Glossary of Terms

Active Management:  The trading of securities to take advantage of market opportunities as they occur, in contrast to passive management. Active managers rely on research, market forecasts, and their own judgment and experience in selecting securities to buy and sell.
Beta: A measure of risk that tracks the relative volatility of an investment versus a corresponding benchmark. A beta of 1 indicates that the investment has historically moved in-sync with the benchmark. An investment with a beta greater than 1 indicates that the investment has been more volatile than the benchmark overall. For example, a beta of 1.5 means that the investment is 1.5 times more volatile than the benchmark. An investment with a beta less than 1 indicates that the investment is has been less volatile than the benchmark. 
Diversification: The practice of investing in multiple asset classes and or securities with different risk characteristics to reduce the risk of owning any single investment.
Dividend Growth Rate: The annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time.
Dividend: A distribution that is derived from a portion of a given company's earnings.  Dividends are decided and managed by the company’s board of directors, though they must be approved by the shareholders through their voting rights. Dividends can be issued as cash payments, as shares of stock, or other property, though cash dividends are the most common. 
Downside: The negative movement in the price of a security, sector or market. Downside can also refer to economic conditions, describing potential periods when an economy has either stopped growing or is shrinking.
Financial Analysis: A process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability.
Fundamental Research: A method of measuring a security's intrinsic value by analyzing all related economic and financial factors. Fundamental analysts study anything that can affect the security's value, from macroeconomic factors such as the state of the economy and industry conditions to microeconomic factors like the effectiveness of the company's management.
Liquidity: The ease with which an investment can be converted into cash. If a security is very liquid, it can be bought or sold easily. If a security is not liquid, it may take additional time and/or a lower price to sell it.
Market Risk: The possibility that the value of an investment will fall because of a general decline in the financial markets.
Portfolio Manager: The individual, team or firm who makes the investment decisions for an investment fund, including the selection of the individual investments.
Portfolio: A collection of investments such as stocks and bonds that are owned by an individual, organization, or investment fund.
Qualitative Analysis: An analytical process that uses subjective judgment based on non-quantifiable information, such as management expertise, industry cycles, and strength of research and development for example. 
Return: The gain or loss on an investment. A positive return indicates a gain, and a negative return indicates a loss.
Risk Control: A set of methods by which the potential for losses are evaluated and action is taken to reduce the impact of such risk. 
Risk Tolerance: The degree of variability in investment returns that an investor is willing to withstand in their overall asset allocation. 
Risk: The potential for investors to lose some or all the amounts invested or to fail to achieve their investment objectives.
Risk-Adjusted Return: A calculation of an investment's return by measuring how much risk is involved in producing that return, which is generally expressed as a number or rating. 
S&P 500 Total Return Index: An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of large cap stocks. All cash distributions (e.g. dividends and income) are reinvested. Used as a proxy for "Stocks" above.
Sector: An area of the economy in which businesses share the same or a related product or service. It can also be thought of as an industry or market that shares common operating characteristics. Dividing an economy into different sectors allows for more in-depth analysis of the economy as a whole.
Sharpe Ratio: A measure for calculating risk-adjusted return. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return, the performance associated with risk-taking activities can be isolated. Sharpe ratio = (Mean portfolio return − Risk-free rate)/Standard deviation of portfolio return.  For Sharpe Ratio calculations in this presentation, the “risk free rate” is represented by the annualized monthly returns of the 3 Month US T-Bill.
Standard Deviation: A statistical measurement in finance that, when applied to the annual rate of return of an investment, sheds light on the historical volatility of that investment. The greater the standard deviation of securities, the greater the variance between each price and the mean, which shows a larger price range. 
Total Return: A performance measure that is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time.
Volatility: The amount and frequency of fluctuations in the price of a security, commodity, or a market within a specified time period. Generally, an investment with high volatility is said to have higher risk since there is an increased chance that the price of the security will have fallen when an investor wants to sell.
Yield: Yield is a measure of cash flow that an investor gets on the amount invested in a security. It is mostly computed on an annual basis, though other variations like quarterly and monthly yields are also used. Yield should not be confused with total return, which is a more comprehensive measure of return on investment.