Definitions Flashcards
what`s an alternative investment?
An alternative investment refers to investment options that fall outside the traditional asset classes of stocks, bonds, and cash. These can include:
- Real estate (such as REITs or direct property investments)
- Private equity (investing in private companies)
- Commodities (like gold, oil, or agricultural products)
- Hedge funds
- Venture capital
- Collectibles (such as art or rare coins)
These investments often have a different risk-return profile and can offer diversification benefits, though they may be less liquid and harder to value than traditional investments.
what is a commodity
a material that is often used to create other products, so examples are wheat, gold, copper, etc.
what is a sales communication?
A sales communication includes any communication relating to a mutual fund that induces the public to invest in that mutual fund.
This includes printed material, audio and visual displays, and personal endorsements. Part 1.1 of NI 81-102 specifically excludes the prospectus, the annual information form, financial statements, trade confirmations, and statements of account.
what is a national instrument? and while we are here, who creates them?
A National Instrument is an instrument that has been adopted in all thirteen Canadian provinces and territories. A Multilateral Instrument is an instrument that has been adopted in more than one, but not all Canadian provinces and territories.
CSA
what does hedging mean?
going against.
e.g. hedge fund goes against the market
hedging your risk means preventing risk
what is REIT
real estate investment trust
what is a bond rating?
A bond rating is an evaluation of the creditworthiness of a bond issuer, which helps investors assess the risk of default on the bond. It is assigned by credit rating agencies like Moody’s, Standard & Poor’s (S&P), and Fitch. The rating reflects the issuer’s ability to repay the principal and interest on the bond.
Bond ratings range from high-quality investment-grade ratings to lower-quality, higher-risk ratings:
- Investment-grade bonds (e.g., AAA, AA, A) are considered lower risk and have a lower likelihood of default.
- Non-investment-grade bonds (e.g., BB, B, CCC) are considered riskier and are often referred to as “junk bonds.”
A higher rating means the issuer is seen as financially stable and less likely to default, while a lower rating indicates higher risk.
what is YTM
Yield to maturity (YTM) represents the total return an investor can expect if the bond is held until maturity, considering both the bond’s current price, coupon payments, and the face value to be received at maturity.
what is growth investing?
Growth investing involves buying securities, typically stocks, in the hope that their prices will increase over time due to the company’s growth potential
What is a bear market?
A market in which stock prices are falling. A bear market refers to a period when the overall market or a specific asset class experiences a decline of 20% or more from its recent highs.
bear because bears swat their prey downward
whats a bull market?
In contrast, a bull market refers to rising prices, as bulls attack by thrusting their horns upward, which is symbolically linked to the upward trend in stock prices.
what is value investing?
The primary goal of value investing is: To invest in companies that are undervalued compared to their intrinsic value. Value investors look for stocks that they believe are trading for less than their true worth, hoping that the market will eventually recognize their value
what is systematic risk
Systematic risk affects the entire market or economy, such as risks from interest rates, inflation, or economic recessions, and cannot be eliminated through diversification.
whats systemic risk?
Systemic risk is the possibility that an event at the company level could trigger severe instability or collapse an entire industry or economy. Systemic risk was a major contributor to the financial crisis of 2008. Companies considered to be a systemic risk are called “too big to fail. (google)
difference between systematic & unsystematic risks. also whats another name for systematic risk?
Systematic risk (aka market risk) refers to the risk that affects the entire market or economy, such as economic downturns, changes in interest rates, or natural disasters. It’s different from unsystematic risk, which is specific to an individual company or industry and can be reduced through diversification.
Understanding how to manage both systematic and unsystematic risk is key to making informed investment decisions.
