Glossary of Financial Terms
Expressed as a percentage, annualized return calculates the return of a mutual fund or other investment over the period of an average year within a given duration. For example, an annualized ten year-return calculates the average annual return required to result in the 10-year cumulative return.
Asked or Offering Price
The price at which a mutual fund's shares can be purchased. The asked or offering price means the current net asset value (NAV) per share plus sales charge, if any. For a no-load fund, the asked price is the same as the NAV.
The smallest measure used for quoting yields on bonds and notes. One basis point is 0.01% of yield. So, if the Federal Reserve increases rates 50 basis points, or a bond's yield changes 50 basis points, that equates to 0.5% or 1/2 of 1%.
Capital Gains Distributions
A taxable distribution paid to shareholders when any investments in their mutual fund's portfolio are sold at a profit. Realized Capital Gains are when stock or bond holdings are sold at a profit. Unrealized Capital Gains represent an increase in the market value of a mutual fund.
A fund with a fixed number of shares outstanding, and one which does not redeem shares the way a typical mutual fund does. Closed-end funds behave more like stock than open-end funds: closed-end funds issue a fixed number of shares to the public in an initial public offering, after which time shares in the fund are bought and sold on a stock exchange, and they are not obligated to issue new shares or redeem outstanding shares as open-end funds are. The price of a share in a closed-end fund is determined entirely by market demand, so shares can either trade below their net asset value ("at a discount") or above it ("at a premium").
The income or capital gain made by a mutual fund that is paid to the fund's investors.
The option to reinvest cash dividends by purchasing additional shares or fractional shares on the dividend payment date.
Net Asset Value - (NAV)
In the context of mutual funds, the total value of the fund's portfolio less liabilities. The NAV is usually calculated on a daily basis.
A legal document that provides full disclosure of all information investors need to make a sound decision about an investment. Financial institutions file prospectuses with the Securities and Exchange Commission (SEC).