Glossary

Quincy Cass Associates Professionals

The majority of the following definitions came from the Dictionary of Financial Terms.

Aggressive InvestorAn investor who is more concerned with returns than risk, and is willing to take higher-than -average risk in exchange for the possibility of higher-than-average returns.
AlphaA mathematical estimate of the amount of return expected from an investment's inherent value, such as the rate of growth in earnings per share. In the case of a mutual fund, alpha measures the relationship between the fund's performance and it's beta over a three-year period.
Arithmetic Rate of ReturnThe simple average return obtained by dividing the sum of two or more returns by the number of returns.
AssetAnything having commercial or exchange value that is owned by a business, institution, or individual.
Asset ClassThe broad classification of types of investments; i.e. Stocks, bonds, real estate, cash, etc.
BenchmarkAn average or expected rate of return against which a specific portfolio's performance may be compared.
BetaA coefficient measuring a stock's relative volatility; the covariance of a stock in relation to the rest of the stock market. A beta higher than 1 is more volatile than the market, and a beta lower than 1can be expected to rise and fall more slowly than the market.
Bond RatingsA method of evaluating the possibility of default by a bond investor. Ratings range from AAA (highly unlikely to default) to D (in default). Bonds rated BB or below are not investment grade.
BondAny interest-bearing or discounted government or corporate security that obligates the issuer to pay the bondholder a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity. Bondholders have an IOU from the issuer, but no ownership privileges, as stockholders do.
Capital MarketsMarkets where capital funds - debt and equity - are traded. Included are private placement sources of debt and equity as well as organized markets and exchanges.
CommissionFee paid to a broker to executing a trade based on the number of shares traded or the dollar amount of the trade.
Compound GrowthA geometric return, as when profits or losses on principal are added to or subtracted from the principal for the next holding period.
Conservative InvestoAn investor who is more concerned about risk than return.
CorrelationThe degree to which the movements of two variables are : related.
Coupon Rate (bonds)The rate on a debt security that the issuer promises to pay to the holder until maturity, expressed as an annual percentage of face value.
DiversificationSpreading of risk by putting assets in several categories of investments - stocks, bonds, money market instruments, and precious metals, for instance — or several industries, or a mutual fund, with its broad range of stocks in one portfolio.
EquityThe ownership interest possessed by shareholders in a corporation. Also, the excess of value over debt for a property or account.
Estate PlanningPlanning for the orderly handling, disposition, and administration, of an estate when the owner dies. Includes drawing up a will, setting up trusts, and minimizing estate taxes.
Face ValueThe value of a bond, note, or other security as given on the certificate or instrument. It typically refers to value at maturity. Also referred to as Par Value or Nominal Value.
FiduciaryA person, company, or association holding assets in trust for a beneficiary. The fiduciary is charged with the responsibility of investing the money wisely for the beneficiary's benefit.
Financial AdvisorProfessional who offers financial counsel. May charge a fee and/or earn commissions on the products they recommend to implement their advice.
Fixed Income Security Any security that pays a fixed rate of return. This usually refers to government, corporate, or municipal bonds that pay a fixed rate of return until the bonds mature, and to preferred stock paying a fixed dividend.
GoalsFinancial objective set by an individual or institution.
Inflation Rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market; i.e., too much money chasing too few goods. Moderate inflation is a common result of economic growth.
Interest RatesPercentage charged for the use of money, usually expressed at an annual rate. The rate is derived by dividing the amount of interest by the amount of principal borrowed.
Investment Policy StatementA personal 'business plan' for an individual's investments. It lays out investment objectives, asset allocation guidelines, the time horizon to achieve objectives or to meet distribution requirements, the expected return on investments compared to designated benchmarks, the asset classes which are acceptable for investment, restricted asset classes, responsibility of advisers and the means for communication between the investor and the adviser. This is not a static document
IRAIndividual Retirement Account. A personal, tax-deferred retirement account that an employed person can set up Contributions are deductible if neither the taxpayer nor his/her spouse is covered by a qualified plan or trust.
Large CapStock with a large capitalization (number of shares outstanding times the price of the shares), typically at least $5 billion in outstanding Market Value.
Liquid AssetCash or an asset easily convertible to cash.
Liquidity The ability to buy or sell an asset quickly and in large volume without substantially affecting the asset's price.
Market CapitalizationValue of a corporation as determined by the market price of its issued and outstanding common stock, as calculated by multiplying the number of outstanding shares by the current market price per share.
Maturity Date (bonds)Date on which the principal amount of a bond becomes due and payable.
MeanThe expected value of all likely returns of investments comprising a portfolio. The mean return is the expected return that an investor attempts to maximize at each level of risk.
MeansAvailable assets and income; whatever an individual or institution will use to achieve their financial goals.
Micro capStocks with a very small capitalization (number of shares outstanding times price per share), typically less than $100 million.
Mutual FundA fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds,options, futures, currencies, or money market securities. Mutual Funds offer investors the advantages of diversification and professional management.
Normal DistributionThe shape that a data set takes, with 50 percent of the date being on each side of the mean and the bulk of the data closer to the mean.
NYSENew York Stock Exchange; the largest exchange in the U.S. An unincorporated association governed by a board of directors, listing over 3000 companies that meet the exchange's stringent listing requirements.
NASDAQNational Association of Securities Dealers Automated Quotations system, owned and operated by the National Association of Securities Dealers. A computerized system that provides brokers and dealers with price quotations for securities traded over the counter as well as for many NYSE listed securities
Nominal Rate of ReturnThe rate of return unadjusted for inflation, or gross return.
Organized Securities ExchangeA Stock Exchange, as distinguished from an over the counter market.
Over-the-CounterA market in which securities transactions are conducted through a telephone and computer network connecting dealers in stocks and bonds, rather than on the floor of an Organized Securities Exchange.
Outstanding SharesStock held by shareholders, show on corporate balance sheets under the heading of Capital Stock issued and outstanding.
Primary MarketThe market for new issues of securities, where the proceeds of sales go to the issuer of the securities sold. Is distinguished from the Secondary Market, where previously issued securities are bought and sold.
Real Rate of ReturnThe rate of return, considering the adjustment for inflation.
RiskThe measurable possibility of losing or not gaining value. Risk is differentiated from uncertainty, which is not measurable.
Risk-free ReturnThe yield on a risk-free investment. For example, a 3-month Treasury bill is considered a riskless investment because it is a direct obligation of the U.S. government and its term is short enough to minimize the risks of inflation and market interest rate changes.
Roth IRAAn Individual Retirement Account created by the Taxpayer Relief Act of 1997 permitting account holders to allow their capital to accumulate tax free under certain conditions. Individuals can invest up to $2000 per year, and can withdraw the principal and earnings totally tax free after age 59 Vz, as long as the assets have remained in the IRA for at least 5 years after making the first contribution.
Russell IndicesMarket-capitalization weighted U.S. equity indices published by Frank Russell Company. The Russell 3000 measures the performance of the 3000 largest U.S. companies (98% of the U.S. equity market) based on market capitalization. The Russell 2000 consists of the smallest 2000 companies in the Russell 3000 and is a popular measure of the stock price performance of small companies.
Secondary MarketExchanges and over-the-counter markets where securities are bought and sold subsequent to original issuance, which took place in the Primary Market.
Sharpe RatioThe Average return, less the Risk-free return, divided by the Standard Deviation of return. The ratio measures the relationship of reward to risk in an investment strategy. The higher the ratio, the safer the strategy.
Shortfall Risk The risk that a financial objective will not be met by a measurable or percentage amount.
Small CapStocks with a market capitalization (number of shares outstanding multiplied by the stock price) of $500 million or less.
Standard DeviationThe statistical measure of the degree to which an individual value in a probability distribution tends to vary from the mean of the distribution. The greater the degree of deviation, the greater the risk.
StocksOwnership of a corporation represented by shares that are a claim on the corporation's earnings and assets.
Terminal ValueThe gross value of a portfolio, generally considered over a number of years.
Trustee A person who holds title to property for the benefit of another person (the beneficiary). The trustee is charged with investing trust property productively.
UITsUnit Investment Trusts; an investment vehicle that purchases a fixed portfolio of securities that contain either various types of bonds, common stock or preferred stock. The trust expires when the bonds mature or, in the case of equity funds, at a specified future date.
Variance The difference between actual experience and projected experience in any financial category. Statistically, a measurement of the dispersion of a distribution.
Volatility The characteristic of a security, commodity, or market to rise or fall sharply in price within a short-term period.