A security that combines common stock and notes of the issuer to provide regular income payments to the holder of the security. The holder of the income deposit security receives dividends from the common stock, and fixed income from the debt instrument in the IDS. Taobiz explains Income Deposit Security - IDS These types of securities are traded on stock exchanges and can be purchased by any type of investor. The companies that use this form of security are usually very stable and mature businesses. (This type of security is similar to the Canadian income trust, whose structure helps efficient distribution of a company's cash flow to investors.)
A brokerage account where the customer's securities and assets are held under the name of the brokerage firm, rather than the name of the individual who purchased the security or asset. Although the name on the certificate is not that of the individual, they are still listed as the real and beneficial owner and have the rights associated with the security. Taobiz explains In Street Name It is more convenient for brokers to hold securities in street name due to the complexity of tracking each stock certificate to each individual. Almost all brokers hold securities electronically and all securities in a brokers name comprise their inventory. Any time a client needs to buy or sell stocks, the broker is readily able to allocate a portion of their inventory as required. If brokers were to hold an inventory of paper securities, securities transactions would take more time. For example, if a client would like to sell their certificates, the broker would have to find the exact stock certificates owned by the client and send those securities back to the issuing company who would then change the names on the securities to that of the new owners.
The day that a corporation has a secondary offering of shares to the public. Taobiz explains Impact Day This typically results in a downward movement in share prices because of the excess supply.
The yield that a share of stock would return based on its current indicated dividend. It is calculated by dividing the indicated dividend by the current share price. It is usually quoted as a percentage. Taobiz explains Indicated Yield This is a rough forecasting technique.
An exchange-traded fund that is based on a basket of securities listed on various exchanges in India. India ETFs aim to capture the major sectors of the Indian economy by owning a diversified mix of major companies that represent the majority of the total market capitalization of the Indian economy. Watch: Understanding ETF Taobiz explains India ETF India has become a burgeoning economy with specific proficiency in knowledge-based sectors such as information technology, financials and healthcare. India ETFs carry a higher expense ratio than most domestic funds, but it should be noted that administrative costs will typically be higher when international investments are involved due to increased exchange costs and brokerage fees for trading on an international exchange.
A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value. Stock and bond market indexes are used to construct index mutual funds and exchange-traded funds (ETFs) whose portfolios mirror the components of the index. Taobiz explains Index The Standard & Poor's 500 is one of the world's best known indexes, and is the most commonly used benchmark for the stock market. Other prominent indexes include the DJ Wilshire 5000 (total stock market), the MSCI EAFE (foreign stocks in Europe, Australasia, Far East) and the Lehman Brothers Aggregate Bond Index (total bond market). Because, technically, you can't actually invest in an index, index mutual funds and exchange-traded funds (based on indexes) allow investors to invest in securities representing broad market segments and/or the total market.
A passive index investing strategy that is established by using a combination of index funds and long-term equity anticipation securities (LEAPS). The investor must roll over a series of LEAP options in an attempt to gain exposure to a long-term move in an index. The leverage from the options allows the investor to magnify gains and can result in outperforming an index over the long run. Taobiz explains Index Roll This type of investing strategy allows an investor to have the same exposure to a standard benchmark, but often with less capital because of the exposure from the LEAP option. Over time, the position will have similar payoff characteristics to a regular indexing strategy, but returns tend to be slightly magnified because of the exposure from the option in the early stages of the setup.
Exchange-traded funds that follow a specific benchmark index as closely as possible. Index ETFs are much like index mutual funds, but whereas the mutual fund shares can only be redeemed at one price daily, the closing net asset value (NAV), index ETFs can be bought and sold throughout the day on exchanges. Through an index ETF, investors get exposure to a large number of securities in a single transaction. Index ETFs can cover U.S. and foreign markets, specific sectors, or a specific class of stock (i.e. small-caps, ADRs, etc.) but all incorporate a passive investment strategy, only making portfolio changes when changes occur in the underlying index. Taobiz explains Index ETF Index ETFs may occasionally trade at slight premiums or discounts to the fund's NAV, but any differences will quickly be ferreted out through arbitrage by institutional investors. In most cases, even the intraday prices will correlate rather precisely to the actual value of the underlying securities. Additional options are available such as leveraged ETFs or short ETFs, which will have a compound or inverse response, respectively, to the underlying index. Index ETFs can be found based on most of the major indexes such as the Dow Jones Industrial Average, the S&P 500 and the Russell 2000. Costs are comparable to the cheapest no-load index mutual funds as measured by the expense ratio, but investors will typically have to pay standard commission rates for ETF trades. Mutual fund commission rates are typically lower than for exchange-traded securities. Index ETFs can be set up as either grantor trusts, unit investment trusts (UITs) or open-ended mutual funds, and will have slightly different regulatory guidelines as a result. Most index ETF shares can be traded with limit orders, sold short and purchased on margin.
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