Glossary of Terms

The following are terms that are used on the site. Most of the text for the glossary is sourced from Wikipedia. Where appropriate, a specific explanation may be provided as to how the term has been interpreted and used on this site.

A Shares: 'A' shares on the Shanghai and Shenzhen stock exchanges refers to those that are traded in Renminbi, the currency in mainland China. In general, foreign individuals cannot directly invest in A-shares due to Chinese government restrictions; some large foreign entities may be given clearance by the Chinese government to buy A-shares and package them as fund products in other markets.

ADR:An American Depositary Receipt (abbreviated ADR) represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.

Asset Class: The categories used by investors to classify their investment portfolio, usually based on type of underlying securities and risk / return profile. On this site, ETFs have been classified into the following high-level asset classes:
B Shares: B shares on the Shanghai and Shenzhen stock exchanges refers to those that are traded in foreign currencies.

Build America Bonds: Build America Bonds are taxable municipal bonds that carry special tax credits and federal subsidies for either the bond issuer or the bondholder. Build America Bonds were created under Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act that U.S. President Barack Obama signed into law on February 17, 2009. The program expired December 31, 2010.

CUSIP: A 9-character alphanumeric code that uniquely identifies any North American security. The CUSIP distribution system is owned by the American Bankers Association and is operated by Standard & Poor's.

Developed Markets: Those countries that are considered to have more mature financial markets due to factors such as their size, liquidity and regulatory environment. On this site, funds have generally been classified as developed market funds based on the methodology used by MSCI.

EAFE: A stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada. It is maintained by MSCI Barra; the EAFE acronym stands for Europe, Australasia, and Far East.

EEM: A stock market index that is designed to measure the equity market performance of emerging markets. It is maintained by MSCI Barra.

Emerging Markets: Those countries that are considered to have less mature financial markets due to factors such as their size, liquidity and regulatory environment. On this site, funds have generally been classified as emerging market funds based on the methodology used by MSCI.

Equal Weighting: A methodology whereby securities in an index or fund are held in equal proportion. Since stock prices change every trading day, in practice the securities may not exactly be equal weighted at all times and are typically rebalanced at periodic intervals such as every quarter.

Exchange Ticker: Also known as ticker symbol. A short abbreviation used to uniquely identify publicly traded shares of a stock or a fund on a particular stock market.

Expense Ratio: The Expense Ratio is a measure of the total cost of a fund to the investor, and is expressed as a percentage of the funds net assets. The Gross Expense Ratio usually includes the management fees, distribution fees and other expenses. It does not include brokerage commissions. Some funds offer fee waivers, and the fund expenses after deducting these waivers is referred to as the Net Expense Ratio. If the term Expense Ratio is used on the site, it refers to the Net Expense Ratio.

Float adjustment: The process of adjusting the market capitalization calculation of a company, to take into account that not all the stock may be available to the investing public. Many stock market indices like the S&P 500 use ‘float-adjusted’ market capitalization i.e. when calculating market capitalization they only include shares accessible to public investors and exclude those held by a control group, founding family, another corporation, or government.

Fund Sponsor: The professional manager that organizes the mutual fund and raises money from investors who become fund shareholders. It then invests the proceeds in securities related to the fund's investment objective. The fund sponsor may rely on third parties or service providers, either fund sponsor affiliates or independent contractors, to manage the fund's portfolio and carry out other operational and administrative activities.

Fundamental Weighting: In a fundamentally weighted index or fund, the securities are given weights based on fundamental factors such as sales, earnings, dividends or a combination of these factors. This is considered an alternative to the more widely used market capitalization weighting approach.

GICS: An acronym for the Global Industry Classification Standard, the most widely used system for categorizing companies into sectors and industries. The system is maintained jointly by S&P and MSCI. Having a uniform set of standards allows financial professionals to make company, sector and industry comparisons across countries, regions, and globally. GICS consists of 10 sectors, 24 industry groups, 67 industries and 147 sub-industries. (http://bit.ly/gOE1nC)

Growth: Growth investing is a style of investment strategy, and in typical usage contrasts with the style known as value investing. Those who follow this style invest in companies that exhibit signs of above-average growth in measures such as sales and earnings. There is no universally accepted definition of what constitutes a growth stock, though the most widely adopted standard in the US for classifying growth and value stocks is Russell’s style methodology (http://bit.ly/h2nCrU)

H Shares: Refers to the shares of companies incorporated in mainland China that are traded on the Hong Kong Stock Exchange. Many companies float their shares simultaneously on the Hong Kong market and one of the two mainland Chinese stock exchanges.

High Yield Bonds: Generally refers to a bond that is rated below investment grade at the time of purchase (may also be referred to as a speculative-grade bond or junk bond). These bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds in order to make them attractive to investors.

Inception Date: The date on which the fund began its operations.

Industry: A grouping of companies based on the similar nature of their underlying business. The most widely used system for classifying companies into sectors and industries is the Global Industry Classification Standard. On this site, ETFs are classified as industry funds if they provide specific exposure (or equivalent exposure) to industry groups, industries or sub-industries (levels 2,3 and 4) in the GICS classification system. All industry funds will also be classified into their respective sectors.

Investment Grade: A bond is considered investment grade if its credit rating is BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's or BBB(low) or higher by DBRS. Generally they are bonds that are judged by the rating agency as more likely to meet payment obligations than bonds that have lower ratings.

Laddered: An investment technique that requires investors to purchase multiple financial products with different maturity dates.

Market Capitalization: Market capitalization (or market cap) is a measurement of size of a business enterprise (corporation) equal to the share price times the number of shares outstanding (shares that have been authorized, issued, and purchased by investors) of a publicly traded company. Many stock market indices like the S&P 500 use ‘float-adjusted’ market capitalization i.e. when calculating market capitalization they only include shares accessible to public investors and exclude those held by a control group, founding family, another corporation, or government.

Market Cap Weighting: A methodology for weighting a market index, where each component in the index is weighted according to the total market value of its outstanding shares. Note that several index providers use a float-adjusted market capitalization approach.

Maturity Date: Refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid. The length of time until the maturity date is often referred to as the term or tenor or maturity of a bond.

Sector: A grouping of companies that are in similar industries or industry groups, based on the nature of their underlying business. The most widely used system for classifying companies into sectors and industries is the Global Industry Classification Standard. On this site, ETFs are classified as sector funds if they provide exposure (or equivalent exposure) to a specific sector (level 1) in the GICS classification system.

Target Date Funds: Funds that are designed to provide a simple investment solution through a portfolio which becomes more conservative over time as the target date (usually retirement) approaches.

TIPS: Treasury bonds that provide investors with protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U).

Value: Value investing is a style of investment strategy, and in typical usage contrasts with the style known as growth investing. Those who follow this style invest in companies that exhibit signs of being under-valued based on measures such as price/earnings, price/book etc. There is no universally accepted definition of what constitutes a value stock, though the most widely adopted standard in the US for classifying growth and value stocks is Russell’s style methodology (http://bit.ly/h2nCrU)

VRDO: Acronym for Variable Rate Demand Obligation. A short-term tax-exempt fixed income security whose yield is reset on a periodic basis (typically weekly or monthly). 

Zero Coupon: Bonds that pay no regular interest. They are issued at a substantial discount to par value, so that the interest is effectively rolled up to maturity (and usually taxed as such). The bondholder receives the full principal amount on the redemption date.

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