Glossary

Alpha

Alpha measures an investment’s performance relative to a benchmark, showing how well a fund or portfolio manager outperforms the market.

Alternative Investments

Alternative investments refer to financial assets outside the traditional categories of equity, debt, or cash. They include options like real estate, private equity, hedge funds, commodities, and collectables, often used for diversification and higher return potential, though with higher risk and lower liquidity.

Asset Under Management

AUM is the total market value of all the investments that a financial institution, mutual fund, or portfolio manager manages on behalf of clients. It represents the size and financial strength of a fund or firm.

Beta in Stocks Trading

Beta is a measure of a stock’s volatility in relation to the overall market. Beta is measured in value and compared with overall market volatility. Beta helps with risk management and portfolio diversification.

Dividends

Dividends are a part of a company's profits that are given to the shareholders as a reward for investing. Investors receive periodic payments in the form of dividends, and these are provided by companies that are financially stable and have consistent profitability.

Follow-on Public Offering (FPO)

FPO, also known as a follow-on public offering, is a process through which a listed company raises further capital by selling new shares to the public.

Information Ratio

The Information Ratio (IR) is an important financial metric used to evaluate how consistently an investment fund, especially a mutual fund, performs against its benchmark after considering the level of risk taken.

Intrinsic Value in Shares

Intrinsic value refers to the true, fair value of an asset or company, based on its actual business performance, not what the stock market currently says it's worth.

Jensen's Alpha

Jensen's Alpha tells you how much extra return an investment makes compared to its benchmark index. This gives an idea of the expected return that is generated by the portfolio over anticipated and predicted returns by the CAPM (capital asset pricing model).

Portfolio Management

Portfolio management is the process of selecting, monitoring, and adjusting a mix of investments such as stocks, bonds, mutual funds, or other assets to achieve specific financial goals.

Portfolio Turnover Ratio (PTR)

The Portfolio Turnover Ratio (PTR) measures the frequency with which assets within a mutual fund are bought and sold over a specific period, typically one year.

R-Squared

R-squared, also known as the coefficient of determination, is a number between 0 and 100 (or 0.0 to 1.0 in decimal form) that tells us how much of a fund’s or stock’s returns can be explained by the market movements.

Tracking Error

Tracking error is a crucial metric that measures how closely the performance of a mutual fund follows its benchmark index. Tracking errors in mutual funds gives investors insights into the consistency of a fund's returns relative to the market.

Treynor Ratio

The Treynor Ratio is a key metric that helps investors understand the return of their investments relative to the risk taken, measured by the volatility of their portfolio.

Value at Risk (VaR)

Value at risk is the minimum loss that would be expected a certain percentage of the time over a certain period of time, given the assumed market conditions. It can be expressed in either currency units or as a percentage of portfolio value.