An index that tracks the monthly performance of a hypothetical $1000 investment. The calculation for the current month's VAMI is: = Previous VAMI x (1 + Current Rate of Return)
The value-added monthly index charts the total return gained by an investor from reinvestment of any dividends and additional interest gained through compounding. The VAMI index is sometimes used to evaluate the performance of a fund manager.
A technique used to estimate the probability of portfolio losses based on the statistical analysis of historical price trends and volatilities.
VaR is commonly used by banks, security firms and companies that are involved in trading energy and other commodities. VaR is able to measure risk while it happens and is an important consideration when firms make trading or hedging decisions.
A mutual fund that primarily holds value stocks, stocks deemed to be undervalued in price.
There are numerous examples of value funds. Every large mutual fund family has a value fund component, which are often broken down by size. For example, a fund family may include small-, mid- and large-cap value funds for investors to choose from. The premise of value investing is that the market has inherent inefficiencies that enable companies to trade at levels below what the are actually worth. In theory, once the market corrects these inefficiencies the value investor will see the share price rise. A common misconception is that value investors simply seek out low P/E stocks. Although this can be a characteristic of an undervalued company, this is not the sole feature that astute value investors seek.
An ETF whose underlying asset is a Vanguard index fund. VIPERs are traded like any other share on the American Stock Exchange. The performance of the VIPER and the net asset value (NAV) of the Vanguard index fund follow each other closely. The benefit of a VIPER is that an investor receives both the lower cost of index funds, and the liquidity of an exchange-traded stock.
The main difference between a Vanguard index fund and the VIPER that follows it is that a VIPER can be bought and sold anytime during the trading day at the current market price (like any ETF) while the fund can only be bought or sold based on the NAV closing price of the fund. There are a large number of VIPERs including Vanguard Energy VIPERs, Vanguard Financials VIPERs and Vanguard Mid-Cap VIPERs.
An investment fund that manages money from investors seeking private equity stakes in small- and medium-size enterprises with strong growth potential.
Theoretically, venture capital funds give individual investors the ability to get in early on startup companies that, in the past, were only accessible to venture capitalists.
A trading benchmark used especially in pension plans. VWAP is calculated by adding up the dollars traded for every transaction (price multiplied by number of shares traded) and then dividing by the total shares traded for the day.
The theory is that if the price of a buy trade is lower than the VWAP, then it is a good trade. The opposite is true if the price is higher than the VWAP. In other words, a trade that is made at a share price lower than the volume weighted average price is usually considered a bargain.
An investment method where a retail investor periodically invests (at their discretion) relatively small amounts of funds into a mutual fund, building a comparatively large position over an extended period.
By investing savings into a mutual fund gradually over time with a voluntary accumulation plan, an investor is able to build a large investment at their own pace, since their contributions are voluntary (although common practice is to invest a fixed amount at specified intervals). By spreading their contributions over a period of time, investors reap the benefits of dollar-cost averaging, as their fixed dollar amount contributions will buy more shares of a mutual fund when its price is low than when it is high.
A fund that buys securities in distressed investments, such as high-yield bonds in or near default, or equities that are in or near bankruptcy.
Even highly leveraged firms may be targeted if there is a chance that the owners will not be able to make all required debt payments. As the name implies, these funds are like circling vultures patiently waiting to pick over the remains of a rapidly weakening company. The goal is high returns at bargain prices. Some people have looked down upon hedge funds that operate like vulture funds, which have preyed on the cheap debt of struggling companies and forced these companies to pay it back, plus interest.
The weighted average of all the bond credit ratings in a bond fund. The measure gives investors an idea of how risky a fund's bonds are overall. The lower the weighted average credit, rating the riskier the bond fund. The weighted average credit rating is expressed as a regular letter rating (AAA,BBB, CCC).
To arrive at the weighted average credit rating, the calculation starts with dividing the value of each bond in the fund by the total value of the fund. This gives the individual bond weights. The weight of a bond in the fund determines how much that bond influences the weighted average credit rating. For example if a bond fund has 95% AAA government bonds and 5% junk bonds, the bond fund would still have a weighted average credit rating of AAA.
A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders.
Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings. Another variation of window dressing is investing in stocks that don't meet the style of the mutual fund. For example, a precious metals fund might invest in stocks that are in a hot sector at the time, disguising the fund's holdings, so clients really have no idea what they are paying for. Window dressing may make a fund appear more attractive, but you can't hide poor performance for long.
1) A payment structure arranged with a mutual fund in which the investor receives a set amount of funds from the fund on a periodic basis. This is also called a "systematic withdrawal plan".2) Any strategy in which an investor liquidates a portion of their portfolio and extracts cash periodically, such as an investor selling equity shares every year to help supplement their retirement.
1) This type of arrangement with a mutual fund affords the investor an income stream during their retirement years while also maintaining exposure to further growth by keeping their remaining funds invested in the mutual fund for as long as possible.2) Once an investor has finished the accumulation phase, most generally prefer to structure their spending so that their funds will last for an extended period of time. This can be done by managing a portfolio and periodically selling assets, investing in income-producing securities, purchasing an annuity, etc.
A type of international fund traded on the American Stock Exchange that follows the Morgan Stanley Capital International (MSCI) country indexes. It was introduced in 1996 by Morgan Stanley and is a type of hybrid security that possesses qualities from both open and closed-end funds. Investors can use WEBS to achieve international diversification effectively and efficiently.
WEBS is available for many different countries, including Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia, Mexico, the Netherlands, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The MSCI the WEBS follows reflects around 60% of the capitalization of a country’s stock market.
An account in which a brokerage manages an investor's portfolio for a flat quarterly or annual fee. This fee covers all administrative, commission, and management expenses. Sometimes this also includes funds of funds.
The advantage of a wrap is that it protects you from overtrading. This is when your broker trades your account excessively to make more commission. Furthermore, because the broker gets a flat annual fee, then he/she only trades when it is advantageous to you. A traditional wrap typically requires an initial investment of at least $50,000 to $100,000.
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