An absentee owner is an individual or entity that owns real estate but does not personally manage or reside at the owned property. Such ownership requires the delegation of management tasks and often involves the hiring of property managers.
The Accelerator Principle is an economic concept that proposes investment levels respond to growth in output, suggesting that changes in the rate of output growth result in changes in investment.
Agency refers to the relationship between two parties where one, the agent, represents or acts on behalf of the other, the principal, in various contexts such as finance, government, investment, and personnel.
Aggressive Growth Funds are investment funds that focus on increasing capital by investing in rapidly growing companies. These funds aim for high return potential and are inherently more volatile and risky.
Allocation in accounting refers to the process of distributing resources, costs, or investments among various accounting entities or activities.
The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange (LSE). Launched in June 1995 to replace the Unlisted Securities Market, AIM provides a platform for smaller, growing companies to raise capital and have their shares publicly traded without the significant costs and regulatory complexities associated with a full market listing.
The annual percentage rate (APR) represents the annualized cost of borrowing or the annual rate of return on an investment, incorporating interest rate and all associated fees.
An annuity due is a type of annuity where payments are made at the beginning of each period, as opposed to an ordinary annuity where payments are made at the end of each period.
An annuity in arrears, also known as an ordinary annuity, is a series of equal payments made at the end of consecutive periods over a fixed length of time. It contrasts with an annuity due, where payments are made at the beginning of each period.
Asset Management involves the systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner. This term is typically used in the financial world to describe the management of investments, aiming to grow their value over time and achieve higher returns.
An asset-backed security (ABS) is a financial instrument that represents a claim on the cash flows generated by a pool of underlying assets, such as mortgages, car loans, or credit-card receivables.
Auction Market Preferred Stock (AMPS) is a type of U.S. preference share where the dividend is variable and set through an auction process among investors.
Baby bonds are low-denomination bonds that make it easier for small investors to participate in the bond market. They are generally worth $5,000 or less and were originally coined to make investing more accessible.
A balanced mutual fund invests in a mixture of common stock, preferred stock, and bonds to achieve the highest possible return while maintaining a low-risk strategy.
Basic financial instruments are the underlying tools used in financial operations, including currencies, bonds, stocks, and derivatives. These instruments serve as the backbone of financial transactions and investment strategies.
Bellwether is a security or indicator used to predict the direction of a market or sector. Notable examples include IBM in stocks and the 30-year U.S. Treasury Bond in bonds.
A bellwether security is a stock or bond that is widely believed to indicate the potential direction or future trend of the market or sector it represents, often used by investors as a predictive tool.
Below Par refers to a financial security, especially a bond, that is trading at a price lower than its face or nominal value.
Bond yield refers to the return an investor realizes on a bond. Various types of bond yields provide investors with insight into the return they could potentially receive if they hold the bond until maturity or sell it earlier.
The São Paulo Stock Exchange, known as Bovespa, is the largest and most significant stock exchange in Latin America, located in Brazil. It merged with the Brazilian Mercantile and Futures Exchange (BM&F) in 2008.
A term used in both Finance and Investment contexts, referring to points where pricing structures change due to volume discounts or significant drops in market prices, among other uses.
A broker-dealer is an individual or firm that buys and sells securities for its clients and its own account. Broker-dealers play a crucial role in the securities industry, providing liquidity and facilitating the trading of securities.
Brokerage refers to the business or activity of a broker, which involves facilitating transactions between buyers and sellers in exchange for a commission. This term also refers to the commission earned from such transactions.
A Brokered Certificate of Deposit (Brokered CD) is a type of CD issued by banks or thrift institutions but bought in bulk by brokerage firms who then resell it to their clients. These CDs often offer higher interest rates compared to those offered directly by banks.
A bunny bond is a specialized financial instrument that gives bondholders the option to receive interest payments or additional bonds, commonly referred to as 'coupon bonds.' This flexible feature makes bunny bonds an appealing choice for investors seeking growth through compounding interest.
Burn rate is the speed at which a company is spending its cash. Particularly applicable to start-up enterprises, which may not generate enough new cash flow to offset their rate of spending.
Buying on margin involves purchasing securities using credit from a broker, facilitated through a margin account, and is strictly regulated by the Federal Reserve Board (FRB).
The CAPM is a formula used to determine the expected return on an investment by accounting for both the risk-free rate of return and the risk premium.
The Capital Asset Pricing Model (CAPM) is a cornerstone of modern financial theory, providing a framework used to determine the expected return on an investment for a given level of risk.
Capital contribution refers to the cash or property acquired by a corporation from a shareholder without the receipt of additional stock. This amount is added to the basis of the shareholder's existing stock, and the corporation's basis is carried over from the shareholder.
Capital deepening refers to the process of increasing the amount of capital per worker in an economy. This typically means that each worker has more tools, equipment, or technology to use in their work, leading to higher productivity and economic growth.
Capital flight refers to the large-scale exit of financial assets and capital from a country due to economic or political instability, or in search of higher returns elsewhere.
Capital formation refers to the creation or expansion of capital through savings, which are then invested in buildings, machinery, equipment, and other assets that produce goods and services, thereby contributing to economic growth.
Capital outflow refers to the exodus of capital from a country, driven by a combination of political and economic factors. Domestic and foreign owners of assets may sell their holdings and relocate their money to countries with more political stability and economic growth potential. Large capital outflows may prompt countries to impose currency controls or other measures to restrict the movement of money.
The relationship between the value of capital and the output it produces in a given period, usually a year; the lower the ratio, the more efficiently capital is being used to produce goods and services.
Capital requirement refers to the amount of capital a business needs to sustain its operations, including both long-term and working capital necessary for maintaining day-to-day functionality and growth.
Carry trade is a financial strategy that involves borrowing funds in a low-interest-rate market and investing them in a higher return market. This practice capitalizes on the interest rate differential between two markets to generate profit.
The amount of cash or equivalent instruments held at any point in time. A commodity or securities trader or an investment company needs to monitor its cash position carefully to maintain adequate liquidity.
An acronym representing Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa, identified in the late 2000s as emerging markets with significant growth and investment potential due to their dynamic economies, young populations, and political stability.
A Collateralized Bond Obligation (CBO) is a type of structured security backed by a diversified pool of high-yield bond issuances. CBOs are a subset of Collateralized Debt Obligations (CDOs), designed to earn investors returns based on the performance of the underlying bond collateral.
A Collateralized Loan Obligation (CLO) is a complex financial tool that repackages pools of loans, often corporate loans, into different classes of securities to be sold to investors. CLOs provide high returns for investors with an appetite for risk while offering a source of financing for companies.
A collateralized mortgage obligation (CMO) is a type of mortgage-backed security that combines multiple mortgage loans and separates them into tranches based on maturity and risk.
A rare object collected by investors, ranging from stamps, coins, oriental rugs, antiques, baseball cards, to photographs. Collectibles are often valued higher during inflationary periods, but they are not valid investments for IRAs and self-directed Keogh plans.
Items such as art, stamps, and antiques acquired for their aesthetic merits and potential source of capital gains and inflation protection.
The Committee on Uniform Securities Identification Procedures (CUSIP) assigns identifying numbers and codes for all securities. These CUSIP numbers and symbols are used when recording all buy and sell orders.
A common stock fund is a type of mutual fund that exclusively invests in common stocks of publicly traded companies. These funds aim to provide capital growth through equities.
A consent letter is a formal document included in a prospectus where an expert, such as a reporting accountant, consents to the issuance of the prospectus and acknowledges the inclusion of their report or any reference made to them.
Consumption, Investment, Government expenditures (C&I or C&I&G) are key components of the Gross Domestic Product (GDP), used to measure a country's economic performance.
Cost of carry refers to the expenses associated with holding a particular asset over a period of time, which can include storage costs, insurance, and financing.
A Credit Default Swap (CDS) is a financial derivative that allows an investor to 'swap' or offset their credit risk with that of another investor.
Crowdfunding refers to the financing of a new company or other project by selling shares or bonds directly to small private investors via the Internet. Despite its attractions, there have been fears that this growing practice offers scant legal protection to investors or to entrepreneurs, who may find their ideas are stolen and developed by others. In the UK and the USA, crowdfunding platforms have increasingly been brought within the remit of the regulatory authorities.
A cumulative dividend is a feature often associated with preferred stock, entitling holders to receive dividends in arrears before any dividends can be paid to common stockholders.
A type of preference share that entitles the owner to receive any dividends not paid in previous years, guaranteeing eventual payment before ordinary shares are addressed.
Cumulative Preferred Stock is a type of preferred stock where omitted dividends must be paid out before any dividends can be paid to common stockholders.
A day trader is an individual who buys and sells financial instruments within the same trading day, with the goal of profiting from short-term price fluctuations.
The debt/equity ratio is a financial metric that indicates the relative proportion of a company’s debt to its total equity. It demonstrates how leveraged a company is in terms of its debt financing compared to its equity financing.
A deep discount bond is a debt security that sells for a substantial amount below its face value, often at a discount of more than 25%. Unlike original issue discount bonds, these bonds were initially issued at their par value but have since declined in market value.
A loan stock or government security issued on terms that make the redemption value significantly higher than the issue price, often with more than 15% discrepancy or ½% per completed year.
In finance, denomination refers to the face value of currency units, coins, and securities. It is an important concept in the fields of accounting, taxation, and investment.
Depreciable real estate refers to property used in trade, business, or investment that is subject to depreciation deductions under Section 167 of the Internal Revenue Code. Land itself is generally not depreciable.
A discount bond is a bond sold for less than its face value or par value. When the bond matures, the investor receives the face value of the bond. Discount bonds can be treasury, municipal, corporate, etc. They offer a way for the issuer to raise capital by selling at a reduced price.
An interest or cost of capital rate applied to discount factors in discounted cash flow (DCF) appraisals, used in determining the present value of future cash flows.
Discounted Payback Method is a method of capital budgeting in which managers calculate the time required for the forecasted discounted cash inflows from an investment to equal the initial investment expenditure, considering the time value of money.
Divestment is the process of selling off assets, subsidiaries, or business segments to realize value or streamline operations. It serves as the opposite of investment.
Dividend cover, or dividend coverage ratio, is a financial metric indicating how many times a company can pay dividends to its ordinary shareholders out of its net profits after tax in the same period. It measures the sustainability of dividend payments.
The Dow Jones Industrial Average (DJIA) is a widely-recognized stock market index that tracks the performance of 30 major publicly traded companies in the United States.
Earnings Per Share (EPS) represents a portion of a company's profit allocated to each outstanding share of its common stock. It is a significant factor in evaluating a company's profitability and its stock outlook.
The Efficient Market Hypothesis (EMH) is a financial theory suggesting that asset prices reflect all available information, making it nearly impossible to consistently achieve higher returns than average market returns.
The Enterprise Investment Scheme (EIS) is a UK government initiative designed to help smaller, higher-risk companies raise finance by offering tax relief to investors who purchase new shares in those companies.
Exchange-Traded Funds (ETFs) are investment funds that are traded on stock exchanges, much like stocks. They offer a way for investors to buy and sell shares of a diversified portfolio in a single transaction.
Eurodollar bonds are bonds that pay interest and principal in Eurodollars, which are U.S. dollars held in banks outside the United States. These bonds are usually issued by foreign corporations or governments.
The ex-dividend date is a pivotal date in the dividend distribution process on which a stock goes ex-dividend, typically about three weeks before the dividend is paid to shareholders of record. An investor who buys on or after that date is not entitled to the dividend.
Ex-rights refers to the period in which a stock is trading without the value of its newly issued rights attached. This typically happens after the record date for the rights issue, when new shares are offered to existing shareholders.
An exchange-traded note (ETN) is a debt instrument that tracks the performance of a specific index and promises to repay the principal adjusted by applicable fees and index performance. Unlike exchange-traded funds (ETFs), ETNs are backed by the issuer.
Expected return is a key concept in finance that estimates the likely return on an investment, based on historical data or anticipated performance. This measure helps investors evaluate the potential profitability of various investment options and make informed decisions.
An extendible bond is a type of bond whose maturity date can be extended at the option of all the involved parties. This flexibility can benefit both issuers and investors under certain market conditions.
An extra dividend is an additional payment made to shareholders on top of the regular dividend, typically awarded after a particularly profitable year to reward shareholders and foster loyalty.
Face value, also known as par value, denotes the nominal or stated value a particular asset maintains, such as stocks, bonds, or other types of securities. It is predominantly utilized in the fields of finance and investment to determine the fixed worth sovereignly ascribed to an instrument.
The Federal National Mortgage Association, commonly known as Fannie Mae, is a government-sponsored enterprise (GSE) that enhances the availability of mortgage credit across the United States by purchasing and guaranteeing mortgages issued by lenders.
A feeder fund is an investment vehicle similar to a fund of funds but typically invests all its assets into a master fund, which is responsible for managing the investments. This structure is common in hedge funds.
Finance involves the practice of managing and manipulating money, the capital involved in a project, and obtaining loans for specific purposes.
Any organization whose core activity is to provide financial services or advice in relation to financial products. Financial institutions include state bodies, such as central banks, and private companies, such as banks, building societies, and financial markets.
Financial leverage refers to the use of debt in a firm's capital structure to amplify the returns on equity. It is an essential concept in corporate finance that can significantly impact a company's earnings and risk profile.
Financial risk refers to the potential for volatility in investment performance due to the use of borrowed money. It indicates the possibility of losing money when investing in financial instruments.
A Floating-Rate Note (FRN) is a type of debt instrument with a variable interest rate that adjusts periodically based on a benchmark interest rate, such as the LIBOR or the federal funds rate.
Foreign Direct Investment (FDI) refers to the investment made by a foreign entity into a business or production in another country. This often involves acquiring control or significant ownership of a company in the target country.
A comprehensive overview of FTSE Indexes, including their types, historical significance, and relevance to investors and portfolio managers.
A fund refers to a pool of financial resources managed and set aside for a specific purpose. Common types of funds include mutual funds, pension funds, and endowment funds, among others.
Funding is the act or process of providing financial resources, typically in the form of money, to finance a program, project, or organization. Funding is critical across various sectors for initiating and sustaining operations and achieving objectives.
A fungible issue refers to a bond or security that can be interchanged with another of the same class, offering benefits such as consistent documentation and an increased market depth.
A discount UK government stock that has been issued by the Bank of England since 1996. A bond can be divided into a set of payments, which are made by the state and sold at a discount.
A comprehensive guide exploring the definition, examples, FAQs, related terms, references, and recommended books for understanding global bonds.
Globalization refers to the multifaceted process that allows investment in financial markets and the exchange of goods, services, and information across international boundaries, facilitated by advancements in technology, deregulation, and the operations of powerful multinational enterprises.
Going long refers to the practice of purchasing a stock, bond, or commodity for investment or speculation purposes. The purchased security is held with the expectation that its value will increase over time, thereby providing profits to the investor.
Government agency securities are debt instruments issued by U.S. government agencies that, while often rated highly, are not explicitly backed by the full faith and credit of the U.S. government.
A fixed-interest British government debt security.
Government securities are debt instruments issued by a government to support government spending and obligations. These securities include Treasury bills, bonds, notes, and savings bonds, all of which are considered highly creditworthy due to the backing of the government's 'full faith and credit.'
A growth fund is a mutual fund that primarily invests in growth stocks with the aim of providing capital appreciation for the fund's shareholders over the long term. These funds tend to be more volatile compared to conservative income or money market funds.
A Guaranteed Income Contract is a financial instrument commonly used in the investment and insurance industries to provide a stable, guaranteed stream of income over a specified period of time.
A Guaranteed Income Contract (GIC) is a financial instrument typically utilized within corporate profit-sharing or pension plans wherein an insurance company guarantees a specific rate of return on invested capital over the contract's duration.
