The theory that stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market cannot be used to predict its future movement. Taobiz explains Random Walk Theory In short, this is the idea that stocks take a random and unpredictable path. A follower of the random walk theory believes it's impossible to outperform the market without assuming additional risk. Critics of the theory, however, contend that stocks do maintain price trends over time - in other words, that it is possible to outperform the market by carefully selecting entry and exit points for equity investments. This theory raised a lot of eyebrows in 1973 when author Burton Malkiel wrote "A Random Walk Down Wall Street", which remains on the top-seller list for finance books.
Municipal debt securities issued by a government agency on behalf of a private sector company and intended to build or acquire factories or other heavy equipment and tools. |||Industrial Development Revenue Bonds are issued by a government to assist a private company that might otherwise be unable to obtain financing for its industrial venture or unwilling to undertake the project on its own. The government's goal in providing the debt securities is to improve the economic and employment conditions of its region.
Exchange-traded funds that invest the majority of assets in equity REIT securities and related derivatives. REIT ETFs are passively managed around an index of publicly traded real estate owners; indexes may vary from provider to provider but two popular benchmarks are the MSCI U.S. REIT Index and the Dow Jones U.S. REIT Index, both of which cover about two-thirds of the aggregate value of the publicly-traded REIT market domestically. REIT ETFs are characterized by their above-average dividend yields. Watch: Understanding ETF Taobiz explains REIT ETF REIT securities have traits of both equities and fixed income securities; high dividend yields provide consistent income (REITS must pay out the majority of profits to investors each year), but valuations can swing along with the equity market. Investors should read prospectus materials closely when researching REIT ETFs; many different indexes with a variety of focuses (commercial mortgages, high-risk mortgages etc.) exist.
A savings certificate entitling the bearer to receive an interest rate that is indexed to inflation. The indexed certificate of deposit (indexed CD) yields a rate of return that is linked to a stock market index, such as the S&P 500 or the NASDAQ 100. |||Although indexed CDs have their principle guaranteed by the Federal Deposit Insurance Corporation (FDIC) like any other certificate of deposit (CD), the returns based on a market index and are not guaranteed in any way. Many look at these products as either a safer way into the stock market, or a riskier money market product.
Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. 2. In terms of mutual funds, it is the reinvestment of distributions and dividends to purchase additional units of that fund. 3. In terms of tax gain/loss harvesting, it is the realization of losses to offset a capital gains liability. Taobiz explains Reinvestment This is definitely a great way to significantly increase the value of a stock or mutual fund. In the case of stocks, investors can use dividends to buy additional shares instead of receiving payments in cash.
An indicator of potential problems with a security. Most often used to refer to a stock, a red flag can be any undesirable characteristic that stands out to an analyst. There is no universal standard for identifying red flags; the method used will depend on the investment methodology being employed. Taobiz explains Red Flag A red flag is anything that marks a stock as undesirable. Because there are many different methods used to pick stocks, there are many different types of red flags. What is a red flag for one person might even be considered desirable by another. For example, low institutional ownership might be a positive for someone looking for undiscovered companies, but a negative for a pension fund that searches out blue chips.
A bond in which payment of income on the principal is related to a specific price index, often the Consumer Price Index. This feature provides protection to investors by shielding them from changes in the underlying index. The bond's cash flows are adjusted to ensure that the holder of the bond receives a known real rate of return. In Canada, they also referred to as "real return bonds". |||This type of bond is valuable to investors because the real value of the bond is known from purchase and the risk involved with uncertainty is eliminated. These bonds are also less volatile than nominal bonds and they help investors to maintain their purchasing power. For example, assume that you purchase a regular bond with a nominal return of 4%. If inflation is 3%, you will actually only receive 1% in real terns. On the other hand, if you buy an index-linked bond your cash flow will be adjusted to changes in inflation and you will still receive the full 4% in returns.
A company based in Mainland China that is incorporated internationally and listed on the Hong Kong Stock Exchange. Red chip stocks are expected to maintain the filing and reporting requirements of the Hong Kong exchange, which makes them a main outlet for foreign investors who wish to participate in the rapid growth of the Chinese economy. Red chips may be issued in addition to A-shares in the same companies, although only Chinese citizens can invest in A-shares. Taobiz explains Red Chip Thirty red chip stocks (a reference to the color of China's flag) make up the Hang Seng China-Affiliated Corporations Index, which appreciated rapidly in the 2002-2007 time frame. As a sign of the pent-up demand among mainland Chinese citizens for Chinese stocks, the A-shares they are permitted to invest in often have 30-50% premiums compared to red chips for the exact same companies.
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