|
Account
A collection of investments, either taxable or tax-deferred. Account
can be real (contains investments actually owned) or model (hypothetical).
Account type can be brokerage, mutual fund, or other (a mutual
fund can be an account if the fund is purchased directly from
fund company or it can be an investment within an account, if
purchased through a broker). Legally, accounts are set up as taxable
or tax deferred. The legal owner of an account can be an individual,
joint, corporate, custodian, estate, or trust. See Real Taxable
Accounts, Joint Accounts, and Real Tax-Deferred Accounts.
Accrual Method
Accounting method where income and expenses are recorded when
items are booked or billed. Contrast with a more common method,
cash method, where income and expenses are logged from the time
cash is actually spent or received.
Accrued Interest
Interest earned but not yet paid. For most taxpayers, tax is due
in year accrued interest is paid. When buying a bond, buyer pays
seller any interest accrued since the last payment date. When
the buyer eventually sells the bond, the new buyer pays any accrued
interest. The accrued interest is subject to taxes for the seller,
but reduces the tax liability for the buyer. For example, if a
bond buyer paid R30 accrued interest to a seller, then received
R150 interest for the rest of the year, the buyer needs to pay
taxes on R150 - R30 = R120.
Advances/Declines
Advances are the number of issues on a Stock Exchange that have
risen in price since the previous trading day's closing price.
Declines represent those that have fallen in price. Sometimes
the advances and declines are expressed as a ratio and plotted
as a line graph. A rising A/D line indicates that the market has
good breadth (a majority of issues are rising in price) and that
a rising trend is more likely to be sustainable.
After Tax Real
Rate of Return
The percentage gain on an investment, account, or portfolio after
taxes and inflation have been deducted. Note that the after tax
real rate of return for money market mutual funds is frequently
less than zero, so you should use these accounts only as temporary
cash accounts.
All or None
Order
In brokerage, order instruction, particularly for large
orders, to execute the total quantity or none.
Annual Report
Written report to shareholders summarizing the past fiscal
year's financial results and news items of importance about products,
law suits, board members, etc. Prospective shareholders should
also review the annual report because it provides important balance
sheet information.
Annualized
Return
Projects the year to date return over a full 12 month
calendar year. Most useful for projecting return for money market
funds, CDs, and bonds. Annualized return for equities can be misleading
if YTD return is high and covers a short period of time. See Total
Return.
[back to top]
Annuity
An insurance product that pays an income benefit on a
specific date, for a specific time, or for the lifetime of the
person(s) receiving the annuity (the annuitant). A fixed annuity
guarantees fixed payments with a constant rate of return. A variable
annuity's value fluctuates with that of the assets that are backing
it. There is no guaranteed rate of return for a variable annuity;
the annuitant bears the investment risk and receives the return
actually earned on invested assets less charges assessed by the
insurance company.
Arbitrage
A financial transaction where an arbitrageur (arb) simultaneously
purchases in one market and sells in another where there is a
slight price differential. Often it is a full hedge, and therefore,
a risk-free transaction. Arbs play an important role in keeping
markets liquid and efficient.
[back to top]
Ask
The lowest price at which a seller is willing to offer a security
at this time.
Asset
Something of value that you own. Appreciating assets,
such as stocks, have the potential of increasing in value and/or
producing income. Depreciating assets, such as a car, lose value
over time. Assets minus liabilities (what you owe) equals net
worth.
[back to top]
Asset Allocation
The process of deciding what kinds of assets you want
to own, and the percentage of each. Tactical asset allocation
is a sophisticated form of market timing in which an investor
decides how much to allocate to each asset class based on market
indicators, particularly interest rates. As conditions change,
the percent allotted to each asset class changes.
Asset Classes
Appreciating assets are put into 7 asset classes: maximum
capital gain equity, long-term equity, international equity, U.S.
government bond, corporate bond, precious metals, and cash.
[back to top]
Average Annual
Return
The cumulative return divided by the number of years
of the life of the investment or account, with the compounding
effect factored in. In reverse, the average annual return times
a given number of years equals the cumulative return for that
time frame. AAR is used to compare returns of two or more investments
of unequal track records.
Average Daily
Volume
The consolidated trading volume for all exchanges averaged
for the last 20 trading days.
[back to top]
Average Cost
The average price plus commission.
Average Price
The total cost less total commission of all lots you
own of a particular security divided by the total number of shares
owned.
Average Proceed
The sum of net amounts received from all short open lots
divided by the total number of shares short for that security.
Average proceeds is for short investments what average cost is
for long investments.
[back to top]
Balance Sheet
A listing of all assets and liabilities for an individual
or a business. The surplus of assets over liabilities is the net
worth, or what is owned free of debt.
Balance Sheet
Return
A view in the stock database that displays Sales/Price
Ratio, Price/Book Ratio, Book/Share, Return on Equity, Profit
Margin, and Reporting Date. These items are all measures of company
value and profitability.
Balance Sheet
- Cash & Debt
A view in the stock database that displays: Fiscal Year
End, Quick Ratio, Debt/Equity Ratio, Current Ratio, and Cash/Share.
These items measure the financial health of a company, particularly
its assets and liabilities. Click each item in the Glossary list
for definitions of each of these items.
[back to top]
Balanced Equities
A mutual fund whose holdings are split fairly evenly
between stocks and bonds. Balanced funds can change their asset
allocation according to market conditions. Balanced funds seek
a relatively steady return.
Basis Point
The smallest measure used in quoting yields and interest
rates. One basis point equals .01%, so a 100 basis point move
in a U.S. Treasury bond yield is 1%.
Bearer Certificate
A security whose owner is not registered on the books
of the issuer and which is, therefore, payable to the person possessing
the certificate. A bearer bond has coupons attached, which the
bondholder sends in or presents on the interest date for payment.
Bearer stock certificates are negotiable without endorsement.
[back to top]
Beta
A measure of risk commonly used to compare the volatility
of mutual funds or stocks to the overall market. The S&P 500
Index is the base for calculating beta and carries a value of
1. Securities with betas below 1 are less risky than the market
as a whole. Betas above 1 are more risky. A beta of 1.3 is 30%
more volatile than the S&P 500. Betas with negative values
are inversely related to the S&P 500. Note: The beta of precious
metals can be low but these funds have high price volatility.
You cannot compare the beta of bond funds against the beta of
equity funds, because the bond fund beta is calculated using the
Shearson Long Bond Index rather than the S&P 500 Index.
Bid
The highest price a buyer is willing to pay for a security
at this time.
Block Trade
Usually, a trade of 10,000 shares or more. For bonds,
a R200,000 face amount or more. Block trades are often executed
through a special section of a brokerage firm called the Block
Desk. Using the Block Desk may result in a better price.
[back to top]
Bond
A debt security that represents the obligation of the
issuer to pay interest to the creditor or bond holder and return
the principal at maturity. Bonds backed by collateral are termed
secured while those that are not secured are called debentures.
A sinking fund bond obligates the issuer to set aside some of
its earnings to retire bonds periodically. A bond is usually identified
by its maturity date and its coupon rate, which is the interest
rate stated on the bond. The price of the bond is equal to its
face value when issued, which is called the par price. After that,
the price fluctuates in the market. Bonds selling above original
price are selling at a premium to par while those selling below
original price are selling at a discount to par. Prices vary inversely
with interest rates, as the prices of old bonds must adjust so
that their current yield will stay competitive with those of newly
issued bonds. A bond does not represent ownership. See Baby Bond,
Callable, Junk Bond, Municipal Bond, US Gov't Issues, Zero Coupon
Bond, Convertible Bond, Corporate Bond.
Bond Prices
View in the bond database that displays: Maturity, Outstanding
Bond Amount, Latest Price, Current Year High and Low Prices. For
latest price, see Price (Trade) Bonds.
Bond Type
The bond pays fixed interest amounts over its term. The
bond price, however, can change as prevailing market interest
rates change over time. Zero coupon bonds, or zeroes, do not pay
interest. They are sold at deep discount to their par value, which
is returned at maturity. Interest is internally compounded to
produce the stated yield to maturity. With floating rate, the
interest rate paid on the bond can change as prevailing market
interest rates change.
[back to top]
Book/Share
The current fiscal year book value (or net equity for the corporation)
per share of common stock.
Broker/Dealer
In the broadest sense, an agent who facilitates trades
between a buyer and a seller and receives a commission for his
services. Dealers buy and sell for their own account and keep
their own inventory of securities on which they can profit or
incur losses. Most stock brokerage firms really act as brokers
and dealers. Brokers are also classed as Full Service or Discount,
the former using a commission-based sales force and the latter
using salaried brokers only.
Broker Call
Rate
Interest rate at which brokerage firms borrow from banks
to finance their clients' security positions.
[back to top]
Business
Describes the primary product or service offered by a
given corporation.
Buy(s)
A transaction type for the purchase of a security. A
buy creates an open lot which is part of a holding of a given
security that you currently own. Buy(s) is also a filter for displaying
only buy transactions.
Buy-to-Cover
A transaction type that is a closing transaction for
a short sell and which creates a closed lot. Buys-to-Cover is
also a filter for displaying only buy-to-cover transactions.
Buying Power
Value of margin eligible securities that may be purchased
in a margin account. Determined by doubling the sum of the cash
held in the brokerage account and the loan value of margined securities.
[back to top]
Call Option
A call option gives the owner the right, but not the
obligation, to buy the underlying stock at a given price (the
strike price) by a given time (the expiration date). The owner
of the call is speculating that the underlying stock will go up
in value, hence, increasing the value of the option. The purpose
can be to speculate with the option (hope it goes up and sell
for a profit), to invest in the underlying stock at a locked in
price if the stock price goes high enough, or to generate income.
Each option contract equals 100 shares of stock. For example,
an AAA MAR 65 call, would give the owner the right to buy 100
shares of AAA at R65 (strike price) per share between now and
the third Friday in March (expiration date).
Callable
A security redeemable by the issuer before the scheduled
maturity. The issuer must pay the holder a premium price if the
security is retired early. Most Corporate and Municipal Bonds
are callable. US Government issues are generally not callable.
They are called when interest rates fall so significantly that
the bond issuer can save money by floating new bonds at the lower
rate. The first call date is the date to or after which a specific
call price will be offered by the issuer, usually a premium price
to par, as an incentive to the bondholder to redeem the bond.
Canceled Order
A buy or sell order that is canceled before it has been
executed. In most cases, a Limit Order can be can be canceled
at any time as long as it has not been executed. A Market Order
may only be canceled if the order is placed after market hours
and is then canceled before the market opens the following day.
[back to top]
Capital Gains
The buying and selling of a security or other appreciating
asset that has increased in value during the time you owned it.
It is subject to capital gains tax, as listed on IRS Form 1040,
Schedule D.
Capital Stock
Amount of money or property contributed by stockholders
to be used as the financial foundation for the corporation. It
includes all classes of common and preferred stock.
Cash Account
Orders placed in a cash account are settled on a cash
basis, meaning that cleared funds must be in the account within
three (3) business days to cover purchases.
[back to top]
Cash Available
The amount that may either be withdrawn in cash, or used
to purchase additional securities without creating a debit balance.
It is a combination of credit balances in all accounts and excess
credit balances in margin accounts.
Cash Balance
Whenever a transaction occurs that affects cash, the
cash balance is debited or credited. The cash balance is usually
invested in a money market mutual fund that pays interest. Money
market funds can be taxable or tax-exempt. In brokerage accounts,
the balance in cash is swept into the money market daily.
Cash Flow
Net income plus depreciation and other non-cash charges.
A strong cash flow is important for covering interest payments,
particularly for highly leveraged companies.
[back to top]
Cash/Share
The amount of cash divided by total number of common
stock shares outstanding for a given stock. A corporation with
a high cash/share amount relative to the current price per share
is said to be "cash rich" and may be considered low
risk or undervalued.
Cash Market
A market in which security or commodity transactions
occur within a few days of the trade date. Also called the spot
market. The opposite is the futures market, where transactions
are completed at a specified future date, price, and quantity,
which is determined in the present. Stock, bond, and mutual funds
trade in the cash market.
Cash Percent
The percentage of a given mutual fund's total assets
invested in cash and equivalents. A high cash percent is usually
good in a declining market but can result in under performance
in a rising market.
[back to top]
CD Rate
The current interest rate for a given CD (certificate
of deposit).
Certificate
of Deposit
Investment created by banks, which pays stated interest
at either fixed or variable rates. If sold directly by banks,
principal is returned at maturity subject only to penalties for
early cashing in. If sold through brokers (called Broker CDs),
principal value can vary like with bonds, and early cashing in
can fetch a principal lower than amount paid.
Change (in
NAV)
The change in the net asset value since the close of
the previous trading day. Negative values means the mutual fund
has dropped in price; positive values means the mutual fund has
appreciated in price. Note: A way to calculate previous day's
closing price, is to subtract the Change from the Current Price
- add negative values.
[back to top]
Class A/Class
B Shares
Shares of stock issued by the same company but having
some difference, such as voting rights, or a dividend preference
or participation.
Clearinghouse
A computerized facility that compares and reconciles
both sides of a brokerage trade.
Closed to New
Accounts
The mutual fund is currently closed to new investors.
To be sure, call the mutual fund for the latest information.
[back to top]
Closing Commission
The commission deducted from the proceeds before calculating
realized gain or loss. It is the fee charged by your broker to
execute your trade. It may be a composite of several fees &
charges.
Closing Price
The market price you receive when you sell or buy-to-cover
your security.
Commercial
Paper
Unsecured short-term debt, usually from 2 to 270 days,
issued by banks and corporations, which is generally safe and
flexible. It is usually a major component of money market fund
investment portfolios.
[back to top]
Commission
Fee charged by broker to execute your trade. May be a
composite of several fees & charges. Commission is taken into
account when calculating realized gain or loss. The buy, or opening
commission, is added to the cost basis and the sell, or closing
commission, is deducted from the proceeds before calculating realized
gain or loss, therefore commissions reduce taxable gains and increase
losses. Total commission is the sum of both buy and sell commission.
Commission rates take into account the quantity of the purchase,
the unit price of the security (low priced stocks may have higher
commission rates), and the type of investment (options have higher
commissions).
Common Shares
Represents the total number of common shares outstanding,
excluding treasury stock (stock issued but re-acquired by the
company through buy-backs). This number is expressed in thousands,
so add three zeros.
Common Stock
Security representing partial ownership interest in a
corporation. Ownership may also be shares with Preferred Stock,
which has prior claim on any dividends to be paid and, in the
event of liquidation, to the distribution of the corporation's
assets. Common stockholders assume the primary risk if business
is poor, and realize greater gains in the event of success. They
also elect the board of directors that controls the company.
[back to top]
Confirmation
A written notification from a broker to a client specifying
the details of a securities' transaction
Conversion
Price
The price at which convertible securities, such as bonds
and preferred stock, can be converted into common stock at a set
conversion ratio. For example, if the conversion ratio is 25 to
1, and you own a R1000 face value convertible bond, then the conversion
price is R40 per share. The conversion value is the value of 25
shares at the current price per share. If you assume R32 per share,
then the current value is 25 x R32 = R800. In this example, it
is clearly better not to convert.
Convertible
Bond
A debt security that is exchangeable for a set number
of shares of another type of security, usually common stock, at
a predetermined price. See Bond.
[back to top]
Corporate Bond
A debt security investment in obligations of U.S. corporations.
Corporate bonds are taxable and have a specific maturity date.
They are often traded on major exchanges. See Bond.
Covered Calls
A covered call seller or writer is an investor who owns
a stock and sells a call option against it to generate additional
income, which comes from the premium received for selling the
option. If things work out right for the writer, the stock price
will stay below the strike price and the writer will retain both
the premium and the stock. However, if the stock price rises enough,
the stock will be called away by the call buyer who has exercised
the option and now gets the stock and pays the writer the strike
price. Whether the writer makes a profit or loss on the stock
that is called away depends on the purchase price (the cost basis).
See Call Option.
Credit Balance
For cash accounts, it is the uninvested money in your
account. In a margin account, it is the money on deposit against
a short position.
[back to top]
Cumulative
Return (12-Month, 10-Year)
Measures the price change over the period of time indicated,
ending at the current date (or the date the price was last updated).
This measure includes any dividends paid and reinvested during
the period measured. Cumulative return can also be referred to
as total return. It is the most useful measure of performance
among different asset classes, such as stocks, bonds, cash, and
so forth.
Current P/E
Ratio
The ratio of current price divided by last two quarters
earnings per share (EPS) plus next two estimated quarters EPS.
See Price/Earnings Ratio.
Current Year
High & Low Prices
The highest and lowest price for a given bond during
the current calendar year.
[back to top]
Cumulative
Return Through (Year)
Includes the price change over the period of years indicated,
ending at the year shown, plus any dividend paid and reinvested
over the period shown. The bar graph represents the total value
of your portfolio.
Cumulative
Return (1-Yr, 3-Yr, 5-Yr, 10-Yr)
The price change over the time period shown, plus any
dividend, interest, or capital gains paid and reinvested over
the period shown for any given security. Note that for stocks,
the periods are complete calendar years, but for mutual funds,
periods are rolling up to the current month.
CUSIP Number
An industry code which uniquely identifies nearly all
traded stocks and bonds.
[back to top]
Current Ratio
A company's current assets divided by its current liabilities.
Current Yield
For stock, the annual dividend divided by the current
price per share. For bond, the annual interest payment divided
by [current price divided by 100 times quantity]. A measure in
percentage terms of how much income you can derive from the security.
Of great importance to fixed income investors and of minimal importance
to growth investors. See Yield to Maturity.
[back to top]
Date of Record
Date on which a shareholder must own shares to be entitled
to a dividend payment. From the following day, until the day the
dividend is actually paid, the stock trades ex-dividend.
Debenture
A bond issued by a corporation which is secured by the
general credit or promise to pay of the issuer. It is not backed
by collateral such as tangible assets.
Debit
Balance Money owed by the client to the broker.
[back to top]
Debt/Equity
Ratio
Long-term debt plus current liabilities divided by the
last fiscal year net equity per share of common stock for a given
corporation. A ratio above 2:1 or 200% may be excessive and a
sign of strained corporate finances.
Debt Securities
Securities representing money borrowed by an issuer that
must be paid back at a specific date. The security pays interest
or is purchased at a discount to face value.
Debt Service
Cash required by a corporation or municipality to cover
all interest and principal payments due in a given year, including
sinking fund payments.
[back to top]
Discount Rate
The lending rate that the Federal Reserve Bank charges
on loans made to other banks and financial institutions. Changes
in this rate tend to have large ripple effects on the rates banks
in turn charge their customers. The bond market and sometimes
the stock market react sharply to changes in this rate. You can
create market timing alerts with it.
Distributions
Capital gains (long or short term), interest, or dividends
paid to bond holders and shareholders. These can be received as
cash or stock and they are treated as closed lots for tax purposes.
Return of capital is also a type of distribution, but it is usually
tax exempt. Distributions from mutual fund shares are easily reinvested
into more shares and the compounding of reinvested shares can
add substantially to the cumulative return of a fund.
Dividend
The periodic, usually quarterly, payment made by a corporation
to its shareholders, generally expressed as dividend per share.
Dividends represent earnings that are not reinvested by the corporation.
Some stocks pay no dividends and others, such as utility companies
pay substantial ones that represent a large portion of the total
return a shareholder will get from his investment. Dividends are
a type of distribution and are usually taxable in year received.
[back to top]
Dividend Frequency
Shows how often a given mutual fund pays a dividend distribution.
Dividend Growth
Rate (3 Yr and Current Year)
The unweighted average annual growth rate of annual fiscal
year dividends for the last three fiscal years for a given security.
Dividend/Share
Indicates the annual dividend payment for the next 12
months for a given security. Most companies pay dividends quarterly.
[back to top]
Dividend Year
Started
The year in which a given corporation started paying
dividends to stockholders.
Dow Jones Indices
Indices tracked by the Dow Jones company, a highly reputable
information services company; publisher of The Wall Street Journal,
Barron's National Business and Financial Weekly, and other influential
publications.
Dow Jones Industrial
Average (DJIA)
The most commonly followed index of the U.S. stock market.
It is comprised of 30 corporations spanning many different industries.
It is price weighted, meaning that a R2 change in a R100 per share
stock will have a greater affect than a R2 change in a R20 per
share stock. The Dow Jones Industrial Average measures (also defined
in the glossary) can be used to gauge the health and direction
of the stock market; see DJIA 200-Day Moving Average, DJIA Price/Earnings,
DJIA Yield, DJIA Price/Book.
[back to top]
DJIA 200-Day
Moving Average
This value is calculated by averaging all the closing
values of the DJIA for the last 200 days. You can use this and
the following measures to create market timing alerts.
DJIA P/E (Price/Earnings)
The latest DJIA value divided by the estimated current
year earnings per share (EPS), with the index multiplier taken
into account. Readings above 24 and below 8 are considered sell
and buy signals respectively by many analysts.
DJIA Yield
The sum of all dividends of all stocks in the DJIA divided
by the latest value of the DJIA, adjusted by the multiplier. Readings
below 3 and above 6 are considered sell and buy signals respectively.
[back to top]
DJIA Price/Book
The latest value of the DJIA divided by the book value
for all DJIA stocks, adjusted by the multiplier. Readings above
2.5 may be a sell signal.
Dow Jones Transportation
Average (DJTA)
A index of 20 corporations in the transportation sector,
including air, rail, and truck.
Dow Jones Utilities
Average (DJUA)
An index of 15 major utility corporations.
[back to top]
Duration of
an order
In brokerage, when trading stocks or options, it designates
whether a limit trade is valid for Good Until Canceled or Day
Only. Market orders all have a duration of Day Only by definition,
since they are executed as soon as possible at the market price.
It is possible that a market order could arrive after the market
close, in which case, it may remain valid at the next market opening.
Earnings Per
Share
The fiscal year earnings divided by common shares outstanding
for any given year for a given corporation. The estimated current
fiscal year earnings per share includes the actual EPS for quarters
that have already been reported plus estimates calculated by the
S&P Corporation for any quarters remaining in the fiscal year.
Earnings are the principal force behind stock price appreciation.
This view displays: Earnings Per Share, Mean Estimate, and Projected
5-Year Growth Rate.
Effective Tax
Rate
The flat percentage rate equivalent of a given tax payer's
progressive rate. For example, if your taxable income is R55,000
in 1993, the first R22,100 would be taxed at 15%. The next R31,400
at 28%, and the last R1,500 at 31%. The effective rate is approximately
24% applied to the entire R55,000.
Equity
The generic term for ownership interest in an asset.
In real estate, it is often used to describe the net of the current
value and the mortgage balance. It is also used to describe stock
and mutual funds, that is, investments that issue ownership shares.
[back to top]
Equity Security
Instrument representing fractional ownership in a corporation.
Stocks are equity securities.
Ex-Dividend
When a stock trades ex-dividend (without dividend), it
means that a new buyer of the security will pay the price with
the dividend deducted. Also, the new buyer will not have a tax
liability for that dividend as does the buyer who bought on or
before the record date (the official date declared by the board
of directors to determine who is eligible for the dividend). The
actual payment date of the dividend may be a couple of weeks after
the record date. If a stock pays a large dividend, you should
try to make a purchase after the record date, so to avoid the
tax liability on the dividend.
Executed Order
Completed buy or sell transactions.
Exit Fee
A service charge that equals a percent of a share's NAV,
which you pay when you sell your mutual fund shares. Sometimes
the exit fee is a flat dollar charge.
[back to top]
Face Value
The stated value of a bond certificate when issued and
when they are redeemed at maturity. Same as par value or principal.
The face value never changes but the current value does. Current
value for a bond is (face value x price) divided by 100. Bonds
are purchased as units of face value. For example, you buy a R10,000
bond where the current value can be more or less than R10,000,
depending on market conditions.
Federal Call
When a client makes certain types of transactions in
their margin account, the brokerage firm will issue a call notifying
the client if additional equity is required by the settlement
date in order to satisfy Federal Regulation T.
Fees &
Charges
These items relate to the costs of owning mutual fund
shares. This view displays: if it is a Closed fund, Sales Charges,
Exit Fee, Expense Ratio, 5-Year Fee, Phone Switch options.
[back to top]
First Call
Provisions
Some bonds can be called prior to the maturity date at
the issuer's discretion. These bonds are callable. The first call
provision describes the time period and the price offered for
the first call by the issuer.
Fiscal Policy
A method where governments use taxes and budgeting to
raise revenue for public purposes. Another method is monetary
policy, which seeks to influence the money supply by raising or
lowering interest rates and thereby changing credit demand.
Fiscal Year
Any continuous 12 months which is used by a business
or government as its annual accounting period. The U.S. government
fiscal year ends on September 30. A fiscal year is designated
by the year it ends. For example, an April - March fiscal year
1993 ended on March 31, 1993 and began on April 1, 1992.
[back to top]
Fiscal Year
End
Shows the last month of a corporation's fiscal year.
Flexible Equities
A mutual fund whose holdings can vary between a preponderance
of stocks or bonds, depending on market conditions. Flexible funds
seek to take advantage of changing market conditions.
Floating Rate
Rather than a fixed interest or coupon rate, some bonds
and CDs have a floating interest rate which is adjusted periodically
to market conditions. It is also called Variable Rate.
[back to top]
Front-end Load
The percentage of the purchase price that is charged
and deducted from the investment. Same as Sales Charge. For example,
if you invest R1000 in a 4% front-end load mutual fund, you only
purchase R960 worth of shares.
Futures
Investment contracts which specify the quantity and price
of a commodity to be purchased or sold at a later date. On contract
date, the buyer must take physical possession or make delivery
of the commodity, which can only be avoided by closing out the
contract(s) before that date. Futures can be used for speculation
or hedging.
[back to top]
General Obligation
Bond
A municipal bond which is backed by the full faith and
credit of a municipality. It includes the authority to raise taxes
and/or borrow to pay back interest and principal. See Bond.
Glamour Stock
A stock with a wide public and institutional following.
You may want to avoid investing in these stocks because they are
over-hyped and extremely vulnerable to a downward slide.
Global Bonds
Mutual fund investing primarily in debt obligations (i.e.
bonds) of foreign governments and/or corporations. Global bond
funds can also be subject to foreign currency exchange risks.
[back to top]
Global Equities
Stocks purchased from companies all over the world, including
the Unites States. Global equities can also expose you to foreign
currency risk.
Gold
A precious metal usually sought after during times of
rapidly rising inflation. For mutual fund investors, gold can
also refer to the stock of gold mining companies, as well as bullion.
Government
Bonds
Mutual fund investing primarily in debt obligations (i.e.
bonds) of the U.S. government. Government bond funds can be short-term,
intermediate-term or long-term, reflecting the average maturity
of the bonds held in the portfolio.
[back to top]
Gross Domestic
Product (GDP)
A measure of the economy which includes the value of
all products and services produced by a nation in a given year.
The growth rate of GDP is used to compare the economic progress
of various nations.
Growth &
Income
A security purchased for long-term price appreciation
(similar to long-term growth) and also for potential dividend
(or interest) income.
Growth Rate
The percentage rate of change in some financial characteristic
of a company. See Historical 5-year Growth Rate, Projected 5-year
Growth Rate, Dividend Growth Rate, Sales 3-year Growth Rate, and
Net Income 3-year Growth Rate.
[back to top]
Hedging
An investment strategy of lowering risk by buying securities
that have offsetting risk characteristics. A perfect hedge eliminates
risk entirely. Hedging strategies lower return since there is
a cost involved in hedging. For example, a portfolio manager could
short a futures contract which will perfectly offset any decrease
in the value of the portfolio. Options and short selling stock
can also be used for hedging. Hedge funds are investment pools
that are free to use any hedging techniques they desire and they
often make large bets in a relatively small number of different
holdings.
Hidden Asset
An asset that is omitted or understated in the balance
sheet of a company. Discovering hidden assets before the market
does can lead to appreciable price gains for savvy investors.
A highly speculative stock with a rising price and high volatility
which makes it vulnerable to dramatic downswings.
High Flyer
A highly speculative stock with a rising price and high
volatility which makes it vulnerable to dramatic crashes.
[back to top]
Holding
All the shares (mutual funds & stocks), contracts
(options), or face amount (bonds) you own of an investment.
House
Call A brokerage firm's notice to the client that the
equity in a margin account is below the firm's maintenance level
and needs additional funds immediately.
Hybrid Investment
An investment which has the major characteristics of
two or more other investments. For example, a convertible preferred
stock generally pays a steady dividend and has steady principal
like a high quality corporate bond, but it can be converted into
common stock. Hybrids can be complicated to understand and are
best left to sophisticated investors.
[back to top]
Income
Dividends or interest received by owners of equity or
bonds respectively. Dividends represent a portion of earnings
paid to shareholders while interest is compensation to bondholders
in the form of cash or more bonds for the lending of capital.
Reinvested income can significantly add to returns. See Projected
Income.
Income Account
An account that receives interest from bonds and credit
balances, or dividends from stock positions.
Indexing
Constructing a portfolio to match the performance of
a specific index, such as the S&P 500. Individuals can do
this by purchasing shares in an index mutual fund.
[back to top]
Indices
Click Dow Jones Indices and S&P Indices in the Glossary
list for these definitions.
Information
See Stock Information for these definitions.
Institution
The name of the institution issuing a CD or money market.
[back to top]
Institutions
Holding
The percentage of outstanding shares held by institutions
for investment purposes. Includes charitable trusts, pension funds,
mutual funds, brokerage firms, and banks.
Interest
Compensation to bondholders in the form of cash or more
bonds for the lending of capital. Accumulated or accrued interest
is the interest due to the seller of a bond from the day after
the last interest payment to the day before the settlement date.
It is paid by the buyer of the bond. Imputed interest is not paid
to the bondholder but it is calculated as if it was so that taxes
can be paid on it anyway. Reinvested interest can significantly
add to returns.
Interest Dates
Displays the frequency and dates that interest on a given
bond is paid. By carefully selecting interest dates, you can receive
income monthly from a group of bonds, with staggered interest
dates.
[back to top]
Investment
An appreciating or income producing asset. An open investment
is one you currently own. A closed investment is one you once
owned. A long investment is an open investment that you bought.
A short investment is an open investment that you sold short -
i.e., you borrowed the investment from someone else, sold it,
pocketed the proceeds, you hope it decreases in value, and you
are obliged to buy it back in the future and return it to the
original owner. An investment can be short and long at the same
time if it contains both long and short lots. All investments
are classified by type as a way of organizing your investments.
See Holding.
Individual
Retirement Account (IRA)
An Individual Retirement Account is a personal, tax-deferred,
retirement account in which an employed person can contribute
a maximum amount per year. There are specific rules concerning
level of participation and eligibility for an a IRA and whether
an employee's contributions are tax-deductible. Consult a financial
consultant or tax advisor.
Inflation -
CPI
The rise in price of goods and services, or Consumer
Price Index (CPI), when too much money chases too few goods on
the market. Moderate inflation is a result of economic growth.
Hyperinflation (CPI rising at rates of 100% or more annually)
causes people to lose confidence in their economy and put their
money in hard assets such as gold and real estate.
[back to top]
Inflation Rate
The annual percentage change in the price of goods and
services. At the consumer level, it is the Consumer Price Index
(CPI) and at the wholesale level it is the Producer Price Index
(PPI).
Issuer
The official name of the company issuing a given bond.
[back to top]
Joint Account
A bank or brokerage account that two or more people own
jointly. Some joint accounts are set up so that all owners of
the account must sign checks and approve all withdrawals or brokerage
transactions. In others, any one party can take these actions
on his or her own. Joint accounts usually include rights of survivorship
(upon the death of one party , the other gets complete ownership)
or with tenants in common (the ownership of the deceased party's
half goes to his estate, not the other party).
Joint and Survivor
Annuity
An annuity that pays two or more beneficiaries. When
one of them dies, the payments continue to the survivors but the
deceased's share is no longer paid.
Junior Security
A security with a lower claim on assets in the event
of a company's liquidation. Normally, common stock is most junior
to all other corporate issues. Then, from junior to senior, the
order is preferred stock, debentures, and mortgage bonds. This
last item is a direct claim on real property and is the most senior.
[back to top]
Junk Bond
A junk bond (or high-yield bond) is one with a S&P
credit rating of BB or lower and that carries higher risk of interest
or principal default than better rated investment grade bonds.
Junk bonds are issued in leveraged buyouts and other takeovers
by companies without long track records of sales and earnings,
or by those with questionable credit strength.
[back to top]
Kicker
A provision for equity participation which is often added
to a new debt issue to make it more attractive in the market.
Rights, warrants, and convertibility are common examples. Also
called sweeteners.
[back to top]
Leverage
A company is leveraged when it has a high ratio of debt
to equity. If the company can use the extra debt to expand and
generate more than enough additional revenue to cover the higher
interest costs, then the leverage is beneficial to the current
shareholders, that is, each share has been leveraged.
Liabilities
Total liabilities is the sum of your Short Market Value
plus your Debit Balances from the prior trading day. Short Market
Value is the market value of short positions held in your short
account as of the prior day's market close. Increases in this
figure mean that positions you have sold short are moving against
you, or up. Each Monday, your short account will be marked to
the market. The Short Market Value of the account is used to recalculate
the proper level of collateralization to secure the short positions
in the account. The Debit Balance reflects the closing debit balance
as of the close on the prior trading day.
Limit Order
Order that sets a specific price (Limit Price) that is
the highest a buyer will pay or the lowest a seller wants to receive.
Buyer will accept price lower than limit and seller higher than
limit. It may be a Day or GTC (Good Until Canceled) order. If
no price is indicated, the order is a market order by default.
[back to top]
Limited Partnership
A business or investment where limited partners provide
capital, share in profits, have limited legal liability, and leave
the management of the business to general partners. Can be tradable
and listed on an exchange, packaged and sold by brokers and not
exchange tradable, or tradable to other partners only. REITS (real
estate investment trusts) are popular LPs. Most LPs provide both
income and appreciation. Some are highly liquid and others not.
Liquidity
The ability to turn an asset into cash. A highly liquid
asset is easy to sell because an active market exists that sets
prices which are continuously adjusted for supply and demand.
An example is a listed stock or mutual fund. A less liquid asset
is real estate or a collectible.
Loan Value
Maximum percentage of current market value of margin
eligible securities that a brokerage firm can lend a margin account
client.
[back to top]
Long Investments
Includes: Cash Balance, Current Value, Total Cost, and
Unrealized Gain/Loss. Long investments are investments that you
have bought with the goal of price appreciation and/or income
generation. Short investments, on the other hand, are first sold
and then bought back.
Long Position
Securities owned by the client and held in the client's
account at the brokerage firm.
Long-Term Growth
Securities whose price appreciation is anticipated over
the long term; i.e., a year or more. Long-term growth securities
tend to be more stable and appreciate at a slower, albeit steadier
rate than do maximum capital gains securities.
Lot
A group of identical UNITS (for securities) or nearly
identical units (for collectibles) of an investment that are traded
at the same time and price. Open lots are the contents of open
investments and can be long (buys) or short (short sell). Closed
lots are the contents of closed investments and can be long (sell)
or short (buy to cover).
[back to top]
Maintenance
Requirement
The level of equity that must be maintained in a client's
margin account. When the market value of a margined security is
less than maintenance levels, a margin call is issued for the
investor to increase equity.
Margin Account
An investment account which allows you to purchase securities
with funds borrowed from the broker at a specified interest rate.
Margin Balance
A debit in your account secured with stocks and/or bonds
which regulators have authorized for use as collateral.
[back to top]
Margin Call
A firm's demand of a client for additional equity in
order to meet maintenance requirements. If a client fails to deliver
more equity in the account, positions in the account may be liquidated.
There are three types of margin calls: House, Exchange, and Federal.
See House Call, Exchange Call, Federal Call.
Margin Debt
A debit in your account that is owed to the broker. The
debit is secured with stocks and bonds which regulators have authorized
for use as collateral. It excludes funds due which are debits
resulting from purchases in a cash account.
Margin Loan
Availability
The amount of money you may withdraw from your account
using margin eligible securities in your margin account as collateral
[back to top]
Mark to Market
Determination of securities' value within a margin account
to ensure that the account is in compliance with maintenance requirements.
Market Order
An order to buy or sell a security at the next available
price.
Market Timing
Attempting to buy and sell securities to ride up trends
and avoid down trends in the stock, bond, currency, or commodity
markets. In theory, this can dramatically increase your rate of
return, but practically, it is extremely difficult or impossible
to consistently make the right decisions at the right time over
the long term.
[back to top]
Market Value
The number of outstanding common shares of a given corporation
times latest price per share. It is also referred to as market
capitalization. Note: ADRs and ADSs do not display Market Value.
Maturity
The date a given bond will mature and pay off its principal
in full. A bond issued for R1,000 will pay off the R1,000 at maturity.
A single company can issue more than one series of bonds. These
bond series can be differentiated by their maturities.
Maximum Capital
Gains
The attempt to maximize the positive difference between
the buying and selling price of a security. Maximum capital gains
securities are typically more risky, or volatile, than the average
(S&P 500) Security. They rise more during bull markets but
also fall more during bear markets and are typically stocks of
fast-growing small companies.
[back to top]
Mean Estimate
The average of analysts' earnings per share estimates
for the current fiscal year for a given corporation.
Mixed Lot
The combination of round lot (100 shares) or multiple
round lots and an odd lot (99 shares or less), e.g. 163 shares.
Money Market
Fund
A mutual fund that invests in cash and equivalents. Generally,
has a stable R1 per share net asset value (NAV) and a variable
rate of return. Not federally insured but short term nature of
investments plus private insurance make them quite safe. Dividends
are paid periodically and are automatically reinvested in more
shares. Available from banks, mutual fund companies, and brokerage
firms, these funds are used as a convenient place to park cash
and earn "interest" (really dividends, as mentioned
above). Most brokerage and mutual accounts have an associated
money market fund account. Money market funds can be taxable or
tax-exempt. Each day, the balance in the cash / margin account,
which comes from the proceeds of trades and distributions, is
swept into the money market fund. See Account.
[back to top]
Municipal Bond
A bond issued by state or local government. Interest
from these bonds is generally tax-free to residents but in some
cases, interest is federally taxable if subject to Alternative
Minimum Tax. Note that any capital gain realized by trading a
municipal bond is subject to capital gains tax. Because of this
hybrid tax situation, municipal bonds are normally put in taxable
brokerage accounts since there is no special account for them.
See Bonds.
Mutual Fund
A company that pools money of individual investors and
purchases securities which become jointly owned by its shareholders.
The shareholders receive interest, dividends, and capital gains
(but not losses) from the ownership and sale of the fund's securities.
The fund's portfolio is managed by a professional money manager.
Open-end funds offer shares to the public continuously (except
when temporarily closed) while closed-end funds offer a limited
number of shares which then trade on an organized exchange. A
no-load fund charges no up front or back end sales fee while a
load fund may charge one or both. Virtually all mutual funds charge
annual expense fees that reduce the investment return. Mutual
funds can invest in equity, debt, cash, real estate, options,
and futures. There are over 4,000 mutual funds. Closed end funds
are purchased just like stocks. Full service brokers usually sell
their own funds while discount brokers sell mostly funds of other
companies.
Mutual Fund
Cash Level
Measures the average percentage of cash held by managers
of mutual funds in their funds. When levels are over 11%, managers
are holding onto a lot of cash because they are bearish on the
market. Levels below 6% means they are bullish as they have spent
all their cash; fund managers usually need to keep about 5% cash
just to meet daily redemption requirements. This indicator is
usually considered a contrary indicator, as fund managers tend
to be wrong at market extremes.
[back to top]
NASDAQ Composite
Index
A market value weighted index comprised of about 3,500
stocks traded on the NASDAQ exchange. Large technology stocks
have a major effect on this index value. NASDAQ represents the
top tier of the over-the-counter (OTC) market.
Net Amount
Quantity times price, plus or minus commission.
Net Asset Value
(NAV)
The per share price of a mutual fund. For a no-load fund,
NAV is the price received by both buyers and sellers. For front
loaded mutual funds, NAV is equivalent of the bid price (what
shareholders can get for selling a share), while the offering
price is the price buyers must pay per share (and includes front
load). The NAV is usually calculated at the end of each trading
day by taking the closing prices of all securities owned plus
cash and equivalents and subtracting all liabilities then dividing
by the number of shares outstanding, which for open-end funds,
fluctuates depending on daily number of redemptions and purchases.
Many new funds are issued at a NAV of R10. After a distribution,
the NAV falls by the amount equal to the distribution.
[back to top]
Net Income
The net income after taxes but before payout of common
and preferred dividends for the indicated fiscal year for a given
corporation.
Net Income
3-Yr Growth Rate
The unweighted average of the growth rate for net income
over the last three fiscal years for a given corporation.
No-load funds
Mutual funds that have no initial sales charge. Beware
that some no-loads have other charges and expenses. The best measure
of all fees and charges is the five year fee. See Mutual Fund.
[back to top]
Non-callable
Bonds
Bonds which cannot be taken back by the issuer before
maturity. Most U.S. Treasury issues are non-callable. This is
an advantage to the lender since there is no interest rate risk.
With callable bonds, there is the risk of having to reinvest before
maturity at a potentially lower interest rate.
Non-marginable
Securities
Securities that may not be purchased or sold in a margin
account. All transactions involving them must be done on a full
cash basis.
[back to top]
Odd Lot
Purchase or sale of less than the round lot unit of 100
shares.
Offering Price
The net asset value plus the sales charge. Offering price
is what a buyer (you) would have to pay to buy one share of a
given mutual fund. See Mutual Fund.
Open Lot
Open lots are the components that make up open investments
and can be long (buy) or short (short sell). A lot in general
is a group of identical units (for securities) or nearly identical
units (for collectibles) of an investment that are traded at the
same time and price. See lot.
[back to top]
Open Order
Orders that have been placed with the broker but have
yet been executed or canceled.
Open Price
The price at which a given stock opened for the current
trading day. For weekend days or holidays, this would be the opening
price for the previous trading day.
Opening Commission
The commission added to the proceeds before calculating
realized gain or loss. It is the fee charged by broker to execute
your trade. May be a composite of several fees & charges.
[back to top]
Opportunity
Cost
The rate of return you likely would have achieved for
capital in an alternative investment from the one you chose. If
the current investment under performs the foregone investment,
then you have paid an opportunity cost greater than the current
rate of return and you made a bad choice.
Option
A contract that gives the owner the right, if exercised,
to buy or sell a security or basket of securities (index) at a
specific price within a specific time limit. Usually, they are
traded as securities themselves, with buyers and sellers trying
to profit from price changes. They are generally available for
1 to 9 months, with some longer term options (calle | 
