Site Glossary

1 year forward growth

Average financial analyst estimate of future year's growth in earnings

Change in price of fund plus dividends received per share over past year divided by price of fund.

Percentage of fund assets that fund manager may withdraw each year to pay for marketing and other non-operating expenses.

3 year earnings growth

Rate of increase of earnings of past three years.

The alpha coefficient measures the portion of an investment's return arising from specific (non-market) risk. It can be a positive or a negative number. Often referred to as a manager's "value added" (or "value subtracted"), alpha measures the difference between actual returns and expected performance resulting from exposure to specific risk factors.

Percentage of a portfolio that is replaced each year.

Lowest price any investor is willing to pay for a security at a given time.

Asset class breakdown

Percentage of holdings in different types of investments.

Funds that invest in both stocks and bonds.

An index that correlates with a fund, used to measure a fund manager's performance.

The beta coefficient measures an investment's relative volatility or impact of a per-unit change in the independent variable (market) on the dependent variable (portfolio), holding all else constant. The beta of a portfolio is its covariance in relation to the market. The market portfolio has a beta coefficient of 1. A higher (lower) beta would imply more (less) volatility.

Highest price that any investor is willing to pay for a security at any given time.

Book-to-Market (BtM) Ratio

The "BtM" is the ratio of a firm's book value of equity to its market value of equity. Book value of equity is determined by the firm's accountants using historic cost information. Market value of equity is determined by buyers and sellers of the stock using current information. A high (low) BtM ratio indicates that the book value per share is high (low) relative to the stock price.

Profits on the sale of stocks, taxable.

A company issues stock (or debt) in exchange for capital to fund its operations. The investor provides this capital by purchasing shares (or bonds) in exchange for an expected return. Because the company foregoes the return on the stock or debt it issues, its cost of capital is identical to the investor's expected return.

An active fund with higher fees that simply tracks an index.

A decile is a portion within a whole that has been divided into ten equal parts. For example, the population of issues on the NYSE can be broken into ten deciles according to market capitalization, each containing the same number of stocks.

Percentage of an investor's assets that fund may charge as a fee at time of redemption.

A company's declared dividends per share as a percentage of its current share price.

Dollar cost averaging

Investment stragegy of making fixed investments (monthly for example) to a mutual fund.

Efficient Market Theory

"EMT" is the theory postulating that market prices reflect the knowledge and expectations of all investors. It asserts that any new development is instantaneously priced into a security, thus making it impossible to beat the market consistently.

"E(R)" is the mean value of the probability distribution of possible returns.

An index fund that is designed to generally track an index but also to outperform it through the use of futures, trading strategy, capital gains management and other methods.

Exchange-traded fund

An exchange-traded fund is an index fund which is traded on the stock market. Some common ETFs are the Nasdaq-100 Index Tracking Stock (QQQ), which tracks the Nasdaq-100 and Standard & Poor's Depositary Receipts (SPY), which tracks the S & P 500.

Percentage of fund assets that fund manager may withdraw each year to pay for operating expenses.

Factor loading is an asset's sensitivity to an economically important return.

The number of company shares actually available for purchase by public on open markets.

Percentage of an investor's assets that fund may charge as a fee at time of investment.

Index funds are mutual funds or exchange traded funds with specific and clearly defined sets of rules of ownership. When stocks or bonds are within the rules of ownership, they are purchased and held. When they no longer meet the rules, they are sold. For example, a Small Value Index Fund will have a clear set of rules that define small and value. However, those rules are not the same for all small value indexes. Vanguard (S&P 600 Barra Value), Dimensional Fund Advisors (Fama-French Small Value), Russell (Russell 2000 Value), and Wilshire (Wilshire Small Value) all have small value indexes, but no two of them have the same set of rules of ownership.

Indexing is an investment strategy to match the average performance of a market or group of stocks. Usually this is accomplished by buying a small amount of each stock in a market. An index, such as the S&P 500, is the number that represents the market or group of stocks.

Market capitalization

Market capitalization is the value of a company as determined by the market price of its issues and outstanding common stock. It is calculated as the product of market price and shares outstanding. = (stock price) x (shares outstanding)

This measure of central tendency indicates the point at which a population of observations is measured. Equals the sum of the observations' values, divided by the number of observations.

Median market capitalization

Minimum initial purchase

Minimum an investor may deposit initially. (*may be lower in some cases for IRA retirement accounts.)

Ratio of price to book value of a stock, or average of a portfolio of stocks.

Ratio of price to annualized earnings of a stock, or average of portfolio of stocks.

The difference between the "bid" and "ask" price on a stock or ETF.

A measurement of how closely a fund's performance correlates with an index. It can range between 0.00 and 1.00. An R squared of 1.00 indicates perfect correlation, while an R squared of 0.00 indicates no correlation.

A statistical technique used to establish the relationship of a dependent variable (e.g., excess return) and one or more independent variables (e.g., exposure to market, size, and value risks). Slope coefficients measure the sensitivity of the dependent variable to changes in the independent variables. By measuring exactly how large and significant each independent variable has historically been in its relation to the dependent variable, the future value of the dependent variable can be estimated. Essentially, regression analysis attempts to measure the degree of correlation between the dependent and independent variables, thereby establishing the latter's predictive values.

Indicate the total percentage gain of a fund over that time period.

The risk premium is the additional return an investor requires to compensate for the risk borne.

Percentage of a fund's equity holdings in various industries.

Securities & Exchange Commission

Federal agency that regulates U.S. financial markets, also known as SEC.

A risk-adjusted measurement of fund performance. Sharpe ratio is calculated by dividing the excess return of a fund over the risk-free rate by its standard deviation. The higher the Sharpe ratio, the better a fund's risk-adjusted performance.

Standard deviation 3 year

Measure of fund volatility in percentages. Standard deviation measures the average variability of the fund's returns over a time period. Stable investments like money market funds have standard deviations near zero, while high-risk equity funds often have a much higher one. A standard deviation of 10 means approximately 68% of the time a fund will be within 10% of its mean (average) price.

When a fund moves away from its stated investment objective over time.

Symbol used by brokerage firms to identify fund.

Indicates the total amount of assets a fund holds as of a certain date.

How much a fund's returns deviate from the benchmark index's return.

The calendar Year To Date (i.e. January 1 to the end of the last month).