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12b-1 Fee
12b-1 fee is an operational fee included in the fund’s expense ratio that mutual funds charge on their investment portfolio to cover charges of marketing, and distribution. It is calculated as a percentage of the fund’s net asset, and usually ranges between 0.25% to 0.75% of net assets.


A 401(k) is a retirement savings and investing plan sponsored by an employer, on a tax deferred basis. Contributions are automatically withdrawn from paychecks and invested in funds of personal choosing (from available offerings). The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement. Watch Video


Active Management
Active Management is an investment strategy where investment managers or investment management teams rely on their investment expertise, analytical research, and forecasts to make investment decisions for their fund’s portfolio.


Actively Managed Fund
An actively-managed fund is a fund in which an investment management team makes investment decisions that determines how the fund invests its assets. Actively-managed funds attempt to outperform the market or achieve specific investment-specific. Actively-managed funds usually have management fees attached to the cost of investing in the fund.


Alpha (α) is used in finance as a measure of performance of an investment against a market index. The excess return of an investment compared to the return of a market index, such as the S&P 500, is the investment’s alpha. It may be positive or negative.
It is also used to rank active MF and other investments and the baseline value is zero. For example, if an investment has an alpha value of three, this means that it has outperformed the benchmark by three percent.
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The NYSE(New York Stock Exchange), formerly known as AMEX(American Stock Exchange), is the largest stock exchange in the world with the total market capitalization of its securities’ estimated at $28.5 trillion (as of June 30, 2018). The exchange has both floor traders, and electronic systems to set pricing and trade securities during market hours.


Assets Under Management (AUM)
Assets under management (AUM) is the total market value of the investments in a portfolio or fund. The AUM fluctuates daily because money is constantly flowing in and out of funds and price of underlying securities are always changing.


Basis Points
Basis points, also known as bps or “bps” are units of measure commonly used to describe percentage changes in interest rates and yields on bonds, and changes in equity indexes. 1 bps( basis points) is identified as .01%, which means that 100bps is identified as 1%. For example, in context of bonds if a bond yield is 5% and it increases by 200 bps, the yield increases by 2%. Therefore, the resulting bond yields 7%. Watch Video


Bear Market
A Bear market occurs when the price of an index falls at least 20% or more from its 52-week high. Bear markets are often occupied by negative investor sentiment of the market and can be cyclical, lasting several months or lasting several years.

While bear markets are usually measured by broad market indexes such as the S&P 500, the NASDAQ Composite, or the Dow Jones Industrial Average, they can occur in any asset class. For example, the Dow Jones Industrial Average index recently entered the bear market in March 2020 when it fell to 23,553.22, which was a fall for more than 20% from its most recent 52-week high of 29,551.42. Watch Video


A benchmark is a standard against which investment managers measure the relative performance of their portfolio or fund. Generally, the most commonly used benchmarks are broad market stocks indexes and bond indexes. Watch Video


Beta is a measure of the volatility of a security or portfolio in comparison to the whole market. It is a component of the capital asset pricing model (CAPM) model and is often used by investment managers to show the systemic risk of the portfolio or security arising from market movements.
In theory, the market portfolio of all available assets has a beta of 1. Therefore, a security with a beta below 1 can indicate that the security either has lower volatility than the market or has prices that are uncorrelated with market price movements. A security with a beta above 1 indicates that the security either has higher volatility than the market or has prices that are very correlated with market price movements. Therefore, securities with a beta less than 1.0 (such as treasury bills) are considered less risky but have a lower return, as compared to securities with a beta greater than 1.0 (such as growth stocks) that are riskier and have a higher expected return. Watch Video


Bond ETFs
Bond ETFs are ETFs that exclusively invest in bonds. However, the bonds in the portfolio can have many different strategies, investment grades, holding periods, and industry exposures. They provide investors the opportunity to gain exposure to the bond market at a generally lower price and liquidity and transparency of the stock market. Most bond ETFs pay money through interest payment from bonds which they pay to investors through monthly dividend payment. Watch Video


Comission Fees
Commission fees are fees charged by a brokerage when you buy or sell a stock, ETF or another type of investment product. Watch Video


Commodity ETFs
Commodity ETFs are ETFs that invest in commodities. These commodities can range from commodities such as agricultural products to natural resources, and metals. They gain exposure to the commodities market through investing in a basket of single commodity types, investing in futures contracts of commodities, or tracking the performance of commodity indexes that contain many different combinations of commodities. Watch Video


Compounding, in finance, is the process of repeatedly growing a principal amount by an interest percentage over some time. Compounding exponentially grows the principal amount by both the additional interest payment and accumulated interest on the principal amount. Generally, compounding comes into play with money in the form of compounding interest or compounding returns.


A coupon is the annual interest rate paid on security from the issue date to maturity. Coupons are usually used in the context of bonds and are described in terms of coupon rate which is the sum of all coupons paid in a year divided by the face value of the security. Watch Video


Currency ETFs
Currency ETFs are ETFs that have underlying currency holdings of a single country, or multiple countries. They track the relative value of currencies through their underlying holdings and thereby provide investors exposure to the forex markets. They are most commonly used by investors to hedge inflation, portfolio risk, and foreign risk. Watch Video


Dark Pools
Dark pools are private exchanges for trading securities that are not accessible to public investors. Most dark pool trades are large trades made by financial institutions that do not want to publicize their trades, and impact markets through their large trade blocks.

There are various types of dark pools in the market today that differ in trade execution strategy, and their trade schedule timings. Dark pools are heavily used in high-frequency trading which has led to criticism of conflict of interest for dark pool operating overpayment for order flow and priority access to dark pools. Watch Video


Diversification is a risk management strategy used to lower the risk of any single security in a portfolio while yielding a higher return for the overall portfolio in the long term. To create diversification in their portfolio, investors try to create a portfolio with a mix of asset classes and securities so that they can reduce the correlation of individual securities’ performance and thereby reduce the unsystematic risk of the whole portfolio. Watch Video


A dividend is a portion of the company’s profit that is disturbed to its shareholders. Dividends are usually managed by the board of directors who issue dividends to investors for choosing to invest their money in the company. Dividend payments often reflect positively on a company which is why when dividends are announced, a company’s stock price usually appreciates.


Dividend ETFs
Dividend ETFs are ETFs that invest baskets of high dividend-paying securities. The most common types of dividend-paying securities are dividend-paying common stocks, preferred stocks, or real-estate investment trusts (REIT). These securities can be both U.S. domestic stocks or international securities, as long as they are dividend-payments securities.


The Dow, also known as The Dow Jones Industrial Average, is a price-weighted stock market index that measures the daily price movements of 30 blue-chip companies with consistently stable earnings. Because of the diversity of companies that make up its index composition, the Dow is widely viewed as a proxy for consensus on the general market economy. Watch Video


Efficient Frontier
The Efficient Frontier is set investment portfolios that offer the highest expected return given a defined level of risk, according to the modern portfolio theory. It is an optimal portfolio set because, given a specific risk, it will provide the highest return of all the portfolios on a risk-return spectrum. Watch Video


Emerging Market
An emerging market is defined as a nation whose economy has some characteristics of a developed nation but does not fully identify as a developed nation right now.
Some characteristics of emerging markets are nations with low to middle per capita income that is progressively improving, nations that are moving to open market system with developing economic reform programs, nations with increasing domestic and foreign investments, and nations with economies that are not fully stable thereby carrying risks for investments. Watch Video


Equity Funds
Equity Funds, also known as stock funds are mutual funds that invest primarily in stocks. They are categorized based on several factors such as market capitalization, management strategy, investment style based on their stock holdings, industry sector focus, and broad market, international, or regional exposure.


An ETF is an investment vehicle that pool together securities into a single-vehicle that tracks specific indexes to which it benchmarks its performance. Through their underlying securities, ETF investors can gain passive exposure to diverse asset classes and investment strategies. Watch Video


Expense Ratio
The expense ratio is an annual fee that is expressed as a percentage of assets deducted for fund expenses. It is typically charged by ETFs, mutual funds, and other types of funds to their shareholders. Watch Video


Expense Ratio Fee
The expense ratio is the annual fee that expresses the percentage of assets deducted each fiscal year for fund expenses. It is charged by ETFs, mutual funds, and other types of funds to their shareholders. Watch Video


Fixed Income (& Bond)
Fixed income is a type of security that pays its investors a fixed amount of coupon payment based on a predetermined interest rate. These coupon payments are usually paid semiannually or quarterly until maturity, which is when the initial principal amount is returned to investors.

Bonds are a type of fixed income securities because they pay investors fixed coupon payments until a bond’s maturity. Watch Video


Fixed Income Funds
Fixed-income funds, also known as bond funds, are funds that invest primarily in fixed-income securities. The most common types of fixed-income securities are US Treasuries, corporate bonds, municipal bonds. Watch Video


Fractional Shares
A partial ownership of a stock. All of the gains or losses of the fractional share are proportional to the gains and losses of a whole share. This is a new tool created by retail brokers to help investors afford shares of companies they can’t afford a whole share of, especially helpful in a time where companies no longer perform stock splits.


Growth Investing vs Value Investing
Growth investing and value investing are the two fundamental investing styles. Growth investors seek to invest in securities that have a high potential for growth such as strong earnings. Value investors seek to invest in securities that they believed are undervalued by the market as compared to their intrinsic value. Watch Video


High-Frequency Trading
High-frequency trading (HFT) is a trading strategy that uses computer algorithms that analyze and transact large numbers of trade orders in seconds. While high-frequency trading has been characterized by adding liquidity to the market and eliminating small bid-ask spreads this trading style has garnered criticism.
First, the liquidity that HFT is supposed to create only exists temporarily which means that it cannot be exploited for profit. Secondly, the algorithmic nature of the trading has occasionally resulted in unexpected large market sell-offs when massive orders trigger specific algorithm rules. Lastly, HFT is accused of benefiting institutional traders who take advantage of the algorithm to trade in large blocks, at the expense of smaller players. Watch Video


Hybrid Funds
Hybrid funds, also known as balanced funds or asset allocation funds, are funds that have more than one type of underlying asset class in their portfolios. Most types of hybrid funds hold a combination of stocks and fixed-income securities and will have an investment style on how to allocate the assets in its portfolio.


An index, in finance, measures the performance of a basket of securities intended to replicate a certain area of the market, such as the Standard & Poor's 500 index. Watch Video


Index ETFs
Index-based ETFs benchmark the performance of its securities to the return of a specific index. Depending on the type of Index the ETF tracks, index ETF can include U.S. markets, foreign markets, specific sectors, or various asset classes, such as small-caps or blue-chips. Watch Video


Index Fund
An index fund is a type of mutual fund that aims to track the performance of a benchmark index. Most index funds are passively-managed, which results in them carrying a lower expense fee than actively-managed funds. Index funds can provide passive exposure to diverse industries and asset classes based on the benchmark index whose performance they aim to track. Watch Video


International ETFs
International ETFs, also referred to as Foreign-based ETFs, are ETFs that invest specifically in foreign-based securities. The focus may be global, regional, or on a specific country and may hold equities or fixed-income securities depending on the amount of international exposure of the ETFs’ securities.


Intraday Trading
Intraday means "within the day." It is used to describe securities that trade on the market during regular market hours (9:30 am - 4:30 pm for USA EST).


An Initial Public Offering(IPO) is the process of a private company offering its shares in the public market for the first time in a new stock issue. By becoming public through an IPO, a company can raise money from public investors by issuing its stock for capital. Watch Video


An IRA(individual retirement account) is a savings account provided by many financial institutions to individuals to help them save funds for retirement. AN IRA provides tax advantages that benefit individuals by allowing them to save money with tax-free growth or on a tax-deferred basis. IRAs have a maximum income limit for contributions and an early-withdrawal penalty of individuals who decide to withdraw their saved money before a certain age limit.

The three most common types of IRA are the Traditional IRA, Roth IRA, and Rollover IRA. Watch Video


Market Cap
Market capitalization is the market value of all the outstanding shares of a publicly-listed company. It is an indicator of what the market thinks the company is worth. It is calculated by multiplying the total outstanding shares by the current share price of a company. Watch Video


Mean-Variance Optimization
Mean-Variance Optimization is a portfolio optimization tool that arises from the Modern Portfolio theory that theorizes an efficient frontier of portfolios. The Mean-Variance Optimization is a quantitative tool created to find the best optimal risk-adjusted portfolio on the efficient frontier for an investor given their risk level.


Modern Portfolio Theory
The modern portfolio theory (MPT), also known as the mean-variance analysis, is a theory showing how to create optimal portfolios that maximize expected return given a specific risk level. This theory also theorizes that it is possible to create an efficient frontier of optimal portfolios. Watch Video


Money Market Funds
Money -market funds are a type of fixed-income funds that invest primarily in short-term debt securities with minimal credit risk. The securities in a money market fund are short in maturity and high in credit quality which leads to money market funds having lower volatility and higher liquidity as compared to other types of funds. Watch Video


Mutual Fund
A mutual fund is a type of investment vehicle that pools money from many investors into a portfolio of securities such as stocks and bonds. The portfolio is structured to meet the specific investment objectives of the mutual fund. Because mutual funds pool together money from many different investors into an investment portfolio, each individual investor takes fractional ownership of the securities in the fund proportional to how much they invest in the fund, thereby spreading both the risk and profit of the portfolio. Watch Video


Nasdaq, also known as The Nasdaq Composite Index, is a market-capitalization-weighted index that measures the performance of 2,500+ equities in the market. Its index composition is heavily weighted toward information-technology equities, which has led it to be considered as a stand-in for the technology sector. Watch Video


The Net Asset Value is the total value of a company’s assets minus its total liabilities. It is referred to as the net value of the company and is most often used in the context of mutual funds or ETFs where the NAV price represents the share price of a fund. Watch Video


Net Asset Value Price
Net Asset Value price, also known as NAV price is calculated by subtracting total liabilities from total assets of security and dividing the result by the number of shares outstanding. This calculation gives the net value of the security per share.

NAV price is most commonly used in the context of mutual funds where it is the price/share at which investors buy, and sell fund shares . The buying price is known as the “bid price” and the selling price is known as the “redemption price”. For mutual funds, this NAV price is calculated at the end of each trading day based on the closing market price of the portfolio's securities. Watch Video


Owner's Equity & Common Stock
Owner’s equity, also viewed as a residual claim on a business’s asset, represents an investor's investment claim in a business. Common stock is the security that represents the investor’s ownership in a business. It is recorded in the stockholder's equity section of a company's balance sheet. Holders of common stock have the right to vote on corporate policies and elect a board of directors. However, in the case of bankruptcy, common stock owners get their money after debt holders and preferred shareholders. Watch Video


P/B Ratio
The price-to-book ratio, also known as the P/B ratio is a financial ratio used to compare the book value of a company to its current market price. It is calculated by dividing a company's stock price by its book value per share (BVPS). The P/B ratio is mostly used by value investors to identify undervalued stocks in a specific industry. Watch Video


P/E Ratio
The price-earnings ratio, also known as P/E ratio is a financial ratio used for valuing companies. It is calculated by dividing the company’s share price by the company's earnings per share. The P/E ratio is mostly used to determine if a stock is overvalued or undervalued by providing a relative value of a company's shares in an apples-to-apples comparison to other companies in the same industry.


Passive Management
Passive management, also known as indexing, is an investment strategy where a fund’s portfolio tracks the performance of a benchmark market index to replicate its returns. In passive management, there is no professional investment manager making decisions about asset allocation for a fund’s portfolio, rather the portfolio mirrors the asset allocation of the index that it is replicating.

A strong proponent of passive management investment style is the Efficient Market Hypothesis that says in the long-term passive management returns better returns than active management whose success in beating the market is only a matter of luck. Watch Video


Passively-managed Fund
Passively-managed funds also known as index funds are funds that track a benchmark index for fund’s performance. The investment decisions of the fund are not made by a professional investment management team, but rather follow predetermined guidelines for the allocation of their asset holdings in their fund.
Passively-managed funds are usually less expensive than actively managed funds because they don't charge management fees. Watch Video


In finance, a portfolio is a basket of financial assets that are held by a portfolio manager for investments. Portfolios can contain a wider selection of investments ranging from equity stocks to mutual funds and currencies. These securities are held in such a way to help the portfolio minimize its portfolio risk and meet its investment objectives. Watch Video


Portfolio Optimization
Portfolio optimization is the process of selecting the most optimal portfolio, out of a set of portfolios to meet some portfolio objective. The objective typically seeks to maximize return and minimize the risk of a portfolio. Watch Video


In investment analysis, R2 is a statistical measure of fit used to determine the correlation of an investment or portfolio to its benchmark. Because it shows the correlation of an investment to its benchmark, investors can interpret how much of the investment's movement can be explained by the movement of its benchmark. For example, 100% R2 means that all of the movements of an investment can be explained by the movement of its benchmark. Watch Video


According to the National Bureau of Economic Research, a recession is defined as a significant decline in economic activity spread across the economy. It lasts more than a few months and is normally visible in a decline in real GDP, real income, employment, industrial production, and wholesale-retail sales. Recession can also occur in specific industries when that industry experiences a significant economic activity. Watch Video


Risk, from an investor's point of view , is the amount of uncertainty that an investor is willing to take in regards to the future expected return of their investment. Watch Video


The S&P, also known as the S&P 500, is a market-capitalization-weighted index that measures the stock performance of the largest 500 publicly-listed companies. It is one of the most widely followed indexes, with its 500 companies covering almost 80% of the available market capitalization, which has made it one of the best proxies for the U.S. stock market. Watch Video


The U.S. Securities and Exchange Commission (SEC) is an independent federal agency that is responsible for regulating the securities markets, and protecting investors. Some of the functions of the SEC are protecting investors against fraudulent activities through civil actions and promoting full disclosure of securities, approving registration statements for underwriting bookrunners, monitoring corporate activities in the market, and facilitating capital formation. Watch Video


A sector in finance is a part of the economy in which businesses share related products or services. The economy is divided into different sectors to allow for greater in-depth analysis of the economy.


Settlement Period
Settlement period is the time between the trade date of security(date trade order of security is executed) and the settlement date of security(date a buyer becomes the holder of security). During the settlement period, transactions of trade are being completed such as the buyer paying for the shares of a security and the seller delivering the shares of a security.


Sharpe Ratio
The Sharpe ratio is defined as the difference between the investment return of an asset and the return of a risk-free asset. It is a measure of risk-adjusted return used by investors to measure the performance of their investment in comparison to risk-free assets to determine the additional amount of return the investment has made per unit increase of risk, in comparison to a risk-free asset. Watch Video


Standard Deviation
The standard deviation is a statistical measure that, in investment analysis, allows investors to measure the deviation of securities from the mean. This reflects in the volatility of the investment by showing the range of the price swings of the security when applied to the annual rate of return of investment. Watch Video


Style-based ETFs
Style-based ETFs (commonly associated with Factor-based ETFs) are ETFs that invest in securities based on a certain investment style or market capitalization. The Style-based ETFs generally track either growth indexes or Value-indexes. In these indexed categories, investors can find ETFs that can give them exposure to stocks with different market capitalizations, industry focus, and country exposure. Watch Video


Target Date Funds
Target Date funds are types of funds that provide a diversified portfolio of equities and bonds that is rebalanced over some time period. The asset allocation of the fund initially begins with a diversified portfolio that is more heavily weighted towards equities and has higher risk tolerance, which then rebalances over time to be more conservative and fixed-income weighted as the target date of the fund approaches.

This fund is popular with 401(k) investors who like the autopilot nature of the fund that rebalances risk and asset allocation of equities and fixed-income from aggressive to more conservative weighing automatically as their retirement date approaches. Watch Video


Time Value of Money
The time value of money (TVM), also known as a present discounted value, is an idea that a dollar today is worth more than the same dollar in the future due to its potential earning capacity. The principle behind this idea is that since money can earn interest, the dollar in present will earn more in interest than the same dollar in the future, thereby making the present value worth more in the future. Watch Video


Tracking Error
Tracking Error is the difference between the return that investors receive from an investment and the return of the benchmark that they were trying to imitate. Tracking error sometimes presents itself in the return of a mutual fund or ETF that does not return the expected return of its benchmark, thereby creating an unexpected loss or profit.


Treasury Bill/Bond/Note
Treasury bills, treasury bonds, and treasury notes are all fixed-income securities issued by the government. They are considered safe, steady and risk-free investments compared to other securities because they are backed by the full faith and credit of the United States government.

Of the three securities, Treasury bills, also known as T-bills, have the shortest maturity ranging from 4 weeks to 1 year. Treasury notes, also known as T-notes, have a maturity period ranging from 2 and 10 years and pay interest semi-annually as coupon payment. Treasury bonds, also known as T-bonds, have the longest maturity ranging from 10 years to 30 years, pay interest as coupon payment semi-annually. and have the highest interest rate of the three securities.


Yield is the amount of money (usually expressed as dividend payment or interest payment), that is returned on investment. Yield is usually expressed as an annual percentage rate calculated by dividing the interest payment by the investment's cost(such as market value, or face value).


Yield to Maturity
Yield to Maturity, also known as book yield or redemption yield, is the total return expected on investment if the investment is held until maturity. Yield to maturity is often used in the context of bonds where it is considered the internal rate of return (IRR) of a bond if it is held to maturity and its coupon payments are reinvested at the same rate.