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Friday, April 3, 2020

MUTUAL FUND/INVESTMENT/MARKET TERMINOLOGY-S & T

Secondary market

When investors buy and sell securities through a brokerage account, the transactions occur on what's known as the secondary market. While the secondary market isn't a place, it includes all of the exchanges, trading rooms, and electronic networks where these transactions take place.The issuer - company or government - that sold the security initially receives no proceeds from these trades, as it does when the securities are sold for the first time.
Secular market

"A secular market is one that moves in the same direction - up or down - for an extended period. Benchmark indexes continue to rise to new, higher levels during a secular bull market despite some short-term corrections. Similarly, during a secular bear market, index levels decline or remain flat despite short-term rallies.

Secular markets tend to move in cycles, or predictable though not regular patterns, so that a secular bull market is followed by a secular bear market, which is followed by a secular bull market, and so on. The length of secular markets varies, from as few as 4 or 5 years to more than 20 years, though when one begins and ends becomes clear only in retrospect. "
Securitization

Securitization is the process of pooling various types of debt - mortgages, car loans, or credit card debt, for example - and packaging that debt as bonds, pass-through securities, or collateralized mortgage obligations (CMOs), which are sold to investors. The principal and interest on the debt underlying the security is paid to the investors on a regular basis, though the method varies based on the type of security. Debts backed by mortgages are known as mortgage-backed securities, while those backed by other types of loans are known as asset-backed securities.
Sharpe ratio

"Using the Sharpe ratio is one way to compare the relationship of risk and reward in following different investment strategies, such as emphasizing growth or value investments, or in holding different combinations of investments.

To figure the ratio, the risk-free return is subtracted from the average return of an investment portfolio over a period of time, and the result is divided by the standard deviation of the return. A strategy with a higher ratio is less risky than one with a lower ratio. This type of analysis, which is done using sophisticated computer programs, is named for William P. Sharpe, who won the Nobel Prize in economics in 1990."
Standard deviation

Standard deviation is a statistical measurement of how far a variable quantity, such as the price of a stock, moves above or below its average value. The wider the range, which means the greater the standard deviation, the riskier an investment is considered to be.Some analysts use standard deviation to predict how a particular investment or portfolio will perform. They calculate the range of the investment's possible future performances based on a history of past performance, and then estimate the probability of meeting each performance level within that range.
Systematic risk

Systematic risk, also called market risk, is risk that’s characteristic of an entire market, a specific asset class, or a portfolio invested in that asset class. It’s the opposite of the risk posed by individual securities in a class or portfolio, also known as nonsystematic risk. The predictable impact that rising interest rates have on the prices of previously issued bonds is one example of systematic risk.

T

Tailgating

When a broker places your order for a security, and then immediately places an order for his or her own account for the same security, the broker is tailgating. Although this practice isn’t illegal, it is considered unethical, because the assumption is that the broker is trying to profit from information the broker believes you have about the stock. A broker will typically tailgate only when you buy stock in a sufficient quantity to potentially affect the price of the security.
Technical analysis

Technical analysts track price movements and trading volumes in various securities to identify patterns in the price behavior of particular stocks, mutual funds, commodities, or options in specific market sectors or in the overall financial markets. The goal is to predict probable, often short-term, price changes in the investments that they study, which allows them to choose an appropriate trading strategy. The speed and accuracy with which the analysts create their tracking charts has been enhanced by the development of increasingly sophisticated software.
Time value of money

"The time value of money is money's potential to grow in value over time. Because of this potential, money that's available in the present is considered more valuable than the same amount in the future.

For example, if you were given $100 today and invested it at an annual rate of only 1%, it could be worth $101 at the end of one year, which is more than you'd have if you received $100 at that point. In addition, because of money's potential to increase in value over time, you can use the time value of money to calculate how much you need to invest now to meet a certain future goal. Many financial websites and personal investment handbooks help you calculate these amounts based on different interest rates.Inflation has the reverse effect on the time value of money. Because of the constant decline in the purchasing power of money, an uninvested rupee is worth more in the present than the same uninvested rupee will be in the future."
Total return

Total return is your annual gain or loss on an equity or debt investment which includes dividends or interest, plus any change in the market value of the investment. When total return is expressed as a percentage, it's figured by dividing the increase or decrease in value, plus dividends or interest, by the original purchase price. On bonds you hold to maturity, however, your total return is the same as your yield to maturity (YTM).
Trading volume

Trading volume is the quantity of stocks, bonds, futures contracts, options, or other investments that are bought sold in a specific period of time, normally a day. It’s an indication of the interest that investors have in that particular security or product at its current price.

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