Financial Literacy - Financial tuneup
Investment glossary of terms

35. Passively managed -- A fund that emulates a market index instead of actively pursuing an investing scheme to beat the market.

36. Prospectus -- An official document that details the fund's objectives, history, manager background and financial statements.

37. R-squared -- R-squared measures a fund's movements against its particular benchmark index on a scale ranging from 1 to 100. An S&P 500 index fund will have an R-squared very close to 100 because the fund mirrors the index. A fund with a low R-squared number is moving out of sync with its index.

38. REIT -- Real estate investment trusts. In order to qualify as a REIT, a company must derive a certain percentage of income from real estate and pass on 90 percent of its earnings to shareholders. REITs invest in any kind of commercial real estate, from shopping malls to timberlands, even in mortgages. REITs sell on the major exchanges as stocks but can be owned in a mutual fund or ETF.

39. Return -- The amount of money gained or lost on an investment in relation to the amount invested. It's usually stated as a percentage; for example a $25 gain on a $100 investment would have a 25 percent return.

40. Risk -- The probability that the return will be less than expected.

41. Risk tolerance -- An investor's ability to psychologically endure the possibility of losing money.

42. S&P 500 -- Standard and Poor's 500 index is a leading indicator of large cap U.S. equities made up of 500 stocks chosen by the S&P Index Committee. Stocks are chosen based on their representation of industries in the economy and liquidity. There is also an index for small-cap companies, the S&P 600, and an index of midcap companies, the S&P 400.

43. Sector -- A group of companies in the same line of business, for example technology, telecommunications or pharmaceutical.

44. Small cap -- A stock with a market capitalization between $300 million and $2 billion.


45. Standard deviation -- A measure of the volatility of an investment or a portfolio that shows how much it differs from its annual return or its expected return. For example, a mutual fund with a standard deviation of 10 means that about two-thirds of the time, it will be within 10 percent of its average price. Such a fund has greater volatility than one with a lower standard deviation.

46. Value fund -- A mutual fund that invests mainly in value stocks or stocks that are underpriced according to fundamental analysis. Such metrics as the price-to-earnings ratio are used to gauge value.

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