Investment Glossary

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Open-end investment company (OEIC pronounced 'oik')

UK collective investment fund. OEICs are very similar to unit trusts. Each allows many investors to pool their money together to make joint investments under a professional fund manager. 'Open ended' means that investors can freely buy and sell shares in the fund via the manager. Investors in an OEIC buy shares in that investment company, similar to buying units in a unit trust. The fund's assets are protected by an independent trustee (for unit trusts) or an independent depositary (for OEICs) and managed by a manager (for unit trusts) or an authorised corporate director (for OEICs). Click for further info on types of managed investment funds click here.

Opportunity cost

the best alternative that is foregone because a particular course of action is pursued. An example is the interest income that is given up when large balances are kept in a checking account. Likewise, purchasing a home means that less money is available for another investment.

Optimal Portfolio

A portfolio which has investments selected so that it lies on the efficient frontier. See also Modern Portfolio Theory

Option

a contract that permits the owner, depending on the type of option held, to purchase (call option) or sell (put option) an asset to the grantor (writer) of the option at a fixed price (strike price) until a specific date.

Out-of-the-money

used to describe a call option with a strike price above the price of the underlying asset or a put option with a strike price below the price of the underlying asset.

Over weight

An investment position in a portfolio which is greater as a percentage value than its relative proportion of capitalisation value in the market. Eg. If Telecom comprises 25% of the market as a whole and a portfolio has 40% of its investment in Telecom, the portfolio is said to be 'overweight Telecom'. The term can also be applied to portfolio country weights relative to a world share index.

Over-the-counter market (OTC)

a widespread aggregation of dealers who make markets in many different securities. Unlike an exchange on which trading sales take place at one physical location, OTC trading occurs through telephone or computer negotiations between buyers and sellers. Although shares traded over the counter are often more speculative than listed shares, virtually all government and most corporate bonds are traded in the OTC market.

Overdraft

a draft for more than the balance in the account on which the draft is drawn.

Overdraft facility

a prearrangement with a bank to withdraw more than the balance in an account up to a defined limit.

Oversubscribed

1 - pertaining to a new security issue for which there are requests to purchase more securities than are available for sale. For example, brokers may take a sufficient number of preliminary orders for a new issue of shares for which there are insufficient shares available to satisfy the demand. 2 - pertaining to a buyback or takeover attempt in which more securities are offered than the purchaser has agreed to buy. In such a case the purchaser may decide to buy the additional securities or may buy the agreed-upon number on a pro rata basis.

Overvalued

pertaining to or being a security that trades at a price higher than observers perceive it should be.

Owners' equity

the owners' interest in the assets of a business. Owners' equity includes the amount invested by the owners plus the profits (or less the losses) in the enterprise. Owners' equity and liabilities are used to finance a firm's assets. - Also called net assets; shareholders' equity; stockholders' equity.

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