Investment glossary

Equities

Registered, book-entry securities, certifying right of ownership over a given share from a public limited company to the owner of the securities, right to receive dividend, right to participate and to vote in the General Meeting of the shareholders, right to a liquidity share. In contrast to the instruments with fixed return, the equities don’t guarantee to their owners payment of annual return in the form of interests and dividends. The return from equities is formed by two possible sources – distribution of annual dividend and capital increase (increase in the prices of equities during the period in which they are possessed by the mutual fund). In conformity to the Bulgarian legislation, to the shareholders of a public limited company are given a proportional to their stake number of rights in connection to the taken decision to increase the capital. This gives a possibility to the shareholders to keep their stake in the company unchanged as well as to avoid the consequences from an eventual dilution of the capital.

Alpha (Jensen's Alpha)

Expresses the risk-adjusted outperformance of the fund compared to the benchmark. With regard to this indicator, it should be kept in mind that the higher the value, the more positive it is, as it reflects the outperformance of the benchmark.

Benchmark

A ‘standard’ for measuring the performance of a securities fund.

Volatility

Indicates a security's tendency to experience fluctuations and is expressed in percents value. The higher the percent value, the greater the volatility, i.e. the greater risks and opportunities represented by a security.

Derivatives

May refer to: (1) Securities bearing a contractual relation to some underlying asset or rate. Options, futures, forward, and swap contracts, as well as many forms of bonds, are derivative securities.
(2) A financial instrument that offers a return based on the return of some other underlying asset.

Diversification

An investment strategy used to reduce the risk by investing in different assets: fund units, bonds, currencies, properties etc. including also securities issued by different issuers and different countries. The issuer can be a public limited company, municipality or government.

Dealer

A professional participant (investment intermediary) who performs activity in the buy-sell of securities on regulated securities markets and doesn’t work directly with end investors.

Treasury bill

A long-term security issued and guaranteed by the USA government.

Duration indicates

The period of time for which a bond needs to compensate for price fluctuations caused by changes in market interest rates. The longer the duration, the greater the interest rate risk.

Issuer

A legal entity which issues securities and the issuer has a debt obligation.

Mortgage-backed bonds

Bonds that pledge specific assets such as buildings and equipment. The proceeds from the sale of these assets are used to pay off bondholders in case of bankruptcy.

Municipality bonds

Securities with long-term maturity issued by municipalities (local authorities) in order to finance debts and investment projects.

Corporate bonds

Securities with long-term maturity issued by public limited companies in order to gather working capital or for investment purposes.

Liquidity

The degree to which an asset can be sold quickly and easily without loss in value.

Market price

The average price of the contracted deals with given securities on regulated securities markets in the closest day from the last thirty-day period in which the securities are traded in volume, not less than the volume of the owned from the mutual fund securities of this type.

Performance

An expression which denotes the return on a capital investment. It includes the price of the security and all distributions. Performance is a measurement for the success of an investment. It is usually indicated in percent per year or over a certain period of time.

Value of the portfolio

The net asset value included in the portfolio of the fund, as the valuation is accomplished in compliance to the accepted and described in the rules of the mutual fund methods for assessment of the value of the assets.

Hedging

A trading strategy in which derivative securities are used to eliminate (neutralize) or reduce a counterparty’s risk exposure to an underlying asset.