E
Earnings per share (EPS)
Earnings per share (EPS) is calculated by dividing a company's total earnings by the number of outstanding shares. For example, if a company earns Rs.100 crore in a year and has 5 crore outstanding, or existing, shares, the earnings per share are Rs.20.
Economic cycle
An economic cycle is a period during which a country’s economy moves from strength to weakness and back to strength. This pattern repeats itself regularly, though not on a fixed schedule. The length of the cycle isn’t predictable either, and may be measured in months or in years.
Equity
In the broadest sense, equity means ownership. If you own stock, you have equity in, or own a portion - however small - of the company that issued the stock. Having equity is the opposite of owning a bond or commercial paper, which is a debt the company must repay to you. Equity also means the difference between an asset's current market value - the amount it could be sold for - and any debt or claim against it.
Escrow
When someone else holds assets of yours until the terms of a contract or an agreement are fulfilled, your assets are said to be held in escrow. The assets could be money, securities, real estate, or a deed. The person or organization that holds the assets is the escrow agent, and the account in which they are held is an escrow account.
Estate
Your estate is what you leave behind, financially speaking, when you die. To figure its worth, your assets are valued to determine your gross estate. The assets may include cash, investments, retirement accounts, business interests, real estate, precious objects and antiques, and personal effects. Then all of your outstanding debts, which may include loans, or other obligations, are paid, and those plus any costs of settling the estate are subtracted from the gross estate.
Exchange-traded fund (ETF)
"An exchange traded fund looks like a mutual fund that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of its native index. The main difference between ETFs and other types of index funds is that ETFs don't try to outperform their corresponding index, but simply replicate its performance. ETFs don't try to beat the market, they try to be the market. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy and sell in real-time at a price that change throughout the day."
Expense ratio
"Expense ratio is the fee charged by the investment company / asset management company (AMC) to manage the funds of investors.
All the investment companies incur cost for operating mutual funds and they charge a percentage of asset funds to cover the expenses. Suppose the expense ratio is 1 per cent and your investment is Rs 10,000, then Rs 100 is what you pay to the company as operating fee. Major components of the cost are like legal cost, administration cost, advertising cost and the management cost. This fee is different from the sales fee and commission or the expenses incurred on the buying and selling of portfolio."
F
Fiduciary
A fiduciary is an individual or organization legally responsible for holding or investing assets on behalf of someone else, usually called the beneficiary. The assets must be managed in the best interests of the beneficiary, not for the personal gain of the fiduciary. However, the concept of acting responsibly can be broadly interpreted, and may mean preserving principal to some fiduciaries and producing reasonable growth to others. Executors, trustees, guardians, and agents with powers of attorney are examples of individuals with fiduciary responsibility.
Frontrunning
If you trade stock or other investments because you know that an upcoming transaction by a third party is likely to affect the market price of the investment, you're frontrunning. Because frontrunning, sometimes known as forward trading, relies on information that isn't available to the general public, it's considered unethical in certain circumstances. One example is a broker-dealer who trades at a better price for a personal account than for a client's account.
Fundamental analysis
Fundamental analysis is one of two primary methods for analyzing a stock's potential return. It involves assessing a corporation's financial history and current standing, including earnings, sales, and management. It also involves gauging the strength of the corporation's products or services in the marketplace.A fundamental analyst uses these details as well as the current state of the economy to assess whether the stock is likely to increase or decrease in value in the short- and long-term. He or she also decides whether its current price is an accurate reflection of its value.
Futures contract
Futures contracts, when they trade on regulated futures exchanges, obligate you to buy or sell a specified quantity of the underlying product for a specific price on a specific date. The underlying product could be a commodity, stock index, security, or currency. Because all the terms of a listed futures contract are structured by the exchange, you can offset your contract and get out of your obligation by buying or selling an opposing contract before the settlement date. Futures contracts provide some investors, called hedgers, a measure of protection from price volatility on the open market. Unlike hedgers, speculators use futures contracts to seek profits on price changes.
H
Hedging
Hedging is an investment technique designed to offset a potential loss on one investment by purchasing a second investment that you expect to perform in the opposite way. For example, you might sell short one stock, expecting its price to drop. At the same time, you might buy a call option on the same stock as insurance against a large increase in value.
Hypothecation
Hypothecation means pledging an asset as collateral for a loan. If you use a margin account to buy on margin or sell short, for example, you pledge securities (stocks, bonds, or other financial instruments) as collateral for the debt. If the brokerage firm issues a margin call that you don’t meet, it can sell those securities to cover its losses. Similarly, if you arrange a mortgage on your home, you give the lender the right to sell your home if you fail to meet your obligation to make mortgage payments. Hypothecation may make it easier for you to secure a loan, but you do run the risk of losing the asset, if for some reason you default on your obligation to repay according the terms of the agreement.
I
Inflation: Inflation is a persistent increase in prices. The inflation rate is a measure of changing prices, typically calculated on a month-to-month and year-to-year basis and expressed as a percentage. In India, Consumer Price Index (CPI) is one inflation measure used primarily. Hyperinflation, when prices rise by 100% or more annually, can destroy economic, and sometimes political, stability by driving the price of necessities higher than people can afford. Deflation, in contrast, is a widespread decline in prices that also has the potential to undermine the economy by stifling production and increasing unemployment.
Inflation-adjusted return
Inflation-adjusted return is what you earn on an investment after accounting for the impact of inflation. For example, if you earn 7% on a bond during a period when the inflation rate averages 3%, your inflation-adjusted return is 4%. Inflation-adjusted return is also known as real return. Since inflation diminishes the buying power of your money, it's important that the rate of return on your overall investment portfolio be greater than the rate of inflation. That way, your money grows rather than shrinks in value over time.
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