Frequently Asked Questions
Glossary: Investment
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Active Management An investment strategy which aims to outperform a particular market or sector. Active managers have full flexibility in deciding what securities to buy and sell based on investment research, market forecasts, and their own judgment. Annual Return The average annual profit or loss realized by an investment at the end of a specified calendar period. Ask Price The lowest price at which a dealer is willing to sell at a specified quantity of a particular security.
The process of determining the optimal investment portfolio among a mix of assets such as stocks, bonds, cash & real estate. Authorized Funds A unit trust or mutual fund that meets the requirements of the Monetary Authority of Macau and is allowed to be sold in Macau. Authorisation does not imply recommendations by the regulator.
Bear Investor's pessimistic forecast on the market price. Bid Price The highest price at which a dealer is willing to purchase at a specified quantity of a particular security. Bid-ask Spread The difference between bid and ask price.
The amount of stockholders' equity which equal to the amount of the firm's assets minus the firm's liabilities and preferred stocks. Brokerage Fee The commission charged by a broker who facilitates the buying and selling of securities for investors. Bull Investor's optimistic forecast on the market price.
Capital Gain/Loss The difference between the current market value of an asset and the original cost of the asset due to capital appreciation or depreciation. Capital Market Financial market in which financial assets with a maturity term of typically more than one year are traded. Compound Interest Interest paid to the initial deposit plus the accumulated interest.
A common feature of preferred stock requires that the issuing corporation pay all previously unpaid preferred stock dividends before any common stock dividends may be paid. Custodian The bank or trust company that keeps custody of stock certificates and other assets of a mutual fund. Provides safekeeping of securities but has no role in portfolio management.
Day Order A trading order for which the broker will attempt to fill the order only during the day on which it was entered. Declaration Date The date on which a corporation's directors announce the date and amount of the next dividend. Defined Contribution Plan A retirement plan offering a benefit that depends on the total contributions made by the employer and the employee, and on the investment returns earned by those contributions. Under this situation, employees generally bear the investment risk.
Spreading of risk by putting assets in several categories of investments-stocks, bonds, money market instruments, or a mutual fund. Dividends Cash payments made to stockholders by the corporation. Dividend Yield The current annualized paid on a share of common stock, expressed as a percentage of the current market price.
1. The interest rate used in calculating the present value of future cash flows. The discount rate reflects not only the time value of money but also the riskiness of the cash flow. Dollar Cost Averaging A method of accumulating assets by investing a fixed amount of dollars in securities and mutual fund at set intervals. The investor buys more shares or mutual fund units when the price is low and fewer shares and mutual fund units when the price is high.
Earnings per Share (EPS) A corporation 's accounting earnings divided by the number of its common shares outstanding Earnings-price Ratio The ratio of earnings to price, which is the reciprocal of the price-earnings ratio.
The date on which ownership of stock is determined for purposes of paying cash dividends. Owners purchasing shares before the ex-dividend date receive the dividend in question. Owners purchasing shares on or after the ex-dividend date are not entitled to the dividend. Execution The process of completing an order to buy or sell securities.
Fund Manager A mutual fund is run by one manager, or a team of managers who decide upon the mutual fund's portfolio and investment strategy. The portfolio is chosen according to the investment objective of the fund, as stated in the prospectus, and according to the managers' unique investment strategy. Fundamental Analysis A form of security analysis that seeks to determine the intrinsic value of securities based on the basis of underlying economic factors. These intrinsic values are compared with current market prices to estimate current levels of mispricing.
H-share The Chinese enterprise share listed on the Stock Exchange of Hong Kong. High-yield Bond A bond that has a rating of BB or lower and that pays a higher yield to compensate for its greater risk.
Index Fund A mutual fund that seeks to mirror general stock-market performance by matching its portfolio to a broad-based index. IPO (Initial Public Offering)
Junk Bond A bond with a credit rating of BB or lower by rating agencies. Issuers and holders prefer the securities be called high-yield bonds. Junk bonds are issued by companies without long track records of sales and earnings, or by those with questionable credit strength. Since they are more volatile and pay higher yields than investment grade bonds, many risk-oriented investors specialize in trading them
Limit Order A trading order that specifies a limit price at which the broker is to execute the order. The trade will be executed only if the broker can meet or better the limit price. Limit Price The price specified when a limit order is placed with a broker, defining the maximum purchase price or minimum selling price at which the order can be executed.
Management Fee
The amount a mutual fund pays to its investment adviser for services rendered, including management of the fund's portfolio. In general, this fee ranges from 0.5% to 1.75% of the fund's net asset value. Market Capitalization The aggregate market value of a security, equal to the market price per unit of the security multiplied by the total number of outstanding units of the security.
Net Asset Value The market value of an investment company's assets, less any liabilities, divided by the number of shares outstanding. Net Asset Value per Share/ Unit Net Present Value
The percentage change in the value of a financial asset, where the beginning and ending values of the asset are not adjusted for inflation over the time of the investment. Offering Document
A legal document that gives prospective investors information about a mutual fund, including its investment objectives and policies, risks, costs, and past performance. Investor should read the prospectus before investing. Offshore Fund A mutual fund which is domiciled outside Hong Kong. Most mutual fund available in Hong Kong are domiciled in overseas jurisdictions such as Luxembourg, Bermuda or Dublin.
Open-end Fund
Participation Rate
Participation rate refers to the relationship between the potential return of the fund and the performance of the fund's underlying portfolio. The higher participation rate, the higher capability to capture the potential return. Present value
Price-Earnings Ratio Prospectus
Real Return The percentage change in the value of an investment in a financial asset, where the beginning and ending values of the asset are adjusted for inflation over the time of the investment. Redemption Fee A fee charged by a number of funds for redeeming fund shares.
Settlement Date The date after a security has been traded on which the buyer must deliver cash to the seller and the seller must deliver the security to the buyer. Spread Difference between the buying and selling rates of a foreign exchange quotation or between the borrowing and lending rates in deposit.
Technical Analysis A form of security analysis that attempts to forecast the movement in the price of securities primarily on the basis of historical price and volume trends in those securities. Turnover The volume of shares traded as a percentage of total shares listed during a specified period of time.
Year-to-date Return The percentage change in a security/fund value from the last trading day of the previous year to the current price. Yield The rate of return earned by investment over a period of time, usually expressed annually.
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