Target a fixed level of return (e.g. 10%), or positive investment returns, rather than investment returns which are compared to market indices.Accident:
An unforeseen and unintended event or occurrence causing damage/injury to an entity.Accident Benefit:
Provides for payment of an additional benefit equal to the sum assured in installments on permanent total disability and waiver of subsequent premiums payable under the policy.Active Management
Unlike passive management or index tracking this is a process whereby the active manager selects industry sectors in light of expected economic conditions and individual stocks on the basis of research into companies’ prospects.Advisory Management
Allows you to discuss and be advised on financial opportunities by your personal financial advisor. You make the buying and selling decisions regarding financial assets yourself based on the combination of your own ideas and the investment advice of your manager. No investment decision regarding your assets can be taken without your prior approval.Age Limits:
Stipulated minimum and maximum age limit stated by the company. Based on the age limit, the company will accept/reject applications or renew policies.Agent:
An insurance company representative licensed by the state that solicits, negotiates or effects contracts of insurance, and provides service to the policyholder on behalf of the insure.
Basis point is a hundredth of a percentage point and is used in currency and bond markets where large sums of money are moved. A small basis point movement can mean large profits for those involved in the transactions.Bear Market
This is a term used to describe the stockmarket when share prices are falling over a prolonged period.Benchmark
The performance of a financial instrument used as a reference to compare the performances of similar instruments. To measure performance in this way you need a benchmark relative to an index. The most suitable one is an index for the actual market in which the fund invests. This provides an objective tool for addressing the fund manager’s performance. Examples of index are the S&P 500, NASDAQ 100, or the Dow Jones Industrial Index.Beneficiaries
The “beneficiaries” are the persons or companies who may benefit from the assets held in a trust. Or the person to whom an inheritance passes after being named in a will.Best of breed
Products or services that exhibit the highest level of performance in their class.Beta
Used to measure the risk or volatility of a stock or portfolio relative to the specified benchmark. It represents the change in return for every 1% change in the index. Sometimes known as market specific risk.Bid Price
A price which the investor is willing to pay for the securities in the market. In the case of mutual funds, it is the price where the asset management company will buy from investors.Blue Chip
Large well established companies the shares of which are household names. These companies have proven track records and dividend payments and are often referred to as blue chip companies.
A contract of health insurance that may be cancelled during the policy term by the insurer or insured.Capital Gain:The difference between an asset’s purchased price and selling price, when the difference is positive. A capital loss would be when the difference between an asset’s purchase price and selling price is negative.Capital growth
An increase in the value of shares or assets in a fund. An investor looking for capital growth means that all dividends and interest are automatically reinvested into the fund.Coinsurance:
1) A provision under which an insured who carries less than the stipulated percentage of insurance to value, will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required.
2) A policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 per cent by the insurer and 20 per cent by the insured.Compensation: Wages, salaries, tips, professional fees bonuses and other amounts one receive for providing services.Compound Interest:It is the interest computed on the principal amount plus interest accrued during the previous period of investmentConvertible
Fixed income securities which may be converted into equities at a predetermined future date
Convertible Whole Life Policy:
Cooling off period:
The money available with an investment scheme for investment. If already invested, then Corpus is the total value of the investment portfolio.
Another word for insurance, it refers to the amount of insurance.
A brokerage firm that buys or sells a security for its own account, and at its own risk, then charges the customer a mark-up or mark-down.
A type of mutual fund having most of its corpus (assets) invested in many types of asset classes and securities.
Specific to Mutual Fund Income distributed by the Scheme on the Units.
Double/Triple Cover Plans:
|Earnings Per Share (EPS)
Earnings returned on initial investment amount. It reflects a company’s profitability in the form of profit allocated to each outstanding share of common stock.
Excess And Surplus Insurance:
A process of setting objectives, assessing assets and resources, estimating future financial needs, and making plans to achieve monetary goals.
Long term physical assets like real estate, jewellery, furniture etc. which are illiquid in the short term. It is difficult to be converted into cash on an immediate basis or short time period like the current or upcoming fiscal year.
Individuals or investment companies responsible for making decisions to any portfolio investment to maximize benefits.
A fixed-income security pays a fixed rate of return on a specific date. Bonds and preferred stocks are fixed-income securities.Forward Contract
Purchase or sale of a specific quantity of a commodity, security, foreign currency or other financial instrument at the current or spot price, with delivery and settlement at a specified future date. Fund of Funds
A fund whose portfolio is made up of allocations to other funds.
As defined under Section 2(b) of the Securities Contract (Regulation) Act, 1956, Government Security means a security created and issued, whether before or after the commencement of the Act, by the Central Government and/or a State Government and having one of the forms specified in clause (2) of Section 2 of the Public Debt Act, 1944 (18 of 1944) including any amendments thereto or any replacement or re-enactment thereof/clarification and guidelines in the form of notes or circulars etc. issued from time to time; Treasury Bills, such other instruments as may be declared by Government of India and/or SEBI and/or RBI and/or any other regulatory authority to be securities; and rights or interest in the securities.
amount payable on the deferred date under Jeevan Dhara Life of Life Insurance Corporation of India. An annuity of 1% of the GIVE is payable per month after the deferment period. And the entire GIVE is payable on death after deferment period.
A compensation voluntarily given by an organization to an employee as an acknowledgement of services rendered for a minimum specified time period. It is payable when an employee completes 5 or more years of full-time service with the organization.
Gross Insurance Value Element (GIVE):
Group Life Insurance:
A mutual fund whose primary investment objective is long-term growth of capital. It invests principally in common stocks with significant growth potential. Growth Stocks of companies that have shown or are expected to show rapid earnings and revenue growth. Growth stocks have relatively more risk than other conventional forms of investment.
Guaranteed Insurance Sum (GIS):
Guaranteed death benefit:
Bonds and other debt issued by government or governmental organisations and agencies.Governing Law
The trustee’s powers and responsibilities are set out in the trust deed as agreed with you. In addition, the law which governs the trust may impose further duties and obligations on the trustee.We can help you to select an appropriate jurisdiction for the establishment of the trust. A trust may be relocated if circumstances require a change of jurisdiction. Some jurisdictions provide that trusts established under their laws will not be set aside under the forced heir ship provisions of another country.Gross Exposure
A portfolio’s stated exposure when its long and short positions are added together, i.e. “long positions” and “short positions”. See Net Exposure.Growth Style
Investment focused on growth stocks, i.e. those stocks which have exhibited strong earnings or growth or are expected to show this in the future.Guaranteed Bonds
Bond on which the principle and interest are guaranteed by a firm other than the issuer. Guaranteed securities may also include preferred or common stock when dividends are guaranteed.Guaranteed Equity Funds
Limit your exposure to falls in the stock market whilst providing a percentage of the gains. The fund manager buys derivatives to guarantee a certain rise in the index and to limit the percentage of any fall in prices.
|Homeowners’ insurance policy:
The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. This covers all perils except those specifically excluded in the policy
The net total of the flow of payments received in a given time period.Index
An index is a specified basket or portfolio of shares and shows how these share prices are moving in order to give an indication of market trends. Indexes measure the ups and downs of stocks, bonds and commodities markets, reflecting the market prices and the number of shares outstanding for the companies in the index. Every major world stock market is represented by at least one index.NASDAQ
A computerized system that provides price quotations for securities traded over the counter as well as for many New York Stock Exchange listed securities. It is market value weighted; options and futures are not traded on this index.Dow Jones Industrial Average
Price-weighted average of 30 actively traded blue chip stocks. Standard and Poor’s 500: Consists of 500 stocks chosen for market size, liquidity and industry group representation. It is market-value weighted- stock price times no. of shares outstanding.FTSE 100
The index which covers the top 100 companies on the UK stock exchange measured by market capitalization (the number of shares times the share value).CAC40
The CAC40 index is calculated from a sample of 40 stocks listed on the monthly Settlement market.Index Fund
An investment fund that seeks to match the portfolio composition of a particular index, i.e. CAC40, NASDAQ.Index Tracking
The investment manager uses a computer model to select stocks to simulate the performance of a specific stock market index. Also referred to as passive management and is the opposite of active management.Inflation
An increase in the general level of prices over a prolonged period of time, which forces down the real value or purchasing power of money. There are various measures of inflation, the most common being the Retail Price Index (the main measure of consumer inflation).Indemnity:
Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.Insurable Interest:
A condition in which the person applying for insurance and the person who is to receive the policy benefit will suffer an emotional or financial loss, if any untouched event occurs. Without insurable interest, an insurance contract is invalid.Insurability:
All conditions pertaining to individuals that affect their health, susceptibility to injury and life expectancy of an individual’s risk profile.
Joint Life Endowment Assurance Plans:
The sum assured (plus any accrued bonuses) under this type of policy is payable on the end of the endowment term or on the first death of the two lives assured, whichever is earlier. Typically (though not a necessity) taken out by a couple, a variation is available for couples only. In this case, the sum assured will be payable on first death and then again on the second death (along with all vested bonuses) if both deaths occur during the term of the policy. If one or both lives survive to the maturity date, the sum assured along with all vested bonuses will be payable on maturity date. Premiums during this plan cease on the first death or the expiry of the selected term, whichever is earlier. Another variation provides for annuity to both/surviving spouse, or a lumpsum amount to the legal heirs.
Keyman Insurance Policy:
A life insurance policy taken by a person on the life of another person who is or was his employee/connected to his business in any manner whatsoever
A policy, which has terminated and is no longer in force due to non-payment of the premium due.Large Cap. Stocks
Shares with a large market capitalization relative to the general market of which they form a part, e.g. General Electric in the US and Vodafone in the UK.Letter of Wishes
In administering a discretionary trust, HSBC asks for guidance from the settlor, usually in the form of a letter of wishes addressed to the trust company. However this letter does not form part of the trust deed and is not legally binding on the trustee.Leverage
Usually means to borrow money. Known in Britain as ‘gearing’. It is normally stated as a multiple or percentage, three times is 300% gearing. Can also be achieved by buying securities on margin or by using derivatives such as futures and options.Liquidity
The ability to convert an investment into cash with minimum capital loss. A stock, bond or commodity that has a great many units outstanding has liquidity and investors are therefore more inclined to seek out liquid investments so that their trading activity will not influence the market price. Investment funds are thought to be highly liquid as they allow for purchases and redemption’s on a daily basis.Long-Only Strategy
(Also referred to as Traditional Investing). The typical form of investing practiced by most investment managers.Long/Short
Such strategies invest in bond or equity markets by combining long positions with short positions to reduce, but not necessarily eliminate, exposure to the market. These strategies are, therefore, somewhat directional and their returns may typically exhibit higher correlations with traditional markets than the returns of Relative Value or Event-Driven strategies.Limited Payment Life Policy:
Premiums need to be paid only for a certain number of years or until death if it occurs within this period. Proceeds of the policy are granted to the beneficiaries whenever death of the policyholder occurs. Again, this policy can also be of the ‘with profits’ or ‘without profits’ type.
a. Using money borrowed from a broker to purchase securities.
b. The difference in the purchase and sale price of a security.Margin Trading
Trading on the basis of providing only part of the cost of such trade by way of cash payment whilst funding the balance by way of a loan from the broker to the investor. Such trading is riskier than the usual practice of fully funded stock and share trading can be expensive.Market Neutral
See Relative Value.Marketability
The speed and ease with which a particular security may be bought and sold.Market Capitalization
Value of a company as determined by the market price of its issued and outstanding common stock. It is calculated by multiplying the number of outstanding shares by the current market price of a share. Often used as a key indicator/ criterion of how investor’s value a company’s future prospects.Maturity
Another word for redemption when the investment period ends and, in the case of bonds, the nominal capital is repaid.Money Market Funds
Money market funds invest in money market paper and debt securities with short term maturities. Securities include government securities, securities issued by banks and large corporations. These category’s of funds are traditionally known as the least risky of all the mutual funds. However, they generally generate much lower rates of interest than other forms of investment funds.Maximum Drawdown
The worst peak to trough that an investor could have incurred over any time period.
|Net Asset Value
The NAV, or Net Asset Value, of a fund is used to calculate the value of an investment funds share. It is derived by aggregating the value of a funds total assets (securities, cash and accrued earnings), deducting liabilities and dividing by the number of shares outstanding. The NAV is the same as the share price (except in cases where funds are loaded).Net Exposure
A portfolio’s actual exposure when its long and short positions are calculated together; e.g. long positions minus short positions. See Gross Exposure.Net Worth
Amount by which assets exceed liabilities. For an individual, net worth is the total value of all possessions. Such as property, stocks, bonds, and other securities minus all outstanding debts such as mortgage and revolving-credit loan.Non-Directional Investing
The absolute return approach seeking investment returns irrespective of underlying market performance.
Selecting the best products and services that meet a client’s needs, whether offered by HSBC or another financial organization.Option
An agreement, that provides the option but not the obligation, to buy or sell a specified amount of a security at an agreed price at a specific future date.
The economies of scale achieved when individual investors aggregate their monies for the purpose of achieving a common aim.Portfolio
Combined holding of more than one stock, bond, commodity, cash equivalent or other asset by an investor. The purpose of a portfolio is to reduce risk by means of diversification.Portfolio Optimization
Reconciling risk and return in selecting the securities to be included, such as determining which portfolio of stocks offers the best return for a given level of expected risk.Portfolio Risk
Portfolio risk is the sum of two components : market risk (systematic risk) and asset-specific risk (unsystematic risk). The typical common stock contains about one-third market risk and two-thirds asset specific risk. On the other hand, the typically diversified growth fund contains about 85 percent market risk and only about 15 percent market specific risk. As a result 85 percent of the volatility of the fund’s share price results from movements in the stock market.Portfolio Turnover Ratio
This is essentially a measure of the trading activity of an investment fund. It gives an indication of how frequently securities are bought and sold. It is calculated by taking the lesser of purchases and sales of securities and dividing by a fund’s average net assets. The reciprocal of the turnover ratio can be used to approximate the fund’s average securities holding period i.e. a fund with an 80 percent turnover ratio holds its investments an average of 1.25 years.( 1 / 0.80 = 1.25 ).Preference Shares
These are similar to bonds in that they pay a fixed rate of interest, although payment depends on company profits. Preference shares are first in the pecking order of pay outs when an investment fund is wound up.Price Earnings Ratio (PE)
The market price of a share divided by the company’s earnings(profits) per share in its latest 12 month trading period.Prime Broker
Usually undertakes the back office functions of clearing, settlement and custody for a hedge fund, plus it often undertakes the execution of the shorting and leveraging activities.
Analysis based on non-numerical data.Quantitative Analysis
Analysis based on numerical data.
The price at which a fund buys back its shares from selling shareholders.Reference Currency
The base currency in which an investment is made and is used as a unit of account for the fund.Relative Value
A term covering strategies that invest in bonds and/or equities but are not dependent on the general direction of underlying markets. This is typically a conservative approach in which the manager is seeking to exploit market inefficiencies by exploiting pricing disparities between related instruments. The focus can be very quantitative, focusing on stock selection techniques. See fuller explanation in this paper. Such strategies should have low correlation to general market movement. Typical strategies in this category include equity market neutral, fixed income arbitrage, convertible bond arbitrage and mortgage backed securities arbitrage.Return
The amount by which your investment increases as a result of interest or dividend income and capital growth.
Specific or Non-Market Risk
Market where shares are bought and sold on the Stock Exchange after their initial flotation on the primary market.Settlor
The settlor is the person who establishes the trust by transferring assets to the trustee to hold under the terms of the trust deed.Sharpe Ratio
A measure of the return above the risk free rate per return unit of return, usually calculated as the annualised rate of return minus the rate of return on a “risk free” investment divided by the annualised monthly standard deviation. The higher the value the better the risk adjusted returns of that fund manager and an indication of the manager’s ability at controlling volatility whilst delivering investment returns.Short Selling
Selling a security that the seller does not own but is committed to eventually repurchasing. It is used to capitalize on an expected decline in the security’s price.Small Cap. Stocks
Shares whose market capitalisation is noticeably smaller than the average for their particular market.Sovereign Debt
Bonds issued by (or guaranteed by) a government.Sovereign risk
A trust can be an effective defence against the consequences of political or social unrest following war or other major change in a country. If political instability or uncertain future prospects damage personal wealth, trusts may be a reassuring solution.Special Situations
The difference in price or yield between two instruments.Spot Market
Refers to the market for immediate delivery. Spot market deliveries generally are required by the same or the next business day and are generally over-the-counter.
Standard & Poor’s 500
Stock Picking/Stock Selection
Strategies focusing on speculation on the direction of market prices of instruments using securities or derivatives. Instruments used may include all or some of currencies, commodities, equities and/or bonds. Managers typically fall into one of the systematic or discretionary categories. This can be the most volatile category of hedge fund, particularly as many managers are often simultaneously long and short in their portfolios whilst also utilizing leverage. The correlation of returns with traditional markets is normally low. Commodity Trading Advisers (CTAs) and global macro managers would typically fall into this category.Taxation
Trusts can assist in maximising tax efficiency, reducing and controlling the impact of personal taxes. Trust A trust is an arrangement whereby a person (the settlor) transfers the legal ownership of assets (the trust fund) to another person (the trustee) who then manages and holds the assets for the benefit of others (the beneficiaries) who may include the settlor.Term insurance:
A form of life insurance that covers the insured person for a certain period of time, the ‘term’ selected by the policyholder. It pays benefit to a designated beneficiary only when the insured dies within that specified period which can be 1, 5, 10 or even 20 years. Term life policies are renewable but premiums increase with age.Travel insurance:
Insurance to cover problems associated with traveling, generally including trip cancellation due to illness, lost luggage and other incidents.Top-Down Investing
As opposed to bottom-up or stock selection-based investing, this is an approach which looks at the trends in the economy and deciding which countries, markets or industries will benefit before selecting individual companies in which to invest.
The price of units of a fund which are quoted on the stock exchange or traded over-the-counter. The price is governed by supply and demand in the market, while the issue and redemption prices per unit are determined by the fund management company on the basis of the net asset value.Underwriting:
Examining, accepting, or rejecting insurance risks and classifying the ones that are accepted, in order to charge appropriate premiums for them.
(Also known as Standard Deviation). Often defined as the Standard Deviation of the return on total investment. It is the degree of uncertainty of returns on an asset.Vesting Age:
The age at which the receipt of pension starts in an insurance-cum-pension plan.
Whole Life Policy:
Premiums are paid throughout the lifetime of life assured. This can be ‘with profits’ or ‘without profits’ (A ‘with profit’ policy is eligible for various bonuses declared by LIC every year, while a ‘without profits’ policy does not have this privilege)With-Profit policy:
Policies entitled to bonus, which is paid at the time of claim-death or maturity one with-profit policies.Without-Profit policy:
These policies are not entitled to participate in bonus announced by the insurer.
The annual dividend or income on an investment expressed as a percentage of a purchase price.Yield Orientation
Defines the investors requirements with respect to investment returns. An investor favoring growth will opt for reinvestment whilst an investor preferring a regular income will opt for distribution. Income Distribution – dividends and interest are paid out. Continual Reinvestment – Dividends and interest are automatically reinvested.