Active investing - An investing style that actively trades assets to outperform the market versus a portfolio that is simply diversified broadly. It involves forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of fundamental variables, economic variables or even technical variables. Also called Tactical asset allocation. Contrast with Passive investing.

Aggressive portfolio - A unit trust that is heavily weighted in shares of high growth and possibly higher risk companies. The aim is to achieve maximum capital appreciation in the long-term in exchange for short-term volatility.Related: Growth Fund.

Annual fund operating expenses - The expenses a fund management company incurs, such as management fee, expenses for maintaining shareholder records, providing shareholders with financial statements, and providing custodial and accounting services. Related: Expense ratio.

Annualized gain - The capital gain of a unit trust compounded over a 12-month period. For example, if unit trust X appreciates 1.5% in one month, the annualized gain for the unit trust over a twelve month period is 12 multiplied by 1.5% = 18%. Compounded over a 12 month period, the gain is (1.015) multiplied by 12 - 1 = 19.6%.

Asset allocation - The distribution of funds among the major classes of assets in a portfolio.

Asset classes - These include stocks, bonds, currencies, and property.

Back-end load - A fee that investors may have to pay when they sell (redeem) their unit trusts. The redemption fee or realisation can range from 4% to 6%. Not all funds charge this fee. But those who do, impose a full commission if the unit trusts are sold within a designated time, such as one year. The commission decreases the longer the investor holds the stocks. Also called realisation charge. Contrast with Front-end load and No-load.

Balanced fund - A unit trust that is fairly weighted across a range of assets like stocks and bonds to minimise its exposure to market volatility.

Bear - An investor who has a pessimistic view of the financial markets. A bear market is a prolonged period of falling stock prices, usually by 20% or more. Contrast with Bull.

Benchmark index - A published index that fund managers use as yardsticks for the performance of their unit trust or fund. The index comprise a predetermined but dynamic basket of securities. Examples include the widely followed Morgan Stanley Capital International (MSCI) indices. Related: Market index.

Bid price - The price at which your fund manager will redeem your unit trust investments. The term also refers to the price an investor is willing to pay for a security. Contrast with Offer price.

Bond - Debt securities issued by a government or corporation to borrow money for a period of more than one year. The issuer agrees to repay the principal amount of the loan plus interest at a specified time. Related: Discount bond, High-yield bond and Fixed income securities

Bottom-up investing - An investment approach that de-emphasizes the significance of economic and market cycles, focusing instead on the analysis of individual stocks. Contrast with Top-down investing. Related: Contrarian investing and Technical investing .

Breakout - A sustained rise of a security or financial market above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) Can be used by technical analysts as a buy and sell indicator. Contrast with False breakout.

Bull - An investor who has an optimistic view of the market. A bull market is a prolonged period of rising stock prices, usually by 20% or more. Contrast with Bear.

Calendar effect - The tendency of stocks to perform differently at different times, including such anomalies as the January effect, month-of-the-year effect, day-of-the-week effect, and holiday effect. For example, the January effect is often said to result in a rise of the stockmarkets due to window-dressing by fund managers.

CBO (Collateralized Bond Offering) - A multitranche debt structure comprising several classes of debt with varying maturities to cater to the different risk profiles of investors. Typically, low rated and high yield bonds serve as the collateral. The offering is usually backed by a triple rated financial institution. The organization creating and promoting the structure usually holds the underlying equity and may also collect a fee.

Closed-end fund - A fund that does not redeem investments by its shareholders. Instead the assets it has invested in are traded on organised exchanges and/or over-the-counter. Thus, an investor wishing to buy or sell the shares of a closed-end fund for example, will have to do so through a broker. Examples of a closed-end fund include an investment trust fund. Contrast with Open-end fund.

Common stock - A security that represents equity ownership in a company. Common shares let an investor vote on such matters as the election of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security. But should the company be liquidated, the claims of common stockholders fall behind those of bondholders and preferred shareholders.

Country fund - A fund that invests primarily in the securities of companies listed on the stock exchange of a country. It could also invest in companies with significant business interests in the country as well as other types of securities trading in the local market. A typical country fund will comprise shares of local leading companies. Contrast with Global fund and Regional fund.

Consolidation - A situation where the prices of a security and/or the overall market trade sideways without any firm direction.

Contrarian investing - An investment approach that seeks to capitalise on overlooked and undervalued securities with the expectation that the market will eventually assign them a higher value. Related: Top-down investing , Bottom-up investing and Technical investing.

Correction - The fall in the value of a security and/or the overall market by over 10% within a general uptrend. Contrast with Rally. Related: Crash and Dip.

Coupon payment - The interest payment made by the issuers of bonds and other fixed income securities to their lenders. These payments will be made according to an agreed schedule (eg: semi-annual) during the life of the securities.

Crash - The sharp drop in the value of a security and/or market. An example would be the freefall of the Asian financial markets during the 1997-1998 crisis. Related: Correction and Dip

Cross rate - The exchange rate between two currencies other the US dollar (the standard currency which other currencies are quoted against) that is expressed as the ratio of two foreign exchange rates.

Cyclical stock - A stock that tends to rise quickly when the economy turns up and fall quickly when the economy turns down. Examples include retail and property stocks.

Dead cat bounce - A small upmove in a declining market.

Derivatives - Financial instruments, such as options or futures, whose value are derived in part from the value and characteristics of the underlying asset. The asset can be equities, fixed income securities, commodities, currencies, and benchmark securities indices.

Dip - The slight drop in the price of a security and/or market after a sustained uptrend. Analysts often advise investors to buy on dips, meaning buy when a price is momentarily weak. Related: Correction and Crash.

Discount - The term is used to describe information that has already been factored into the value of a security or the overall market. It is also used to describe the sale of a security at a price lower than those found in the market.

Discount bond - A bond issued with a very low coupon rate or no coupon and selling at a price far below par value. When the bond has no coupon, it is called a zero coupon bond. Related: Bond and High-yield bond

Diversification - The process of investing in a range of assets from different sectors and different markets to reduce the risks of the investment portfolio.

Dividend - The portion of a company's profit that is paid out to common and preferred shareholders. For example, a stock with a annual dividend yield of 3% per share will translate into gross dividends (excluding corporate tax) of 30 cents per share for the shareholder if the stock is trading at $10.

Dynamic asset allocation - A strategy comprising the quantitative shifting of a portfolio's asset mix in response to changing market conditions. Also called dynamic hedging.

Equity - The total value of ownership interest in a company.

Equity fund - A unit trust that invests primarily in a range of equities. It can be country-specific, regional or global. It is also characterised by the type of industries and sectors it invests in, as well as the investment policy it adopts.

EPS (Earnings per share) - The net profit for a company divided by the number of outstanding shares. If a company that earns $2 million in one year has 2 million outstanding shares, its EPS would be $1 per share. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term.

Exchange controls - Governmental restrictions on the purchase of foreign currencies by domestic citizens or on the sale of the domestic currency to foreigners. Also called capital controls.

Exchange fund - An investment vehicle that allows investors with large holdings in a single stock to exchange some of these for shares in a diversified portfolio of stocks without having to pay any capital gains tax.

Exchange rate - The price of one country's currency expressed in terms of another currency. Exotics - A term used at various times to describe structured financial products and derivatives. Exotics usually contain more than one elementary financial instruments and can be very complicated.

Expense ratio - A unit trust's annual expenses as a percentage of its assets. This includes management and advisory fees, trustee fees, overhead costs and distribution and advertising fees. The expense ratio does not include brokerage costs for trading the portfolio. Related: Annual fund operating expenses

False breakout - A short-lived price move that penetrates a prior high or low before succumbing to a pronounced price move in the opposite direction. Related: Breakout.

Feeder fund - A sub-fund or unit trust within an umbrella fund. It invests directly into the other units of the umbrella fund. Related: Umbrella fund.

Fixed income securities - Assets such as bills, bonds, and other debt instruments which pay a fixed return on investment usually in the form of coupon payments. Related: Bond and Money market instruments.

Fixed income fund - A unit trust that invests primarily in a range of fixed income securities. It is characterised by the type of securities it invest, their credit quality, length of maturity and geographical location.

Floating exchange rate - A system in which the value of a country's currency is determined by trading in the foreign exchange market.

Front-end load - A fee that investors often have to pay when they buy a unit trust. This can range from 2-6%. The fee is to cover the expenses incurred by the fund manager and its distributors to market and sell the product. Also called initial sales charge. Contrast with Back-end load and No-load.

Fund manager - One who is paid a fee to manage a portfolio of assets such as unit trusts. A fund manager has the fiduciary responsibility to manage the assets prudently. Also called an investment manager or a portfolio manager.

Fundamental analysis - The method of analysing the economic prospects of either a company or a country to determine its future value. Analysts evaluate a company's business to understand its future earnings growth and hence the value of its equity or debt. Similarly, they examine a country's economy to work out its GNP growth forecasts. Contrast with Technical analysis.

Global fund - A fund that invests primarily in the securities of companies listed on stock exchanges across the world as well as other types of securities. A typical global fund will comprise many blue-chip stocks. Country fund and Regional fund.

Growth fund - A unit trust that invests in the shares of high growth companies that are expected to provide substantially higher rates of returns compared to companies in other sectors. Related: Aggressive portfolio.

Growth stock - A stock that is expected to churn out high future earnings growth.

Hedging - The act of reducing risks and volatility of a unit trust, including the use of derivative instruments like options and futures. A hedge can also help lock in existing profits.

Hedge fund - A private fund that employs a wide variety of techniques, usually aggressively, and invests in a variety of assets, to enhance returns. In spite of its name, most hedge funds do little or no hedging. In fact, some like the failed Long-Term Capital Management can be highly leveraged. Investors in hedge funds usually comprise institutions as well as high net-worth clients.

High-yield bond - A junk bond with a non-investment grade or speculative credit rating of BB (Standard & Poor's) or Ba (Moody's) or lower. Such bonds offer higher yields than the debt of financially sound companies to attract investments. Related: Bond and Discount bond.

Index arbitrage - A strategy that exploits the difference between the theoretical price of an index futures contract like the S & P 500 futures and the underlying stocks of the index by buying one and selling the other. This is to capitalise on the temporarily-inflated basis between the two baskets.

Index portfolio - A unit trust that replicates the asset mix of a broad-based index such as the MSCI Singapore Free Index or the Straits Times index. The fund's objective is to simply to match the returns on the market index. This passive investment strategy is known as indexing.

Investment horizon - The time frame established by an investor to achieve his financial goals.

Investment objective - The asset allocation strategy of the fund manager as stated in the prospectus for a particular unit trust.

Investment policy - The investment approach of the fund manager, as stated in the prospectus for a particular unit trust. This can range from a top-down to bottom-up. Related: Top-down investing , Bottom-up investing, Contrarian investing and Technical investing.

Launch price - The offer price of a new unit trust issue. Launch prices may include some discounts. These can work out to between 3-5% of the fund's front-end load.

Launch date - The date that a unit trust is open to investments.

Liquidity - A term to describe the ability of an investor to buy or sell a unit trust with ease.

Long bond - A bond with a long maturity date. Examples include the 30-year US Treasuries.

Management fee - The annual fee charged by the fund manager for managing the unit trusts. This is usually between 1-2% of the investment sum.

Marked to the market - The valuation of a unit trust at the prevailing closing prices of all the securities in its portfolio. This is to reflect the current market value, and remove the distinction between realised and unrealised losses.

Market capitalization - The total dollar value of all outstanding shares of a company or all the companies listed on an exchange, calculated by multiplying the number of shares and its current market price.

Market index - An index that comprises a predetermined basket of securities to reflect the general performance of the market. Such sets may be based on published indexes or may be customized to suit an investment strategy. Examples include stock indices like the Dow Jones Industrials or the Straits Times index. Related: Benchmark index

Maturity date - Mainly applies to fixed income securities like bonds. The date on which the principal amount of the bond becomes due and payable.

Minimum subscription amount - The minimum investment amount for a unit trust.

Minimum subsequent investment - The minimum investment amount for a unit trust following an initial investment.

Money market fund - A unit trust that invests primarily in money market instruments and other short-term debt instruments. Its aim is to provide a higher-yielding alternative to deposit accounts.

Money market instruments - Financial instruments with a maturity of less than 1 year. Examples include commercial paper, certificates of deposits (time deposits) and promissory notes. Related: Fixed income securities

Net asset value (NAV) - The market value of a unit trust's assets and income, less any liabilities, divided by the number of outstanding shares in the unit trust.

No-load - No initial or redemption fees. You only need to pay the annual management fee when you buy a "no-load" unit trust. Contrast with Front-end load and Back-end load.

Offer price - The price at which the fund manager will sell you a unit trust. Related: Bid price

Open-end fund - A fund that is ready to sell new shares to the public and to redeem its outstanding shares on demand at a price equal to an appropriate share of its portfolio's value, calculated at the close of each trading day. Related: Closed-end fund

Overbought - A situation whereby the bullish sentiment for a particular security and/or market have pushed prices up dramatically. A technical correction is usually expected under such circumstances.

Overshooting - The tendency for markets to overreact in euphoria or panic to an event/news, hence pushing the prices of stocks beyond its fair value.

Oversold - A situation whereby the bearish sentiment for a particular stock and/or market have pushed prices down dramatically. A technical rebound is usually expected under such circumstances.

Paper gain (loss) - The unrealized capital gain or loss on a unit trust, based on a comparison of current market price to its initial purchase price.

Passive investing - An investment style that relies on diversification and benchmarking against some market index. It assumes that the marketplace will reflect all available information in the price paid for securities, and therefore, does not attempt to find mispriced securities. Also called buy-and-hold investing. Contrast with Active investing.

Penny stock - A stock that typically sells for less than $1 a share, and which belongs to a company with a small market capitalisation.

Performance evaluation - The evaluation of a fund manager's performance which involves, first, determining whether he had added value by outperforming the established benchmark (performance measurement) and, second, determining how he achieved the calculated return (performance attribution analysis).

Preferred stock - A security that shows ownership in a company and gives the holder a claim on its earnings and assets ahead of its common stockholders should the company file for bankruptcy. Unlike common stocks however, preferred stocks usually don't carry voting rights.

Program trading - A strategy that executes a basket of different stocks simultaneously. These trades are often based on signals from computer programs, usually entered directly from the traders' computer to the market's computer system and executed automatically. The objective of program trading can range from index arbitrage to portfolio restructuring.

Prospectus - A formal written document issued by fund management companies that will describe the investment objectives of a unit trust, its risks, and other essential information to help a potential investor decide on whether or not to buy the unit trust

Rally - A rise in the prices of securities and/or the overall market within a general declining trend. Such a rally may result because investors are bargain hunting or because analysts have noticed a particular support level at which securities usually bounce up. Contrast with Correction.

Regional fund - A fund that invests primarily in the securities of companies listed on stock exchanges in a particular region, say Asia, as well as other types of securities trading in the local markets. A typical regional fund will comprise many blue-chip stocks from the region. Contrast with Country fund and Global fund.

Relative returns - The annualised returns of a unit trust measured against the annualised returns of a benchmark index.

Resistance level - The price level that analysts believe will cap any further upside of an asset. At this level, technical analysts also reckon the asset could face strong selling. Contrast with Support level.

Retracement - A price movement in the opposite direction of the previous trend.

Reversal day - A day on which the market reaches a new high (low) and then reverses direction, closing below (above) one or more immediately preceding daily closes.

Risk adjusted return - The return on an asset or a portfolio that takes into account the risk exposure of the asset or portfolio.

Risk arbitrage - Traditionally, a strategy that buys the stock in a company being acquired and sells the acquirer's stock at about the same time. Modern "risk arbitrage" focuses on capturing the spreads between the market value of an announced takeover target and the eventual price at which the acquirer will buy the target's shares.

Risk classification - A system to categorise unit trusts according to the level of risks it undertakes.

Risk management - The process of identifying and evaluating a range of risks and employing the necessary techniques to manage those risks.

Risk profile - A system to understand the investors' appetite for risk. This can range from Conservative to Aggressive.

Risk-reward ratio - The ratio of the estimated potential loss of a trade to the estimated potential gain. According to conventional thinking, an asset with higher risk should give higher returns. This is however not necessarily true.

Special dividend - An extra dividend given to a company's shareholders because of its unexpected strong earnings for example.

Spread - The difference between the bid and ask prices of a security or unit trust.

Support level - The price level that analysts believe will cushion any further downside of an asset. At this level, technical analysts also reckon the asset could face strong buying. Contrast with Resistance level.

Switching fee - The fee that investors have to pay when they switch from one fund to another within an umbrella of funds.

Technical analysis - A form of security analysis that seeks to forecast the movements of prices of securities as well as the overall market based primarily on historical price and volume trends in those securities and markets. Contrast with Fundamental analysis.

Technical investing - An investing approach that relies on charts and the historical prices of securities. Related: Top-down investing , Bottom-up investing and Contrarian investing

Top-down investing - An investment approach based on first making an analysis of macroeconomic factors, then industries and finally companies. Contrast with Bottom-up investing. Related: Contrarian investing and Technical investing.

Trading range - The difference between the high and low prices of an asset or market index during a specified period of time

Trend - The tendency of prices to move in a given general direction. A move up is known as an uptrend, while a move down is a downtrend. A market moving sideways is called a trendless market.

Trend-following system - A system that generates buy and sell signals in the direction of a newly defined trend, based on the assumption that a trend, once established, will tend to continue.

Trustee - An institution that holds a unit trust's assets in safekeeping.

Unit trust - An investment portfolio that pools funds from a broad range of investors to buy a range of assets such as equities and bonds. A unit trust allows investors to own a piece of an expensive stock in the form of units from the portfolio as well as to diversify his risks. Unit trusts are usually characterised by their investment objectives, their investment policies, the geographical location of the markets they invest in, and their risk classification.

Umbrella fund - A collection of unit trusts (or sub-funds) that is administered by the same manager. An umbrella fund provides benefits such as switching privileges and lower transaction costs. Related: Feeder fund.

Value-based investing - A strategy that seeks to buy securities with strong fundamentals and economic prospects at a fair price.

Value portfolio - A unit trust that places high emphasis on the fundamentals of a company and/or economy. It seeks to buy securities that are trading at a discount to their "fair value" and sell them at or in excess of that value.

Whipsaw - A price pattern characterised by repeated and abrupt reversals in trend in what is called a choppy market.

Window dressing - A process of asset re-allocation by fund managers near the end of a quarter or fiscal year to dress up a portfolio and present it to their clients or shareholders. For example, the manager may sell losing positions in his portfolio and buy "hot" stocks to supplement those that have gained in value.