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Laddering
Laddering is an investment strategy that calls for establishing a pattern of rolling maturity dates for a portfolio of fixed-income investments. Your portfolio might include intermediate-term bonds or certificates of deposit (CDs). For example, instead of buying one Rs.3 lakh CD with a three-year term, you buy three Rs.1 lakh CDs maturing one year apart. As each CD comes due, you can reinvest the principal to extend the pattern. If you ladder, you can avoid having to liquidate a large bond investment if you need just some of the money or reinvest your entire principal at a time when interest rates may be low.
Leverage
"Leverage is an investment technique in which you use a small amount of your own money to make an investment of much larger value. In that way, leverage gives you significant financial power.
For example, if you borrow 80% of the cost of a home, you are using the leverage to buy a much more expensive property than you could have afforded by paying cash. If you sell the property for more than you borrowed, the profit is entirely yours. The reverse is also true. If you sell at a loss, the amount you borrowed is still due and the entire loss is yours. Buying stock on margin is a type of leverage, as is buying a futures or options contract. Leveraging can be risky if the underlying instrument doesn't perform as you anticipate. "
Liquidity
If you can convert an asset to cash easily and quickly, with little or no loss of value, the asset has liquidity. The term liquidity is sometimes used to describe investments you can buy or sell easily. For example, you could sell several hundred shares of a blue chip stock by simply calling your broker, something that might not be possible if you wanted to sell real estate or collectibles.
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Mark to the market
When an investment is marked to the market, its value is adjusted to reflect the current market price. With mutual funds, for example, marking to the market means that a fund's net asset value (NAV) is recalculated each day based on the closing prices of the fund's underlying investments.
Market capitalization
"Market capitalization is a measure of the value of a company, calculated by multiplying the number of either the outstanding shares or the floating shares by the current price per share. For example, a company with 100 million shares of floating stock that has a current market value of Rs.25 a share would have a market capitalization of Rs.2.5 billion.
Outstanding shares include all the stock held by shareholders, while floating shares are those outstanding shares that actually are available to trade. Market capitalization, or cap, is one of the criteria investors use to choose a varied portfolio of stocks, which are often categorized as small-, mid-, and large-cap. Generally, large-cap stocks are considered the least volatile, and small caps the most volatile.The term market capitalization is sometimes used interchangeably with market value, in explaining, for example, how a particular index is weighted or where a company stands in relation to other companies. "
Market timing
Market timing means trying to anticipate the point at which a market has hit, or is about to hit, a high or low turning point, based on historical patterns, technical analysis, or other factors. Market timers try to buy as the market turns up and sell before the market turns down. It’s the anticipated change in direction rather than the amount of time that passes between those changes that’s significant for these investors.The term is sometimes used in a negative sense to refer to a trading strategy that aims for quick profits by taking advantage of short-term changes in securities’ prices. The strategy generally practiced by traders and is not recommended for investors.
Mediation
"Mediation is an informal, voluntary method of resolving disputes, in which the parties in conflict meet with a trained, independent third party to come up with a solution that’s satisfactory to everyone involved.
Mediation is considered less expensive, less formal, and less confrontational than arbitration or lawsuits. But both parties must agree to use the process. While you may retain a legal adviser during mediation, any resolution will be crafted with your direct involvement, which is usually not the case with arbitration. Also, unlike arbitration, mediation is nonbinding, which means that if you’re not happy with the outcome, you can stop the process, and either drop the issue or move to more formal proceedings."
Merger
When two or more companies consolidate by exchanging common stock, and the resulting single company replaces the old companies, the consolidation is described as a merger. The shareholders of the old companies receive prorated shares in the new company. A merger is typically a tax-free transaction, meaning that shareholders owe no capital gains or lost taxes on the stock that is being exchanged. A merger is different from an acquisition, in which one company purchases, or takes over, the assets of another. The acquiring company continues to function and the acquired company ceases to exist. Shareholders of the acquired company receive shares in the new company in exchange for their old shares. Despite their differences, mergers and acquisitions are invariably linked, often simply described as M&As.
Monetary policy
"Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.
In India, monetary policy of the Reserve Bank of India is aimed at managing the quantity of money in order to meet the requirements of different sectors of the economy and to increase the pace of economic growth. The RBI implements the monetary policy through open market operations, bank rate policy, reserve system, credit control policy, moral persuasion and through many other instruments. Using any of these instruments will lead to changes in the interest rate, or the money supply in the economy. Monetary policy can be expansionary and contractionary in nature. Increasing money supply and reducing interest rates indicate an expansionary policy. The reverse of this is a contractionary monetary policy.
For instance, liquidity is important for an economy to spur growth. To maintain liquidity, the RBI is dependent on the monetary policy. By purchasing bonds through open market operations, the RBI introduces money in the system and reduces the interest rate."
Money supply
"he total stock of money circulating in an economy is the money supply. The circulating money involves the currency, printed notes, money in the deposit accounts and in the form of other liquid assets.
Valuation and analysis of the money supply help the economist and policy makers to frame the policy or to alter the existing policy of increasing or reducing the supply of money. The valuation is important as it ultimately affects the business cycle and thereby affects the economy.
Periodically, every country's central bank publishes the money supply data based on the monetary aggregates set by them. In India, the Reserve Bank of India follows M0, M1, M2, M3 and M4 monetary aggregates."
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Net asset value (NAV)
"Net asset value(NAV) is the value of a fund's asset less the value of its liabilities per unit.
NAV = (Value of Assets-Value of Liabilities)/number of units outstanding
NAV is often associated with mutual funds, and helps an investor determine if the fund is overvalued or undervalued. When we talk of open-end funds, NAV is crucial. NAV gives the fund's value that an investor will be entitled to at the time of withdrawal of investment. In case of a close-end fund, which is a mutual fund with fixed number of units, price per unit is determined by market and is either below or above the NAV."
"Net asset value(NAV) is the value of a fund's asset less the value of its liabilities per unit.
NAV = (Value of Assets-Value of Liabilities)/number of units outstanding
NAV is often associated with mutual funds, and helps an investor determine if the fund is overvalued or undervalued. When we talk of open-end funds, NAV is crucial. NAV gives the fund's value that an investor will be entitled to at the time of withdrawal of investment. In case of a close-end fund, which is a mutual fund with fixed number of units, price per unit is determined by market and is either below or above the NAV."
Net worth
A corporation's net worth is the retained earnings, or the amount left after dividends are paid, plus the money in its capital accounts, minus all of its short- and long-term debt. Its net worth is reported in the corporation's 10-K filing and annual report. Net worth may also be called shareholder equity, and it’s one of the factors you consider in evaluating a company in which you’re considering an investment.To figure your own net worth, you add the value of the assets you own, including but not limited to cash, securities, personal property, real estate, and retirement accounts, and subtract your liabilities, or what you owe in loans and other obligations. If your assets are larger than your liabilities, you have a positive net worth. But if your liabilities outweigh your assets, you have a negative net worth. When you apply for a loan, potential lenders may want to see your net worth statement.
New Fund Offer (NFO)
"A new fund offer (NFO) is the first time subscription offer for a new scheme launched by the asset management companies (AMCs). A new fund offer is launched in the market to raise capital from the public in order to buy securities like shares, govt. bonds etc. from the market.
NFO is similar to the initial public offer (IPO) with an attempt to raise capital from the market. NFOs are offered for a stipulated period. This means that the investors opting to invest in these schemes at the offer price (in most cases the offer price is fixed at Rs 10) can do so in this stipulated period only. After the NFO period, investors can take exposure in these funds only at the prevailing NAV."
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