Glossary of Terms
Asystemic Risk – risks that are specific to a particular stock or bond
Bear Market – when stock prices are generally declining
Bond Based Mutual Funds – mutual funds that invest in U.S. Government, Municipal or Corporate bonds
Bond Maturity – the length of time until a bond will be redeemed by the issuer
Bonds – a certificate of corporate debt. It is in effect and IOU from a corporation or government entity.
Bull Market – when stock prices are generally rising
Business Risk – loses resulting from the failure of a particular company
Cap – abbreviation for market capitalization which is the value of a company obtained by multiplying its stock price by the number of outstanding shares
Capitulation – when the emotional pain of accumulating losses becomes so great that many investors give up and leave the market regardless of loss. This behavior is often associated with market bottoms
Coupon Rate – the amount of interest to be paid by the bond issuer. It is stated as a percentage of the bond’s face value
Credit Risk – losses resulting from the downgrading of a corporation’s credit rating
Creditworthiness – an estimate of the likelihood of a bond issuer defaulting on interest or principal payments
Current Price of a Bond – the current value of a bond after it has been adjusted to reflect prevailing interest rates
Diversification – a method of reducing risk by investing in many different individual issues and types of securities simultaneously
Economic Cycles – alternating periods when business activity expands or contracts
Face Value – the amount that will be received when a bond is ultimately redeemed by the issuer
Fundamental Analysis – a method of measuring the internal conditions of a company using a variety of accounting measurements and ratios.
Growth Style of Investing – a style of investing where the fund manager invests in profitable companies that are growing rapidly.
Hybrid Funds – mutual funds that use varying combinations of stocks, bonds and cash to achieve a combination of growth, current income and relative price stability.
Index Funds – a mutual fund which attempts to duplicate the performance of a major market index such as the S&P 500 or NASDAQ 100.
Industry Risk – occurs when entire industries become less profitable due to changing economic conditions
Inflation Risk – occurs when investment return is insufficient to offset the effects of inflation
Interest Rate Risk – occurs when interest rates increase and the price of bonds decrease
Intermediate Trend – the trend of a stock or index lasting several weeks to a few months
Intraday Trend – a trend lasting from a few minutes to a few hours, usually of interest only to day traders
Investment Grade Corporate Bonds – bonds issued by corporations where the risk default is believed to be very small
Large Cap Fund – a stock based mutual fund that invests primarily in companies with market capitalizations between $10 billion and $200 billion.
Liquidity Risk – the inability to dispose of an asset in a timely manner and at a fair price
Major Market Indexes – the average price of selected stocks designed to measure the performance of the market as a whole
Market Cycles – the tendency of the stock market to move from bull market highs to bear market lows and back again. Usually in anticipation of major changes in the economy
Market Risk – occurs when an entire asset classes, such as U.S. Stocks declines due to broad economic forces
Market Trends – the propensity of the majority of stocks to move in the same direction at the same time
Mid Cap Fund – a stock based mutual fund that invests primarily in companies with market capitalization between $2 billion and $10 billion.
Minor Trend – the trend of stock or an index lasting several days to a few weeks
Prevailing Interest Rates – the return on a class of bonds determined by the interaction of bond buyers and sellers
Primary Trend – a trend that typically lasts for several years and is used to define a bull or a bear market
Prospectus – a legally required document that contains important information about a mutual fund including charges and expenses, investment risk and a general description of how fund assets will be invested
Return - an estimate of the magnitude and probability of a gain
Risk - an estimate of the magnitude and probability of a loss
Risk Tolerance – an estimate of the type and amount of risk that an individual can assume
Sectors – broad areas of economic activity composed of industries that provide similar goods or services
Secular Trend – a very long term trend that can last for decades
Small Cap Fund – a stock based mutual fund that invests primarily in companies with market capitalization between $300 million and $2 billion.
Speculative Bonds – bonds issued by corporations where there is a significant chance of default
Stocks – a certificate of corporate ownership
Systemic Risk – those risks that affect entire industries or investment classes
Target Retirement Date Funds – Mutual funds that use a combination of stocks, bonds and cash which is rebalanced each year as the target date is approached.
Technical Analysis – a method of stock analysis that attempts to measure the forces of supply and demand directly in order to predict the probability and extent of a future price move
The S&P 500 Index – an average of 500 very large U.S. corporations who’s combined worth represents about 80% of the value of all stocks traded on the New York Stock Exchange
Time Horizon – the amount of time before money set aside for a specific purpose will be needed
U.S. Government Bonds – bonds issued by the U.S. Government and its agencies. Considered to have the highest degree of credit worthiness
Valuation Risk – occurs when the price of an asset is revalued by the market as a result of new information
Value Style of Investing – a style of investing where the fund manager invests in companies and industries that are currently out of favor but where he or she believes a turnaround is imminent
Securities offered through Registered Representatives of Cadaret, Grant and Co., Inc., Member FINRA and SIPC, 239 New Rd, Parsippany, NJ Registered Representatives are licensed to conduct securities business in NY, NJ, PA, MA, CA and FL. Bauman, Noonan and Associates and Cadaret, Grant and Co., Inc. are separate entities.