To accumulate an item such as money, property, or goods. A company may stock up on a commodity now for future sale when it believes that a sharp increase in the price of the commodity will take place at a later date.
The anticipated holding period refers to the estimated duration for which an investor expects to retain an investment before selling it.
The anticipated holding period is the duration during which an investment is expected to be held before being sold or liquidated. In real estate limited partnerships, sponsors often define this period for properties in the prospectus.
Asset stripping involves acquiring a company whose share price is undervalued relative to its asset value, selling its assets for profit, typically at the expense of other stakeholders.
A strategic investment approach where an investor lowers the average price paid for a company's shares by purchasing additional shares as the price decreases.
The bottom-up approach to investing prioritizes the performance and fundamentals of individual companies over broader market or industry trends. This method involves selecting stocks based on their individual merits rather than focusing on the macroeconomic environment.
Capital investment involves the outlay of funds to acquire or upgrade physical assets such as property, buildings, or equipment, which are expected to improve the capacity or efficiency of a business.
Capital outlay, also known as capital expenditure (CapEx), refers to funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. It is a crucial aspect of an organization's investment strategy and financial management.
Capitulation is the terminal stage of a market collapse, characterized by investors giving up hope and taking losses, causing prices to bottom out. This typically stirs bullish sentiment as it creates opportunities for value investing and marks a technical sign that downside risk is being replaced by upside potential. Market bottoms are confirmable only in hindsight, which introduces an element of speculation.
A deferred interest bond is a type of bond that does not pay interest periodically like traditional bonds. Instead, it accrues interest, which is paid in a lump sum at maturity. An example of a deferred interest bond is a zero coupon bond.
Direct investment refers to the purchase of an asset or security directly from the issuer, bypassing financial intermediaries.
The practice of spreading investments or a series of business operations across different sectors, asset classes, or geographies to mitigate risks and maximize returns.
Dollar Cost Averaging (DCA) is an investment strategy where an investor consistently buys a fixed dollar amount of an asset, such as mutual funds or securities, at regular intervals. This results in purchasing more units when prices are low, effectively lowering the average cost per share over time.
Flight to quality is an investment strategy where investors shift their capital to the safest possible assets, such as U.S. Treasury bills, to protect against loss during periods of market instability.
Formula investing is an investment technique grounded in a predetermined timing or asset allocation model that eliminates emotional decisions from the investment process. By following a systematic, rule-based strategy, formula investing aims to mitigate the influence of market sentiment and human emotions in making investment decisions. The approach often involves specific triggers or conditions under which investments are adjusted, rebalanced, or reallocated.
A Fund of Funds (FoF) is a mutual fund or hedge fund that invests in a portfolio consisting of other investment funds rather than investing directly in stocks, bonds, or other securities. This investment strategy provides enhanced diversification and the potential for reduced risk by spreading investments across multiple fund managers and asset classes.
Fund switching refers to the process of moving money from one mutual fund to another within the same fund family, often to respond to market fluctuations or changing financial needs.
The Greater Fool Theory posits that one can make money through the purchase of overvalued assets by selling them to someone even less informed or more optimistic.
A financial projection model that predicts sharply increasing earnings following a period of modest growth, visually resembling a hockey stick when plotted on a graph.
An investment objective is a financial goal that an investor aims to achieve, guiding them on the type of investment suitable for their needs. For example, an objective focused on capital growth might lead to investing in growth-oriented mutual funds or individual stocks, whereas an income-driven objective could direct investments toward income-oriented mutual funds or stocks.
An investment strategy is a plan to allocate assets among various investment choices such as stocks, bonds, cash equivalents, commodities, and real estate. An effective investment strategy considers factors like interest rates, inflation, economic growth, the investor's age, risk tolerance, available capital, and future capital needs.
Laddering refers to purchasing bonds that mature at various intervals to achieve greater regularity of income and protection from interest rate fluctuations.
A level-payment income stream is a series of equal cash flows received or paid at regular intervals over a specified period. Often associated with annuities, it ensures a constant amount of payment or income in each period.
An in-depth exploration of leveraged buyouts, including definitions, examples, related terms, frequently asked questions, and resources for further study.
A long position is a financial strategy where an investor purchases a security or a derivative expecting that its price will rise over time, allowing for a profitable sale in the future.
Modern Portfolio Theory (MPT) is an investment strategy aimed at balancing risk and return by systematically constructing diversified portfolios. This involves including both risky and risk-free securities that exhibit some degree of counteracting performance.
A trader in the stock or commodities market who identifies a trend in the price movement of a security and rides the trend as long as it is profitable.
Parking refers to the strategy of placing assets in a safe and liquid investment temporarily while evaluating other investment opportunities.
An investment strategy involving the use of borrowed funds to increase the return on an investment.
The Presidential Election Cycle Theory posits that major stock market moves are influenced by the four-year presidential election cycle, with stocks expected to rise in anticipation of economic recovery efforts by the incumbent president before election day.
Profit taking is the action by short-term securities or commodities traders to cash in on gains earned on a sharp market rise. It can result in temporary downward pressure on prices.
The interest rate at which an investor can reinvest earnings from an existing investment.
An essential concept in investment management suggesting that the potential return on any investment rises with an increase in risk. In practice, higher-risk investments generally offer greater potential returns, and vice versa.
A 'safe haven' refers to an investment that is expected to retain or increase its value during times of market turbulence. These assets are often turned to in order to protect capital when risky investments begin to lose value.
A scale order is an investment strategy where a specific quantity of shares is bought or sold incrementally at predefined price intervals to average the purchasing or selling price over time.
Selling short involves selling securities, commodities, or foreign currencies not actually owned by the seller, with the hope of repurchasing them later at a lower price to earn a profit.
A stock in which there is little investor interest but has significant potential to gain in price once its attractions are recognized. Sleepers are most easily recognized in retrospect, after they have already moved up in price.
The term 'spread' can refer to several different financial concepts, including the difference between buying and selling prices, the diversity in a portfolio, and a strategy in commodity futures.
Staggering Maturities is a technique used by bond investors to lower risk by diversifying investments across bonds with varying maturities. This approach helps in hedging against interest rate movements and mitigating the volatility associated with long-term bonds.
The ability of an investor to retain their investment during periods of declining value, ensuring that short-term market fluctuations do not force premature sales.
Switching refers to the process of moving assets from one mutual fund to another. This movement can occur either within a family of funds or between different fund families.
Tax selling involves selling securities, usually at year end, to realize losses in a portfolio, which can be used to offset capital gains and thereby lower an investor's tax liability.
A tax straddle is a technique that was once used to postpone tax liability by showing a short-term loss in the current tax year and realizing a long-term gain in the following tax year.
Telephone switching in the context of finance refers to the process of shifting assets from one mutual fund to another via a phone call. This can take place within the various types of funds (stock, bond, money market) of a single family of funds or across different families of funds.
An investment strategy or approach where the investor focuses on macroeconomic factors before identifying specific industries and individual companies that are likely to benefit from those broader trends.
Value Investment is an investment strategy that focuses on the underlying real value of a company and its long-term growth potential rather than short-term market fluctuations.
A Voluntary Accumulation Plan is a financial strategy subscribed to by a mutual fund shareholder to accumulate shares in that fund over time. The shareholder decides both the investment amount and the investment intervals.
A Vulture Fund is a type of limited partnership that invests in distressed properties, often real estate, with the intent of profiting when prices rebound.
A systematic approach used by investors to receive fixed payments from their investment accounts or mutual funds on a regular basis, usually monthly or quarterly, often consisting of income, capital gains, or both.
