Dictionary - Funds & ETFs
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

12b-1 Fee

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 legal. Read more

30-Day Annualized Yield

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 measure of return usually used for mutual funds. Read more

7-Day Annualized Yield

Discover what the 7 day annualized yield is, as well as why it's so important to investors.  Read more

A Shares

A shares are a type of mutual fund share.They are distinguished from B Shares and C Shares by their load (fee) structure. Read more

Aggressive Growth Fund

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 aggressive growth fund brings together a number of equity securities issued by start-up companies believed to have a high growth potential combined with shares of initial public offerings (IPOs) issued by existing companies intending to expand. Read more

All Weather Fund

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. Read more

Appraisal Ratio

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 alpha of 0.06 and an unsystematic risk of 0.60. Read more

Assets Under Management (AUM)

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 generally changes according to the flow of money into and out of a particular fund or company. Read more

B Shares

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 investment amount is invested into mutual fund shares, but when the investor is ready to sell the shares, a certain percentage is deducted and paid to the mutual fund as commission.  Therefore, the investor receives less than the total value of the investment when the shares are sold.  B shares can be converted into A shares if the investor decides the front-end load payment structure is more advantageous. Read more

Back End Load

A back end load (also known as a sales charge or an exit fee) is a commission or sales fee.Investors pay back end loads when selling their investments, which are commonly associated with mutual funds and annuities.  The fee is usually a percentage of the current value of the fund’s shares, with the amount gradually decreasing over time. Read more

Balanced Fund

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 funds, which mostly invest in dividend paying stocks).Income funds seek to generate income but give some attention to capital appreciation -- that is, capital appreciation is secondary to maintaining current income and capital preservation.  Balanced funds (and income funds in general) are mechanically very similar to bond funds but they include varying amounts of non-debt instruments like preferred stock, common stock, or even real estate. Read more

Blend Fund

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 fund differs from a traditional fund, which usually focus exclusively on one asset class such as value stocks or highly rated domestic bonds. Read more

Bond Fund

A bond fund is a mutual fund or exchange traded fund (ETF) composed of bonds. Bond funds come in many shapes and sizes. Read more


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 mutual fund, which has a 4% front-end load (a fee for buying the shares). Read more

C Shares

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 is that C shares are level-load.  This means the full amount of money paid to the mutual fund is invested in shares.  Commissions for level-load shares are paid to the mutual fund through annual fees.  This level-load structure is unique to C shares. Read more

Capital Gains Distribution

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 in net capital gains (that is, capital gains after subtracting capital losses). Read more

Closed-End Fund (CEF)

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 initial public offering. Read more

Contingent Deferred Sales Charge

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 or a redemption charge. Read more

Discount to Net Asset Value (NAV)

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 described as "trading 5% discount to NAV." Discount to NAV (and "premium to NAV") is most often used to describe the price per share of closed-end stock funds. Read more

Diversified Common Stock Fund

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. Read more

Dividend ETF

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 dividend stock index. Read more

Dividend Fund

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 shares of stock which yield dividends in cash and stock (in some cases) on a regularly-occurring basis. Read more

Emerging Markets Fund

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 instability, higher unemployment, and lower levels of business or industrial activity relative to the United States; however, they also typically have much higher economic growth rates. Read more

Equity Fund

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 individual securities. There are literally thousands of equity funds out there, and each has unique characteristics. Read more

Equity Income Fund

An equity income fund is a mutual fund composed largely of dividend-paying stocks. Equity income funds are made up of a variety of different income investments, but they generally invest in securities from established, creditworthy companies that make consistent dividend payments. Read more

Exchange-Traded Fund (ETF)

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 convenient way to purchase a broad basket of securities in a single transaction. Read more

Expense Ratio

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). Read more

Forward Pricing

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 close).  For example, let's say you place an order today to buy $100 worth of mutual fund XYZ this morning.Last night, XYZ had a net asset value (NAV) of $10 per share. Read more

Front-End Load

A front-end load is a fee paid to purchase a specific investment.It is expressed as a percentage of the amount invested. Read more


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 large pool of shareholder money in a portfolio of various assets or combinations of assets. Read more

Fund Manager

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 held in a portfolio. Read more

Funds Settlement

Funds settlement refers to the transfer of funds from buyer to seller and the transfer of an asset's title from seller to buyer. When an investor sends an order to his or her broker, that trade information is sent to a clearinghouse (for example, the National Securities Clearing Corporation). Read more

Hedge Fund

A hedge fund is an investment structure designed to allow management of a private, unregistered portfolio of assets.  The original concept of a hedge fund was to offer plays against the market using short selling, futures, and derivatives.Today, hedge funds follow any number of strategies and cannot be considered a homogenous asset class. Read more

Hedge Fund Manager

A hedge fund manager is an individual responsible for directing all activities associated with the operation of a hedge fund. The role of a hedge fund manager is similar to that of a mutual fund manager. Read more

Hedge-like Mutual Fund

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. Read more

High-Yield Bond Fund

A high-yield bond fund is a mutual fund that invests in corporate bonds rated below BBB (i.e., high-yield bonds, also called junk bonds). High-yield bonds are high-risk investments, and for this reason they (and the funds that invest in them) have potential for higher returns than other types of bonds or bond funds. Read more

Income Deposit Security (IDS)

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 hybrid security that consists of both common stock and a bond rolled into one instrument. Read more

Income Funds

Income funds are mutual funds, ETFs or any other type of fund that seek to generate an income stream for shareholders by investing in securities that offer dividends or interest payments.The funds can hold bonds, preferred stock, common stock or even real estate investment trusts (REITs). Read more

Income-Oriented ETF

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 substantial monthly or quarterly dividends and, in some cases, bonds that make higher-than-average interest payments. Read more

Index ETF

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 ETF mimics part or all of an external index. Read more

Index Fund

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 that contains the securities in an underlying index. Read more

Index Hugger

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. Read more

Institutional Shares

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. Read more

International Bond Funds

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 diverse exposure to foreign securities. Read more

International Fund

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 funds within their portfolio of products and services to investors.  International funds offer a diverse amount of asset types, including foreign government and corporate bonds, which can act as hedges against currency exchange rate changes.  These international funds also target specific market segments with growth potential. Read more


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 and sold during the day just like common stocks. Read more

Labor-Sponsored Venture Capital Corporations (LSVCC)

Labor-sponsored venture capital corporations (LSVCCs) are Canadian venture capital companies established by labor unions. Labor-sponsored venture capital corporations (LSVCCs) issue labor-sponsored investment funds (LSIFs). Read more

Late-Day Trading

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 recorded at the close of a given trading day (4 p.m. Read more


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 expressed as a percentage, and they must be disclosed to potential investors in the fund’s prospectus.  Let’s look at an example: Assume you invested $10,000 in the XYZ Company mutual fund, which has a 4% annual level-load.  In the first year the investment grows to $12,000, but you are not ready to sell.  At the end of year one, you pay $480 ($12,000 x .04) to the fund company, leaving you with $11,520 in your account.You the fund for another year and it grows to $14,000.  At the end of year two, you owe 4% of $14,000 ($560) leaving you with $13,440.  This payment structure continues for as long as you own shares in the fund.  The rate of the load is constant (level), but the payment amounts grow as the investment increases in value. Read more

Listed Security

A listed security is a stock, bond, derivative, ETF, mutual fund, or other security that trades on a national exchange such as the New York Stock exchange or the Nasdaq. The Nasdaq, which stands for the National Association of Securities Dealers Automated Quotation system, is a computerized system for stock trading that does not have a physical trading floor. Read more


A load is a fee paid to purchase or sell a specific investment.It is expressed as a percentage of the amount invested. Read more

Load Fund

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. Read more

Managed Futures Fund

A managed futures fund is an alternative asset created and maintained by a commodity trading advisor (CTA).The fund invests in commodity futures contracts.  When you buy a managed futures fund, in essence you're hiring an expert to buy, sell and manage futures contracts on your behalf.  Managed futures funds tend to be uncorrelated to either the stock market or bond market. Read more

Market Neutral Fund

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 it holds stocks that the fund managers view optimistically as well as pessimistically. Read more

Momentum Fund

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 in the stock market.  When a momentum fund spots an upward trend in the company's earnings or price, for example, it will buy shares or options in the company, expecting to sell for a profit. Read more

Morningstar Risk Rating

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. Read more

Municipal Bond Fund

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 projects, such as the construction of a convention center, water treatment facility or regional airport.Generally, these bonds are not subject to federal income taxes. Read more

Mutual Fund

A mutual fund is a type of investment that pools funds from many individuals to invest in a wide range of securities, which may include stocks, bonds, and other assets. Read more

Net Asset Value (NAV)

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. Read more

Net Asset Value Per Share (NAVPS)

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. Read more

No Load Fund

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 companies rather than through brokers. Read more

Offering Circular

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. Read more

Offshore Mutual Fund

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 U.S. Read more

Pasternak's Normalized Net Asset Value

Pasternak's normalized net asset value (NNAV) allows investors to compare master limited partnership (MLP) funds with each other and with non-MLP closed-end funds. Pasternak's NNAV was created by Carla Pasternak, an income-investing expert at StreetAuthority.com.  Pasternak's NNAV is calculated according to the following formula: Pasternak's NNAV = Net Asset Value + Deferred Tax Liability Investing in MLPs can be incredibly complicated, especially around tax time. Read more

Portfolio Manager

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 funds, such as hedge or venture funds.  He or she is usually an experienced investor, broker, fund manager, or trader with general industry knowledge and a track record of results.  Portfolio managers often have a specific investment approach, such as a focus on active or passive investments. Read more


A prospectus is a legal document filed with the Securities Exchange Commission (SEC) to accompany securities or investment offerings for sale.Containing key facts and information about the offering, a prospectus makes investors more aware of the risks of an investment.  A prospectus also protects the company from claims that it didn’t disclose enough information about itself or the securities in question. Read more


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. Read more

Quant Fund

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. Read more

Sales Charge

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. Read more

Spider (SPDR)

A spider (SPDR) is an exchange-traded fund (ETF) that tracks the Standard & Poor's 500 Index.SPDR stands for S&P Depository Receipts. Read more

Stratified Sampling Approach

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 chooses investments that mimic those cells. Read more

Target Date Funds

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 the beginning of the cycle and capital preservation as the target date approaches. Read more

Tax-Efficient Fund

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. Read more

Tracking Error

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. Read more

Unit Investment Trust (UIT)

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 fixed trusts, unit investment trusts are made up of a portfolio whose security assets are fixed and remain unchanged throughout the life of the trust. Read more

Water ETF

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. Read more


X is an extension to a ticker symbol.It denotes that the security is a mutual fund. Read more

Y Shares

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 defensive stocks. Read more

Yield Tilt Index Fund

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 yield tilt index fund. Read more


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. Read more