Active Strategy is an investment approach that seeks to outperform benchmark returns.
Asset Allocation is the process of diversifying an investment among various asset classes-such as stocks, bonds and cash equivalents-to achieve a portfolio’s investment objectives.
Basis Point is one hundredth of 1% or 0.01%.
Benchmark is an index that serves as a standard against which the performance of a fund or portfolio is measured. For example, a stock fund may be compared to the Standard & Poors 500 Index to assess how it performs over time.
Current Yield is a measure of the amount of interest income a security provides relative to its prevailing market price. It is calculated by totaling the last 12 months of income distributions and dividing by the current unit value.
Distribution Yield is a measure of the amount of interest income a security has provided over a period of time. It is calculated by totaling the last 12 months of income distributions and dividing by the unit value 12 months ago.
Diversification is a way of reducing risk by spreading investments among a number of different assets that are not perfectly correlated so that losses in any one asset class may be offset by gains in another.
Fixed Income Securities are debt-bearing instruments such as government bonds, tax-exempt bonds, corporate bonds and commercial paper. class=GramE>Commonly referred to as bonds.
Index Fund is a mutual fund portfolio, which contains most of the securities in a broad-based index, such as the S&P 500 Index. The holdings in the portfolio are in the same proportion as that of the index. The performance should mirror the index.
Monthly Total Return is calculated by comparing the change in unit value plus any income and/or capital gain distributions for the month with the unit value for the preceding month.
Passive Strategy is an investment strategy in which the goal is to replicate the results of a particular market index or benchmark. It is sometimes called index investing.
Return is the change in value of investment over a period of time, it is usually expressed as an annual percentage.
Risk is the possibility that a particular outcome may not occur. In investment terms, risk is used to define all of the uncertainty relating to an asset, including upside as well as downside possibilities. (The popular definition of risk is the downside only.) Risk in investment returns is measured by the variance of the historical returns.
Risk-Tolerance is the extent to which an investor will accept risk in the pursuit of a financial reward. The greater an investor’s tolerance, the more risk he will accept in order to reach his goal and the more willing he will be to invest in higher-risk assets with correspondingly higher returns.
Strategy is a specific investment approach used to manage a portfolio.
Total Return is the change in value of investment over a period of time plus any distributions (income and/or capital gains) received during that time. It is usually expressed as an annual percentage.
Unit Value is calculated by dividing the total market value of each fund by the total number of units of participation in the fund at the end of the month.
Volatility is a measure of risk, which encompasses the variation in an investment’s returns or price over a set time period, verses the expected return or price, which is represented by the mean.
Yield is the income return on a security or portfolio, usually expressed in annual percentage terms.