Low (or no) Risk:

Low (or no) Risk: A conservative investment such as a Canada Savings Bond that pays a fixed interest rate based on current rates that is virtually risk free.

Mark Berch: Inflation Risk: A risk of investing in fixed income instruments is the threat of inflation. The bond market reacts strongly not only to actual inflation, but also to the threat of inflation. A report that the economy is gaining strength and unemployment is falling can cause bond prices to fall and yields to rise. The reason for this is that investors who buy and hold bonds or other fixed income investments may be looking at a term of 10 years before receiving the principal amount invested. If there is a high rate of inflation during this term, then the principal amount to be received will lose purchasing power. Additionally, the steady stream of interest payments the investor is receiving will also be losing purchasing power. To offset this rising general level of prices, investors will expect higher yields on their fixed income investments.

Banker's Acceptances (BAs): Short-term negotiable commercial paper issued by non-financial corporations, but guaranteed as to principal and interest by their banks. The guarantee results in a higher issue price and hence, lower yield. Ian Berch

Eric Berch: Technical Indicators (for return on equities): This is one of four areas used to help analyze and predict future equity prices. These are the result of analyzing investor attitudes and market psychology through the interpretation of charts of stock price trends and trading volumes.

Index: A selection of companies picked to represent the market or a portion of it. Indexes are used as statistical composites and serve as benchmarks for financial performance.

Eric Berch

Speculative Equities: Speculative investments result in maximum risk over a short-term. They are typically characterized by maximum price volatility. There are typically no earnings or dividends and consequently the P/E ratio is a useless tool for analysis.

Asset Allocation Fund: Similar to a Balanced fund, but typically without specific minimums and maximums for asset classes. The portfolio manager will move funds among equity, money market and fixed income securities according to the economic outlook.

Eric Berch Mark Berch
Growth fund: A more speculative and volatile fund with the goal of capital appreciation. These funds invest in companies that are in an expansion period and whose stock is expected to appreciate more than the broad market over the long term. Ian Berch

Correlation: How two securities move in relation to one another.
Ian Berch

Mark Berch: A load is a sales charge or commission paid...

Load: A load is a sales charge or commission paid to a broker or sales intermediary, not to the fund. A load that is paid upfront at the time of purchase is called the front-end load. One that is paid upon selling shares held for less than a specified period of time is called the back-end load or contingent deferred sales charge.

Ian Berch: Expense ratio: The fee expressed as a percentage of assets that is charged to shareholders to cover the costs of running a mutual fund.

Historical Rate of Return: Another term used for "average annual compound rate of return" normally used in reporting historical performance for mutual funds. It is a calculation of the annual rate of return that would result from an investor re-investing the return generated each year for an investment. Mark Berch

Eric Berch: Aggressive growth: This is an investment style of funds that hold positions in potential high-growth companies. Aggressive growth funds have high betas, meaning they tend to be more volatile than the stock market.

No-load fund: A fund with no sales charge.

Ian Berch

Balanced Fund: A mutual fund that seeks to provide a mixture of safety, income and capital appreciation. It invests in a mix of fixed income and equity investments, usually with specific minimum and maximum proportions.

Small cap: A stock with a market capitalization between $300 million and $2 billion.

Mark Berch Eric Berch
Value fund: A mutual fund that invests mainly in value stocks or stocks that are underpriced according to fundamental analysis. Such metrics as the price-to-earnings ratio are used to gauge value.

S&P 500: Standard and Poor's 500 index is a leading indicator of large cap U.S. equities made up of 500 stocks chosen by the S&P Index Committee. Stocks are chosen based on their representation of industries in the economy and liquidity. There is also an index for small-cap companies, the S&P 600, and an index of midcap companies, the S&P 400.

Book Value - Mark Berch

Book Value: The amount of net assets belonging to the owners of a business (or shareholders of a company) based on balance sheet values.

Ian Berch: Asset: Any item of value. Examples are cash, securities, accounts receivable, inventory, office equipment, a house, a car and other property.

Risk: The probability of losing capital. The more risk associated with an asset, the greater the potential for a capital loss. Increased risk can also be understood as a greater range in price or increased volatility. Mark Berch

Eric Berch: Unitholder: Refers to an individual or organization that owns one or more units of a mutual fund. The unitholder has certain ownership rights, such as the right to vote on key issues affecting the fund.

Growth Managers: Fund Managers whose style is to select stocks for growth or perceived growth potential with valuation typically being a secondary consideration.

Ian Berch

Asset allocation: An investing strategy that strives to minimize risk and maximize returns by dividing money into different investment instruments such as stocks, bonds and cash. The allocation decisions are based on the investor's goals, risk tolerance and time horizon.

Value fund: A mutual fund that invests mainly in value stocks or stocks that are underpriced according to fundamental analysis. Such metrics as the price-to-earnings ratio are used to gauge value.

Mark Berch Eric Berch
Return: The amount of money gained or lost on an investment in relation to the amount invested. It's usually stated as a percentage; for example a $25 gain on a $100 investment would have a 25 percent return.

Risk: The probability that the return will be less than expected.

Ian Berch

Ian Berch

Post-audit
A set of procedures for evaluating a capital budgeting decision after the fact.

Ultra vires activities
Corporate actions and operations that are not sanctioned by corporate charter, sometimes leading to shareholder lawsuits.

Plan for reorganization
A plan for reorganizing a firm during the Chapter 11bankruptcy process.( - Eric Berch)

Mark Berch: Interlocking directorate
Describes cross-memberships of directors on each other's company Board of Directors.

Market-on-Close (MOC) order
An order to tradestocks, options, or futures as close as possible to the market close. See also MOC.

Fee-only compensation
Payment to a financial adviser of a set hourly rate, or an agreed-upon percentage of assets under management, for a financial plan. ( Eric Berch )

Revenues
Sales or royalty proceeds. Quantity times price sold.

Mark Berch

Organization of Petroleum Exporting Countries (OPEC)
A cartel of oil-producing countries.

Ian Berch: Internal growth rate
Maximum rate a firm can expand without outside sources of funding. Growth generated by cash flows retained by company.

Ian Berch: Consolidation
The combining of two or more firms to form an entirely new entity.

Ian Berch

Ian Berch
National Futures Association (NFA)
The futuresindustryself-regulatory organization established in 1982.

General Agreement on Tariffs and Trade (GATT)
A treaty adopted by the United Nations aimed at elimination of international trade barriers between member countries.

Mortgager
The borrower of a loansecured by property.( - Mark Berch)

Eric Berch: Abusive tax shelter
A limited partnership that the IRS judges to be claiming tax deductions illegally.

Roll forward
To move to an optionposition with a later expiration date.

Bill of lading
A contract between an exporter and a transportation company in which the latter agrees to transport the goods under specified conditions that limit its liability. It is the exporter's receipt for the goods as well as proof that goods have been or will be received. ( Ian Berch )

Biased expectations theories
Related: Pure expectations theory.

Mark Berch

Stockout
Running out of inventory.

Eric Berch: Downside risk
The risk that a security will decline in value including the implications of risk.

Eric Berch: Current/noncurrent method
The translation of all of a foreign subsidiary'scurrent assets and liabilities into home currency at the current exchange rate while noncurrent assets and liabilities are translated at the historical exchange rate; that is, the rate in effect at the time the asset was acquired or the liability incurred.

Mark Berch: Clean

Mark Berch

Escrow receipt
A document provided by a bank in optionstrading to guarantee that the underlying security is on deposit and available for potential delivery.

Best-efforts sale
A method of securitiesdistribution/underwriting in which the securities firm agrees to sell as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or fixed-pricesale or bought deal, in which the underwriter agrees to sell a specific number of shares (and holds any unsold shares in its own account if necessary).

Notice Period
The time during which the buyer of a futures contract can be called upon to accept delivery. Typically, the 3 to 6 weeks preceding the expiration of the contract.( - Mark Berch)

Mark Berch: Clean
In the context of general equities, block trade that matches buy or sell orders/interests, sparing the block trader any inventoryrisk (no net position and hence none available for additional customers). Natural. Antithesis of open.

"Put it on "
Used for listed equity securities. "Go to the floor to transact." See: Print.

B2B
An Internet strategy of dealing directly with businesses, rather than consumers, i.e. business to (2) business. ( Mark Berch )

Accounting insolvency
Total liabilities exceed total assets. A firm with a negative net worth is insolvent on the books.

Mark Berch

Disintermediation
Withdrawal of funds from a financial_institution in order to invest them directly.

Mark Berch: Guaranteed Mortgage Certificates (GMC)
First issued by Freddie Mac in 1975, G.M.C.s, like PCs, represent undivided interest in specified conventional whole loans and participations previously purchased by Freddie Mac.

Mark Berch: Term Fed funds
Fed funds sold for a period of time longer than overnight.

Mark Berch

Irrational call option
The implied call imbedded in a MBS. Irrational because the call is sometimes not exercised when it is in the money (interest rates are below the threshold to refinance), and sometimes exercised when it is not in the money. Option exercise like this affects payments on the MBS.

Prearranged trading
Possibly fraudulent practice whereby commoditiesdealers carry out risk-free trades at predetermined prices to acquire tax advantages.

Covered position
Use of an option in a tradingstrategy in the underlyingasset which is already owned.( - Mark Berch)

Mark Berch: Creeping tender offer
The process by which a group attempting to circumvent certain provisions of the Williams Act gradually acquires shares of a target company in the open market.

Overwriting
A speculative option strategy that involves selling call or putoptions on stocks that are believed to be overpriced or underpriced; the options are expected not to be exercised.

Consol
A government bond with no maturity . Popular in Great Britain. The formula for valuing these bonds is simple. The consol payment divided by yield to maturity is the price of the bond. ( Mark Berch )

Capital gain
When a stock is sold for a profit, the capital gain is the difference between the net sales price of the securities and their netcost, or original basis. If a stock is sold below cost, the difference is a capital loss.

Mark Berch

Short interest
Total number of shares of a security that investors have sold short and that have not been repurchased to close out the short position. Usually, investors sell short to profit from price declines. As a result, the short interest is often an indicator of the amount of pessimism in the market about a particular security, although there are other reasons to short that are not related to pessimism. For example, hedgingstrategies for mergers and acquisition as well as derivativepositions may involve short sales.

Mark Berch: Provision for income taxes
An amount on the P & I statement that estimates a company's total income taxliability for the year.

Mark Berch: Form 3
A form required by the SEC and the stock exchange from all holders of 10% or more of a company's stock and all directors and officers, which details securities owned.