ETF Glossary - Hedge - New York Stock Exchange
Hedge
A strategy used to reduce financial risk, or the possibility of loss. For example, an investor owning 100 shares of the Nasdaq 100 (QQQ), could hedge that long position by owning a short position, or one put option.
Income fund
A mutual fund, closed end fund, or ETF that has generating income, as the primary investment objective. Income can be derived from various sources, including interest, dividends, and capital gains.
Index
A statistical measure used to track the aggregate performance of stock, bond, and commodities markets. Widely followed indexes include those developed and managed by Standard & Poor's, Russell, and Dow Jones.
Index fund
A mutual fund or ETF that seeks to match the exact performance of a specific market or benchmark index. Index funds are sometimes referred to as passive funds, and are popular for their tax efficiency and low fees. Popular index funds include those that track the S&P;, Russell, and Dow Jones indices.
Indexing
Investment strategy that seeks to match the exact performance of a specific market or benchmark index.
Index options
Calls and puts on stock or bond indexes. Index options allow investors to trade a particular market sector or index of securities, without having to make individual purchases of each security in that sector. Index options are listed on various exchanges, including the American, New York, and Chicago Board Options Exchange.
Investment company institute (ici)
The Investment Company Institute (ICI) is the national association of the U.S. investment company industry. Founded in 1940, its membership includes approximately 8,664 mutual funds, 601 closed-end funds, 106 exchange-traded funds, and six sponsors of unit investment trusts.
Investment company act of 1940
This Act regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public. The regulation is designed to minimize conflicts of interest that arise in these complex operations. The Act requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis. The focus of this Act is on disclosure to the investing public of information about the fund and its investment objectives, as well as on investment company structure and operations.
Investment grade
Bonds whose issuers are rated AAA to BBB for safety and ability to repay principal by Standard & Poor's or Moody's Investors Service.
Investment style
Indicates the approach of an investment manager in selecting securities. For example, a certain manager may be value oriented, whereas another may emphasize growth.
Large cap
Refers to companies with a market capitalization over $5 billion.
Leverage
Margin and use of option contracts are forms of leverage which allow investors to enhance their returns without adding to their investments.
Liquidity
Ability to rapidly buy or sell an asset without substantially affecting the asset's price. ETFs with limited trading activity are generally not considered liquid because a large buy or sell order can dramatically impact the price and volatility. Liquidity also refers to the relative ease with which an asset can be converted into cash.
Mid cap
Refers to companies with a market capitalization between $1 billion and $5 billion.
Msci
Morgan Stanley Capital International, Inc. (MSCI) distributes index and company-level data and also licenses the MSCI indices to third parties for the purposes of creating Mutual Funds, listed and OTC derivatives, Exchange Traded Funds, research and proprietary products.
Nasd
National Association of Securities Dealers is a nonprofit organization that operates under the careful watch of the SEC. One of its key purposes is to establish and enforce fair rules of securities trading.
Nasdaq
National Association of Securities Dealers Automated Quotations is a computerized system that quotes securities traded over the counter and on other exchanges.
Net asset value (nav)
Represents the per share price of a mutual fund. With closed end funds and ETFs, the true NAV is not always reflected in the share price of the security because it may trade at a premium or discount to the NAV. The calculation of NAV is the fund's total net assets divided by the number of shares outstanding, minus fees and expenses.
New york stock exchange
Located on Wall Street in New York, this is the oldest and largest stock exchange in the U.S. Also known as the "Big Board", or "Exchange".
Brokerage Products and Services offered by Scottrade, Inc. - Member FINRA and SIPC
Any specific securities, or types of securities, used as examples are for demonstration purposes only. No information on this Web site should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security.
Investors should consider the investment objectives, risks, charges, and expenses of an ETF carefully before investing. For a prospectus containing this, and other important information, contact the fund company. The prospectus should be read carefully before investing.
Investors should consider the investment objectives, risks, and charges and expenses of a mutual fund carefully before investing. A mutual fund's prospectus contains this and other information about the mutual fund. Prospectuses are available through our trading site or through a Scottrade branch office. The prospectus should be read carefully before investing. No transaction fee (NTF) funds are subject to the terms and conditions of the NTF funds program. Scottrade is compensated by the funds participating in the NTF program through recordkeeping, shareholder, or SEC 12b-1 fees.
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