Investment Glossary

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Balance sheet

the financial statement of a business or institution that lists the assets, debts and owners' investment as of a specific date. Assets are listed in the order of how soon they will be converted into cash, and debts in the order of how soon then must be paid. Since balance sheets do not list items at their current monetary value, they may greatly overstate or understate the real value of certain corporate assets and liabilities. - Also sometimes called Statement of Financial Position.

Balanced fund

an investment fund (portfolio) that spreads its investments among different asset classes (asset allocation) so that the risk is at a medium level. ie. medium growth and income objectives. The proportion invested in equities is generally around 50% although there may be some variation in this.

Basis point

one one-hundredth of a percent 1/100 of 1%). Basis point is used to measure yield differences among bonds and other financial instruments. For example, there is a 30 basis point difference between two bonds if one yields 10.3% and the other yields 10.6%.

Bear market

an extended period of general price declines, in an individual security or other asset, such as silver or real estate, a group of securities, or the securities market as a whole. Nevertheless, even during widespread bear markets, it is possible to have bull markets in particular industries or groups of industries.

Below par

designating a security that sells at less than face value or par value. (Sometimes called selling at a discount). For example, a $1,000 par bond with a market price of $850 is below par. Likewise, a $100 par, preference share with a market price of $80 is below par.

Beta

The measure of a fund or a share's risk in relation to the market or to an alternative benchmark. Roughly speaking, a security with a beta of 1.5, will have move, on average, 1.5 times the market return. More accurately, it will move 1.5 times the market's excess return. ie. the return above the risk free return.

Black and Scholes Model

a relatively complicated mathematical formula for valuing share options. The Black and Scholes Model is used in an attempt to determine if a particular option should be selling at a price other than the one at which it currently trades.

Bond

1 - a long-term promissory note. Bonds vary widely in maturity, security, and type of issuer, although most are sold in $1,000 denominations. 2 - a written obligation that makes a person or an institution responsible for the actions of another.

Bull market

an extended period of generally rising prices in an individual item (eg shares or gold), a group of items (ie commodities or oil companies), or the market as a whole. Since security prices are often subject to reversals, it is sometimes difficult to know whether there has been a temporary interruption or a permanent end to a bull market. Thus, whether a bull market is actually in progress at any given time is often subject to individual interpretation.

Buyback

a company's repurchase of a portion of its own outstanding shares. The purpose of the buyback may be to acquire a block of shares from the hands of an investor unfriendly to the target firm's management, who is considering taking over the firm. Conversely, the buyback may be an attempt to increase earnings per share by reducing the number of outstanding shares. See Option

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