| Alpha
A coefficient measuring the risk-adjusted performance, considering the risk due to the
specific security, rather than the overall market. A large alpha indicates that the stock
or mutual fund has performed better than would be predicted given its beta (volatility).
Asked or Offering Price
(As seen in some mutual fund newspaper listings) The price at which a mutual fund's shares
can be purchased. The asked or offering price includes the current net asset value per
share plus any sales charge.
Assets
The investment holdings and cash owned by a mutual fund.
Automatic Reinvestment
A shareholder-authorized purchase of additional shares using dividends and capital gain
distributions.
Average-Weighted Coupon
The figure is calculated by weighting the rate of interest of a bond held in a portfolio
by its relative size based on market value with respect to the entire portfolio.
Average Weighted Maturity
Listed only for municipal bond funds, this figure is computed by weighting the nominal
maturity of each security in the portfolio by the market value of the security, then
averaging these weighted figures.
Bear Market
A period during which security prices are generally falling.
Beta
A measure of a fund's sensitivity to market movements. The beta of the market is 1.00 by
definition. Because Morningstar calculates beta by comparing a fund's excess return over
Treasury bills, to the markets' excess return over Treasury bills, a beta of 1.10 shows
that the fund's excess return is expected to be 10% better than the market's excess
return. A beta of 0.85. for example, indicates that the fund's excess return is expected
to perform 15% worse than the market's excess return during up markets and 15% better
during down markets.
Bid or Sell Price
(as seen in some mutual fund newspaper listings) The price at which a mutual fund's shares
are redeemed, or bought back, by the fund. The bid or redemption price is usually the
fund's current net asset value per share.
Blue Sky Laws
A body of state laws governing registration and distribution of mutual fund shares. All 50
states and the District of Columbia regulate mutual funds.
Bond
A debt security issued by a company, municipality, or government agency. A bond investor
lends money to the issuer and, in exchange, the issuer promises to repay the loan amount
on a specified maturity date; the issuer also generally pays the bondholder periodic,
fixed-interest payments over the life of the loan.
Bottom-Up
Investing
When an investment firm looks for attractive companies before considering
economic trends. This approach assumes that companies can do well, even in
an industry or country that is not performing well.
Bull Market
A period during which security prices are generally rising.
Capital Appreciation
An increase in the market value of a mutual fund's portfolio securities, as reflected in
the net asset value (NAV) of the fund's shares. Capital appreciation (or growth) is a
specific long-term objective of many mutual funds.
Capital Gain Distribution
A payment to shareholders of profits realized from the disposition of a mutual fund's
portfolio securities. For tax purposes, if these gains are held for more than one year,
they may be distributed as a capital gain dividend. A fund shareholder treats a capital
gain dividend, which is typically distributed once a year in December, as a long-term
capital gain. However, any gains from securities held less than a year (by the fund) is
not treated as short-term capital gains. Instead, these payments to shareholders are
treated as ordinary income, as if the payments were attributable to dividend or interest
income.
Compounding
Earnings on an investment's earnings. For example, if you invest $1,000 at a fixed rate of
5 percent per year, your initial investment is worth $1,050 after one year. During the
second year, assuming the same rate of return, earnings are based not on the original
$1,000 investment, but also on the $50 in first-year earnings. Over time, compounding can
produce significant growth in the value of an investment.
Diversification
The practice of investing broadly across a number of securities to reduce risk; a hallmark
of mutual fund investing.
Expense Ratio
A fund's cost of doing business - disclosed in the prospectus - as a percent of its
assets. The percentage of fund assets paid for operating expenses and management fees,
including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the
fund, except brokerage costs. Fund expenses are reflected in the fund's NAV. Sales
charges are not included in the expense ratio.
Family of Funds
A group of mutual funds, each typically with its own investment objective, managed and
distributed by the investment adviser.
401(k) Plan
An employer-sponsored retirement plan that enables employees to defer taxes on a portion
of their salaries by earmarking that portion for the retirement plan. 401(k) plans are
regulated by the Employee Retirement Income Security Act of 1974 (ERISA) and provisions of
the Internal Revenue Code (IRC).
403(b) Plan
An employer-sponsored retirement plan that enables employees of universities, public
schools, and nonprofit organizations to defer taxes on a portion of their salaries by
earmarking that portion for the retirement plan. 403(b) plans are also subject to ERISA
and the IRC.
Income
Dividends, interest, and/or short-term capital gains paid to a mutual fund's shareholders.
Income is earned on a fund's investment portfolio after deducting operating expenses.
Individual Retirement Account
(IRA)
An investor-established, tax-deferred account set up to hold funds until retirement.
Investment Objective
The goal, for example - long term capital growth or current income - that an investor and
mutual fund pursue together.
Modern Portfolio Theory (MPT)
Overall investment strategy that seeks to construct an optimal portfolio by considering
the relationship between risk and return, especially as measured by alpha, beta, and
R-squared.
Mutual Fund
An investment company that pools money from shareholders and invests in a variety of
securities, including stocks, bonds, and money market instruments. A mutual fund stands
ready to buy back (redeem) its shares at their current net asset value, which depends on
the total market value of the fund's investment portfolio at the time of redemption. As
open-end investments, most mutual funds continuously offer new shares to investors.
Net Assets
Total assets minus total liabilities of an individual or company. For a company, also
called owner's equity or shareholders' equity.
Net Asset Value (NAV)
The market worth of one share of a mutual fund, this figure is calculated by adding a
fund's total assets (securities, cash, and any accrued earnings), subtracting liabilities,
and dividing by the number of shares outstanding.
No-load Fund
A mutual fund whose shares are sold at net asset value.
Portfolio
A collection of securities owned by an individual or an institution (such as a mutual
fund) that may include stocks, bonds, and money market securities.
Portfolio Managers
Specialists generally employed by a mutual fund company's investment adviser to invest its
pool of assets in accordance with predetermined investment objectives.
Portfolio Turnover
A measure of the trading activity in a fund's investment portfolio; in essence, how often
securities are bought and sold by a fund.
Price to book Ratio (P/B Ratio)
A stock's capitalization divided by its book value. The value is the same whether the
calculation is done for the whole company or on a per-share basis.
Price/Earnings (P/E) Ratio
The weighted average of the price/earnings ratios of the stocks in a fund's portfolio. The
P/E ratio of a stock is calculated by dividing the current price of the stock by its
trailing 12 months' earnings per share. In computing the average, Morningstar weights each
portfolio holding by the percentage of equity assets it represents, so that larger
positions have proportionately greater influence on the funds final P/E.
Professional Management
The full-time, experienced team of professionals generally employed by a fund's investment
adviser that decides what securities to buy, hold, and sell for a mutual fund portfolio.
Prospectus
The official document that describes a mutual fund to all prospective investors. The
prospectus contains information required by federal securities laws and the Securities and
Exchange Commission, such as investment objectives and policies, services, and fees.
R-Squared
A measurement of how closely a portfolio's performance correlates with the performance
of a benchmark index, such as the S&P 500, and thus a measurement of what portion of
its performance can be explained by the performance of the overall market or index. Ranges
from 0 to 1 (or 100), where 0 indicates no correlation and 1 (or 100) indicates perfect
correlation.
Reinvestment Privilege
An option whereby mutual fund dividends and capital gain distributions automatically buy
new fund shares at the then-current NAV per share and thus increase the investor's
holdings.
Risk
The possibility that an investment may fluctuate in value. Such factors as credit quality,
currency exchange rates, inflation rates may increase an investment's volatility. The
level of risk incurred by a shareholder varies from fund to fund (see risk/reward
tradeoff).
Risk/Reward Tradeoff
The investment principle that an investment must offer higher potential returns as
compensation for the likelihood of increased volatility. Investors normally accept higher
risk on long-term investments, where the effects of price volatility usually diminish over
time; they generally seek lower risk on short-term investments, where accessibility and
preservation of principal override the need for maximum return.
Rollover
The shifting of an investor's assets from one qualified retirement plan to another - due
to changing jobs, for instance - without a tax penalty.
Sales Charge or Load
The amount charged for fund shares sold by brokers or other sales professionals. By
regulation, a mutual fund sales charge may not exceed 8.5 percent of an investment
purchase, although the charge may vary depending on the amount invested and the fund
chosen. A sales charge or load is reflected in the asked or offering price (see Asked or
Offering Price).
Sector
A distinct subset of a market, society, industry, or economy,
whose components share similar characteristics.
Securities and Exchange
Commission (SEC)
The primary U.S. federal agency regulating the registration and distribution of mutual
fund shares.
SEC Yield (Bond Funds)
A calculation based on a specified 30-day (or one-month) period by dividing the net
investment income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the results on a semi-annual basis.
Sharpe Ratio
A risk-adjusted measure developed by William F. Sharpe, calculated using standard
deviation and excess return to determine reward per unit of risk. The higher the Sharpe
ratio, the better the fund's historical risk-adjusted performance.
Standard Deviation
A statistical measure of the historical volatility of a mutual
fund or portfolio, usually computed using 36 monthly returns. More generally, a measure of
the extent to which numbers are spread around their average.
Stock
A share of ownership or equity in a corporation. A corporation's financial performance
chiefly determines the value of its stock.
Top-Down
Investing
When an investment firm looks at economic trends, then selects companies
that may benefit from the industry or company trends.
Total Return
A measure of a fund's performance that encompasses all elements of return: dividends,
capital gain distributions, and changes in net asset value. Total return is the change in
value of an investment over a given period, assuming reinvestment of any dividends and
capital gain distributions, expressed as a percentage of the initial investment. Total
return may be calculated on an average annual total return basis or a cumulative total
return basis.
Turnover
Ratio
This is a measure of the fund's trading activity which is computed by taking the lesser of
purchases or sales (excluding all securities with maturities of less than one year) and
dividing by average monthly assets. A turnover ratio of 100% or more does not necessarily
suggest that all securities in the portfolio have been traded. In practical terms, the
resulting percentage loosely represents the percentage of the portfolio's holdings that
have changed over the past year.
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An investor should consider
investment objectives, risks, charges and expenses of the
Fund(s) carefully before investing. Click here for a prospectus,
which contains this and other important information. Please
read the prospectus carefully before investing.
Westcore Funds are
distributed by ALPS Distributors, Inc. |
