower.


Referring to the stocks of a company with a market capitalization of between $3 to $10 billion.

Money market mutual fund

A type of mutual fund that focuses on short-term returns by protecting principal and working to generate income by investing in CDs with maturities of less than one year, Treasury Bills and other safer investments.

Morningstar ratings

A risk rating given to publicly-traded open- and closed-end mutual funds and exchange-traded funds (ETFs) by investment research organization Morningstar Inc. of Chicago. Funds are given from one to five stars according to a risk-adjusted performance rating system whereby performance is determined by the total return of the fund.

Mutual fund

A fund managed by an investment company that pools money from shareholders and invests in stocks, bonds, options, commodities or money market securities.


National Association of Securities Dealers Automated Quotations system. Owned and operated by the National Association of Securities Dealers (NASD), NASDAQ is a transparent electronic marketplace that enables investors, brokers and dealers to trade securities in many of the world’s largest companies.

Net Asset Value Per Share (NAVPS)

Also known as share price, NAVPS is the current dollar value of a single mutual fund share. A fund’s NAVPS is calculated on a daily basis by subtracting its liabilities from its total assets and dividing the figure by the number of shares outstanding. The term used for the process of calculating NAVPS is ‘pricing’.

Number of Holdings

The sum of unique securities in a fund or portfolio.

Par value

The amount a bond was originally bought for, which is the same amount that will be repaid when the maturity date is reached. 


A grouping of investments such as stocks, bonds, commodities, currencies and cash equivalents owned by a single organization or individual. The holdings in a portfolio are often managed as a whole by an investment manager with specific investment goals in mind.

Portfolio allocation

Sum of portfolio assets which fall into a specific asset class with specific investment goals in mind.

Portfolio holdings

Investments held in a portfolio which may include stocks, bonds, options, futures, mutual funds and exchange-traded funds.

Portfolio manager

Individual or organization responsible for investing an investment fund’s assets to execute the specific investment objective of the portfolio.

Preferred stock 

One of the two types of equity, preferred stock differs from common stock in that it has a higher claim to dividends dividend payments and the liquidation of assets. Among the several kinds of preferred stock are adjustable-rate and convertible.


The difference between the par value of a bond or stock and the amount it is sold for.

Price-to-book ratio (P/B ratio)

A ratio used to compare a company’s market capitalization to its book value (net worth). P/B ratio is calculated by dividing price per share of a stock by book value per share. Applied to stock portfolios, the ratio equals the weighted average price-to-book ratio of the stocks held.

Price-to-earnings (P/E) ratio

The current price of a stock divided by its per-share earnings. P/E ratio is used to compare how much investors are paying for the relative earning power of a stock.

P/E Ratio (1 yr. trailing) (long position)

The current price of a stock divided by its per-share earnings from the current year.

P/E Ratio (1 yr. forecast)

The current price of a stock divided by its projected per-share earnings for the coming year.


Formal document providing details about investment offerings that proposes an investment plan for a business enterprise or information regarding an existing company to help investors make informed investment decisions. Included in prospectuses issued by mutual funds is information required by the SEC. They typically provide information on a company’s history, managerial background, fund policies and objectives, financial statements, services, risks and fees.


A ballot cast by one shareholder on behalf of another shareholder who cannot attend a meeting in a vote that requires shareholders’ approval.

Public offering price (POP)

The price (including sales charges) at which a new issue of mutual fund shares is offered to the public by an underwriter.

Quality distribution

The breakdown of the assets held in a portfolio which are ranked based on their investment quality rating.


The percentage of a portfolio or fund’s performance that is explainable by movements on a benchmark index of 0 to 100. An R2 of 100 implies that 100 percent of a fund’s movement can be determined by movements in the fund’s benchmark index.


Evaluations of the credit quality of bonds usually made by independent rating services. Ratings generally measure the probability of timely repayment of principal and interest on debt securities.


A period of at least two consecutive quarters of decline in a country’s gross domestic product that is characterized by a drop-off in economic activity.


Sale of mutual fund shares back to the issuing company by a shareholder.

Reinvestment option

An arrangement between a mutual fund and a shareholder whereby the proceeds from dividends or capital gains distributions are automatically used for the purchase of additional shares.

Relative risk and potential return

The amount of potential return from an investment with regards to the amount of risk one is willing to accept.

Rights of accumulation (ROA)

A shareholder’s right to buy additional shares in a mutual fund with reduced sales commission charges when the purchased mutual funds and the amount of already held exceeds an existing ROA breakpoint.

Risk tolerance

The degree of variability which an individual is willing to tolerate in an investment plan.

Sales charge

A commission charged to an investor for the sale of fund shares, usually paid to a broker, financial planner or investment advisor. Regulations stipulate that a mutual fund sales charge cannot exceed 8.5 percent of the value of an investment purchase. A sales charge or load is included in the asking or offered price but will vary according to different funds and investments. 


A section of the economy composed of similar companies and firms. Used in finance to denote securities that belong to companies in a specific industry.

Sector breakdown

Division of a portfolio’s securities by industry categories.


Broad name given to tradable financial assets such as stocks or bonds. 

Securities and Exchange Commission (SEC)

The independent federal agency responsible for administering the laws to protect investors by maintaining the transparent and fair operation of the securities market. The SEC plays a key role in governing all parts of the securities industry, including the registration and distribution of mutual fund shares.


A unit of ownership in investments such as stocks or mutual funds.

Share class net assets (date)

Assets held by a fund which fall into a specific share class.

Share classes

A categorical designation of shares of a certain type. Share classes are differentiated by the voting rights received by shareholders. For example, listed companies will typically divide shares into Class A and Class B, with each class conferring different voting rights on shareholders.

Sharpe Ratio

A risk-adjusted ratio designed to calculate return on investment per unit of risk. The ratio is calculated by finding the difference between the fund’s annualized return and the annualized return of the risk-free instrument (T-Bills). As far as the security of investments are concerned, a higher Sharpe ratio is better.

Short-term investment 

A asset purchased with the intention of being redeemed after holding for less than a year.


Referring to the stocks of a company with a market capitalization of less than $3 billion.

Standard & Poor’s Index (S&P)

The leading index provider of independent credit ratings. Standard & Poor’s Index monitors changes in stock market conditions based on the average performance 500 of the most popular common stocks.

Standard Deviation

Statistical measure of the degree to which an individual value deviates from the mean dispersion of a dataset.

Statement of additional information (SAI)

A document that accompanies a mutual fund prospectus containing extra details and information about the fund (sometimes referred to as ‘Part B’ of the prospectus).


Security that represents ownership of a fraction of a proportion of a company’s assets. Stocks are seen as long-term, growth-oriented investments.


The owner of common or preferred stock of a company (also called ‘shareholder’).

Systematic investment plan (SIP)

A service option where investors purchase mutual fund shares according to a regular payment schedule, usually via bank account deductions.

Tax-exempt income

Income that is not subject to income tax rules. One advantage of state municipal bonds is that purchasers are exempt from federal taxation on the income derived from the bonds.

Time horizon

The length of time that an investor expects to keep an investment in an asset or security.

Top 10 holdings

A portfolio’s ten largest holdings based on asset value.

Top 10 long and short positions 

The top 10 holdings according to market value in long and short position categories. A long position is one in which an investor buys a stock, commodity or currency with expectation that it will rise in value. A short position is where an investor sells their stocks with the intention of buying them back at a lower price in the future. 

Top five contributors

The five industries in a portfolio with the highest representation based on the amount of invested assets.

Top five detractors

Five portfolio assets that generated largest negative returns.

Top five holdings

Top five portfolio securities with the highest representation based on the amount of invested assets.

Top five industries

To five industries in a portfolio with the highest representation based on the amount of invested assets.

Total return

Performance measure that accounts for all of the dividends and interest earned over a specified period time. Total return is the yield before fees and expenses are deducted, factoring in any changes in the value of principle and working on the assumption that dividends and capital gains are reinvested. 

Tracking Error

A means of assessing the active risk of the portfolio or position. Tracking error represents the divergence in annualized standard deviation of the excess returns between a portfolio or position and a benchmark.

Transfer agent

A commercial bank or trust company assigned to monitor an investor’s stocks, bonds and account balances. A transfer agent maintains a record of the name of each registered shareholder, their address and the number of shares owned. The agent will also ensure that certificates involved in transfers are properly canceled and new certificates are issued in the name of the new owner.

Treasury Bill

Negotiable short-term (one year or less) U.S. government debt obligation which is backed by the government’s full trust and credit.

Treasury bond

Negotiable long-term (10 years or longer) U.S. government debt obligation which is backed by the government’s full trust and credit.

Treasury note

Negotiable medium-term (one year to 10 years) U.S. government debt obligation which is backed by the government’s full trust and credit.

Treasury security

Bonds issued by the U.S. Treasury Department and backed by the U.S. government.


1. An organization or individual who is responsible for one or more accounts.

2. An individual who has ultimate responsibility for a fund’s activities and is a member of its board of trustees.

Turnover Ratio

Percentage of mutual fund holdings that change hands in a specified period.


The estimated value or worth of a company or the price assigned to an individual stock by investors.

Value investing

Investment strategy involving the identification of securities that are believed to be priced below their estimated true value. Investors realize profit by selling the securities when they are perceived to have hit their true value.

Value stock

A stock which is trading at a price which is lower than its estimated true value.

Value-style funds

Funds which invest in stocks that are perceived to be undervalued in the current market. Such funds will target strong companies whose stocks are inexpensive but on the upward swing.


The frequency and degree with which an investment fluctuates in value.

Weighted Average Market Cap

A stock market index in which companies with higher market capitalization largely dictate the index’s performance.

Weighted average maturity (WAM)

A calculation of the average time to maturity of all the securities held in a portfolio which is adjusted to the percentage of net assets of each security. 

YTD total return

Total return on an investment since the beginning of the year, including appreciation and dividends or interest.

YTD Return (w load)

Return on an investment since the beginning of the year, including appreciation, dividends and interest after applicable expenses or charges have been subtracted.


Earnings on capital expressed as an annual percentage. Yield determines the amount of dividend or interest to be paid by a company.

Yield to maturity

Total return expressed as an annual rate that can be expected on a bond if it is held until it reaches maturity. 

12b-1 fee

Annual marketing or distribution fee applicable to mutual funds. Named for the SEC rule that permits it, the fee pays for a fund’s operating costs as well as other distribution costs. A fund which has a 12b-1 fee will disclose it in the fee table of the fund’s prospectus.

30-day SEC yield (date)

Standard yield calculation representing a fund’s net investment income earned over a 30-day period. 30-day SEC yield is given as an annual percentage rate using the fund’s share price at the culmination of each 30-day period. The 30-day yield is typically regarded as an estimate of investment income and should not be taken as an accurate representation of the fund’s real income distribution rate.

52 Week High

The highest trading point of a security over the last 52-week period.

52 Week Low

The lowest trading point of a security over the last 52-week period.