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Equities are 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 (aka 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 is 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 is 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 is 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 is 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 is a legal entity which issues securities and the issuer has a debt
obligation.
Mortgage-backed bonds are 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 are securities with long-term maturity issued by municipalities (local authorities)
in order to finance debts and investment projects.
Corporate bonds are securities with long-term maturity issued by public limited companies in order
to gather working capital or for investment purposes.
Liquidity is the degree to which an asset can be
sold quickly and easily without loss in value.
Market price is 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 is 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 is 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 is a trading strategy in which derivative securities are used to
eliminate (neutralize) or reduce a counterparty’s risk exposure to an
underlying asset.
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