Funds & ETFs
A 12b-1 fee is a fee assessed by a mutual fund to its shareholders. The fees cover the fund's marketing expenses and are named after the section of the Investment Company Act of 1940 that makes them ...
The 30-day annualized yield is a measure of the yearly rate paid to investors of an interest-bearing account, based on the returns earned in a 30-day period.   The 30-day annualized yield is a meas...
The 7-day annualized yield is a measure of the yearly rate paid to investors of an interest-bearing account, based on the returns earned in a 7-day period.   The formula is: 7-Day Annualized Yield ...
A shares are a type of mutual fund share. They are distinguished from B Shares and C Shares by their load (fee) structure. A shares have a "front-end load" fee structure. A certain percentage of the...
An aggressive growth fund is a mutual fund which invests exclusively in high-risk/high-return stocks in an attempt to benefit from the potentially high returns on start-up companies and IPOs. An agg...
An all weather fund is a mutual fund that performs well regardless of market conditions. The performance of an all weather fund is largely unaffected by market climate. The term unofficially describ...
An appraisal ratio is the ratio of a mutual fund's alpha to its risk. The formula for the appraisal ratio is: Appraisal Ratio = Alpha / Fund's Unsystematic Risk Let's assume Mutual Fund XYZ has an a...
Assets under management (AUM) refers to the total market value of investments managed by a mutual fund, money management firm, hedge fund, portfolio manager, or other financial services company. AUM...
B shares are a type of mutual fund share.  They are distinguished from A shares and C shares by their load (fee) structure. B shares have a "back-end load."  This means that the entire initial inv...
A back end load is a fee paid when an investor sells a specific investment. Back end load mutual funds are often referred to as "B Shares." Back end loads are expressed as a percentage, and they mus...
A balanced fund is a mutual fund that generally keeps to a 50-50 mix of stock and bond investments.  Balanced funds are one of two general types of income funds (the other type is equity-income f...
A blend fund, also called a hybrid fund, is a mutual fund composed of a combination of securities from different asset classes designed to increase diversification with just a single fund. A blend f...
In the mutual fund world, a breakpoint is the size of an investment that qualifies the investor for a lower load. Let's assume you are interested in making a $10,000 investment in the Company XYZ mu...
C shares are a type of mutual fund share.  They are distinguished from A shares and B shares by their load (fee) structure. The main aspect that differentiates C shares from A shares and B shares i...
Capital gains distributions are capital gains that are passed on to investment company shareholders. Let's assume that XYZ Company mutual fund invested well during the year and realized $1,000,000 i...
A closed end fund (CEF) is a publicly-traded security that offers its shareholders partial ownership in an underlying portfolio of assets. Closed-end funds initially raise capital through an initia...
Also called a back-end load, a contingent deferred sales charge is a fee paid to sell a specific investment. It is expressed as a percentage of the amount invested, and may also be called an exit fee...
Discount to net asset value (NAV) refers to a situation where shares of a closed-end stock fund are trading at a price lower than the fund’s net asset value per share. For example, a fund could be ...
A diversified common stock fund is a type of mutual fund that invests exclusively in shares of common stock. Diversified common stock funds may comprise any combination of common stocks. The portfol...
A dividend ETF is a basket of dividend-paying securities that are bundled together into a single security that can be bought and sold like a stock. A dividend ETF usually mimics part or all of a div...
A dividend fund is a type of mutual fund which invests exclusively in equity shares which pay regular dividends. A dividend fund seeks to provide investors with income from common and preferred shar...
An emerging markets fund is a fund that invests in the securities of companies and governments in developing countries. Emerging markets have lower per-capita incomes, above-average sociopolitical i...
An equity fund is an open or closed-end fund that invests primarily in stocks, allowing investors to buy into the fund and thus buy a basket of stocks more easily than they could purchase the individ...
Exchange-traded funds (ETFs) are securities that closely resemble index funds, but can be bought and sold during the day just like common stocks. These investment vehicles allow investors a convenien...
The expense ratio is the recurring management fees for a mutual fund. A fund company charges its fund holders the expense ratio each year (expressed in terms of a percentage of the fund's assets). Th...
Forward pricing is the SEC-mandated policy of processing buy and sell orders for open-ended mutual fund shares at the net asset value (NAV) as of the next market close (not the most recent market clo...
A front-end load is a fee paid to purchase a specific investment. It is expressed as a percentage of the amount invested. Front-end load mutual funds are often referred to as "A Shares." Let's assum...
Fund usually refers to mutual fund, which is an open-ended investment company that pools investors' money into a fund operated by a portfolio manager. This manager then turns around and invests this ...
A fund manager is an investment professional who oversees the investments within a portfolio. A fund manager implements the chosen investment strategy by selecting when to buy or sell the assets hel...
A hedge-like mutual fund is a mutual fund that engages in strategies similar to a hedge fund. Hedge funds are capitalized by and available only to individuals with high net worth. Hedge funds employ...
An income deposit security (IDS), also known as an "enhanced income security," is an exchange-traded security composed of both an issuer's common shares and its subordinated notes. An IDS is a hybri...
An income-oriented ETF is an exchange-traded fund that pays frequent dividends or interest payments to investors in the ETF. An income-oriented ETF is made up of stocks that typically pay substantia...
Like other ETFs, an index ETF is essentially a passive mutual fund -- similar to traditional index funds -- that allows investors to purchase a basket of securities in a single transaction. An index ...
Index funds are mutual funds that are designed to track the performance of a particular index. When an investor purchases a share of an index fund, he or she is purchasing a share of a portfolio tha...
An index hugger is a type of mutual fund whose performance closely tracks a major stock index. An index hugger is also referred to as a closet tracker. An index hugger is an actively-managed fund wh...
Also called Y shares, institutional shares are mutual fund shares that are available for sale only to institutions. Let's say that the XYZ Mutual Fund invests in a variety of defensive stocks. Avera...
International bond funds invest in bonds issued by foreign governments or foreign companies in a variety of markets, industries, and currencies. They allow investors to have an easy way to gain a div...
International fund usually refers to an investment or mutual fund composed of international bonds and foreign company stocks. A number of the largest families of mutual funds include international f...
Created by Barclays Global Investors, iShares are a trademarked brand of exchange-traded funds (ETFs). Exchange-traded funds (ETFs) are securities that closely resemble index funds but can be bought...
Late-day trading is the practice of illicitly recording trades executed after hours as having occurred prior to the end of market trading. A mutual fund's net asset value (NAV) reflects the value re...
A level-load is a periodic fee (usually annual) paid by the investor during the time he or she owns the investment.  Level-load mutual funds are often referred to as "C Shares." Level-loads are exp...
A load is a fee paid to purchase or sell a specific investment. It is expressed as a percentage of the amount invested. The term is most often used when discussing mutual funds. In general, there ar...
A load fund is a mutual fund that carries a fee to purchase or sell its shares. This load is expressed as a percentage of the amount invested. In general, there are two kinds of load funds: front-en...
A market neutral fund is a mutual fund whose goal is consistent returns in any market climate. A market neutral fund namely generally holds both short and long share positions in specific stocks and...
A momentum fund invests in companies with a trend of positive earnings or price, expecting a further increase in the price of the stock. Momentum funds evaluate the trends for individual companies i...
The Morningstar risk rating is Morningstar's evaluation of a mutual fund's level of risk. The mutual fund ratings agency Morningstar ascribes a risk rating to each fund it covers. This rating is a c...
A municipal bond fund is a mutual fund that invests primarily in securities issued by municipalities.  Municipal bonds are issued by local or state agencies to raise money for infrastructure projec...
Mutual funds are open-ended investment companies that pool investors' money into a fund operated by a portfolio manager. This manager then turns around and invests this large pool of shareholder mone...
Most commonly used in reference to mutual or closed-end funds, net asset value (NAV) measures the value of a fund's assets, minus its liabilities. NAV is typically calculated on a per-share basis. A...
In finance, the net asset value per share (NAVPS) is the value of one share of a mutual fund. A fund's NAVPS fluctuates with the value of its underlying investments. The formula for NAVPS is: NAVPS ...
A no load fund, also called a "no transaction fee mutual fund," is a mutual fund that does not charge a sales commission to investors. shares of no load funds are purchased directly from the fund com...
An offering circular is an abbreviated prospectus. For example, let's assume than Company XYZ wants to conduct an initial public offering (IPO) of its shares. It hires an underwriter, which estimate...
An offshore mutual fund is a mutual fund based in another country. Offshore mutual funds cannot be sold in the United States unless they comply with American regulations; however, they can invest in...
A portfolio manager is responsible for investing a fund's assets, overseeing investment strategy and carrying-out day-to-day trading. A portfolio manager manages mutual funds and other investment fu...
A prospectus is a legal document that is required by the Securities Exchange Commission (SEC) to accompany securities or investment offerings for sale. A prospectus contains key facts and information...
QQQQ was the ticker for the Nasdaq 100 Index Trust ETF (it is now QQQ). The Nasdaq 100 Index is composed of the 100 largest stocks (based on market capitalization) traded on the Nasdaq. This index i...
A quant fund is typically a mutual fund that picks investments based solely on mathematical analysis. For example, let's say John Doe runs the XYZ Fund. He uses the Quadrix system to screen and sele...
Also called commission or a load, a sales charge is a fee paid to purchase or sell a specific investment. It is expressed as a percentage of the amount invested. The term is most often used when dis...
A spider (SPDR) is an exchange-traded fund (ETF) that tracks the Standard & Poor's 500 Index. SPDR stands for S&P Depository Receipts. However, the term can also refer to any ETF that tracks ...
A stratified sampling approach is an indexing strategy whereby a fund manager divides an index into different "cells" that represent different characteristics of the index. The fund manager then choo...
Target date funds are mutual funds designed to target the date of an investor’s goal, such as retirement or college education funding. The strategy of the fund will focus on capital appreciation at...
A tax-efficient fund is a mutual fund or ETF that minimizes the fundholder's tax bill in some way. For example, let's say John is in a high tax bracket. He wants to invest, but he wants to avoid a h...
Tracking error is the difference between a portfolio's returns and the benchmark or index it was meant to mimic or beat. Tracking error is sometimes called active risk. There are two ways to measure ...
A unit investment trust is a type of investment fund comprising a fixed portfolio of securities that is sold in units to potential investors similar to a mutual fund. Also called unit trusts or fixe...
A water ETF is an exchange-traded fund that invests in water-related companies. An exchange-traded fund (ETF) allow investors to purchase a basket of securities in a single transaction. There are se...
Also called institutional shares, Y shares are mutual fund shares that are available for sale only to institutions.   For example, let's say that the XYZ Mutual Fund invests in a variety of defensi...
A yield tilt index fund is a mutual fund that mirrors a specific stock index but gives extra weight to stocks within the index that offer high dividend yields. Let's assume the XYZ mutual fund is a ...
Z-shares are shares of mutual funds for the employees of those mutual funds. For example, let's say John Doe works in the human resources department of the XYZ Fund Co. As part of his compensation p...