Glossary
Capital appreciation: Capital appreciation is a rise in the value of an asset based on a rise in market price. It occurs when the asset invested commands a higher price in the market than an investor originally paid for the asset. The capital appreciation portion of the investment includes all of the market value exceeding the original investment or cost basis.
Commodities: Basic goods used in commerce that are interchangeable with other goods of the same type. For investors, commodities can be an important way to diversify their portfolios beyond traditional securities.
Correlation: A statistic that measures the degree to which two variables move in relation to each other.
Current income: Refers to cash flows that are anticipated in the immediate to short term. Current income investing is a strategy that seeks to identify investments that pay above-average distributions.
Dividend: A sum of money paid regularly by a company to its shareholders out of its profits (or reserves).
Growth company: A company that is expected to grow sales and earnings at a rate significantly above the average growth for the market.
Index: An index represents a particular market or segment of it, and is a tool used to describe the market and compare returns on specific investments.
Inflation: The rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market – in other words, too much money chasing too few goods.
Inflation-linked bonds: Also called Treasury Inflation-Protected Securities in the US, these bonds pay interest that is linked to an underlying index, such as the Consumer Price Index (CPI).
Investment grade bonds: A bond issued by a corporation or sovereign that has been awarded a ‘Baa3’ or higher credit rating by Fitch, or ‘BBB-’ or higher credit rating by Standard & Poor’s or Fitch.
Mortgage-backed security: A mortgage-backed security is an investment similar to a bond that is made up of a bundle of home loans bought from the banks that issued them. Investors in mortgage-backed securities receive periodic payments similar to bond coupon payments.
MSCI ACWI: MSCI All Country World Index.
Real estate investment trust (REIT): A company owning and typically operating real estate which generates income.
Securities: Fungible and tradable financial instruments used to raise capital in public and private markets. There are primarily three types of securities: equity – which provides ownership rights to holders; debt – essentially loans repaid with periodic payments; and hybrids – which combine aspects of debt and equity.
Value company: A company that appears to trade at a lower price relative to its fundamentals, such as dividends, earnings or sales.
Yield: Yield is the income returned on an investment, such as the interest or dividends received from holding an asset. The yield is usually expressed as an annual percentage rate based on the investment’s cost, current market.
