Puke Point 

Today's Word: Puke Point

 The "puke point" is the point at which the investor can no longer stomach the losses, and decides to sell the asset, regardless of its steeply falling price.

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BOGEY

Today's word: BOGEY
Theme for this fortnight: MUTUAL FUNDS

 

The benchmark return that a portfolio or fund manager is compared against, such as the S&P 500. More generally, the target return than an investor is aiming for.

 

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FOUL WEATHER FUND

Today's word: FOUL WEATHER FUND
Theme for this fortnight: MUTUAL FUNDS

 

A type of mutual fund that performs well or even better than the market as a whole in weak market conditions. The goal of these types of funds is to limit or benefit from downward market effects. Often these funds invest in stocks with lower volatility.

 

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DISTRIBUTION WATERFALL

Today's word: DISTRIBUTION WATERFALL
Theme for this fortnight: MUTUAL FUNDS

Hierarchy of distribution of an equity fund. This specifies the order of distribution to investors when their investments are sold. For instance, general investors can only receive their share of the fund after preferred investors are given their corresponding shares.

 

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COUNTRY BASKET

Today's word: COUNTRY BASKET
Theme for this fortnight: MUTUAL FUNDS

Exchange traded fund composed of stocks in foreign countries combined into one security. A country basket allows an investor to own multiple stocks in his or her portfolio without being subject to multiple transaction costs and/or multiple securities.

 

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ELEPHANT

Today's word: ELEPHANT
Theme for this fortnight: MUTUAL FUNDS

 

Slang for a large institutional investor such as a mutual fund or pension fund. The term comes from the idea that these investors move huge amounts of money into and out of assets and sectors in a herd-like fashion, having a large impact on security prices when they move.

 

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CLONE FUND

Today's word: CLONE FUND
Theme for this fortnight: MUTUAL FUNDS

 

A mutual fund started by another mutual fund as a result of the parent fund's large growth and management's assessment that the parent is limited as to the investments it can make. For example, a very large fund would generally be unable to establish investment positions in small or new corporations. Thus, a new, smaller fund with the same goals as the older, bigger fund is started. Although the parent fund and clone fund have the same investment objectives, they purchase different securities and generally operate under different managements.

 

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DELTA ONE

Today's word: DELTA ONE
Theme for this fortnight: MUTUAL FUNDS

 

A category of derivatives for which a change in the value of the underlying asset results in a change of the same, or nearly the same, proportion in the value of the derivative. Some examples of delta one derivatives include equity swaps, forwards, futures, and exchange-traded funds (ETF's).

 

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BEAR FUNDS

Today's word: BEAR FUNDS
Theme for this fortnight: MUTUAL FUNDS

Funds that utilize short-selling methods to quickly make profits during a bear or declining market. These funds are usually made up of hedge funds and mutual funds. They are actively managed, and short individual stocks or inverse-index funds that short entire indexes. Bear funds revolve around the idea of playing with both sides of the market so that gains in the bear fund offset losses elsewhere in an investor's portfolio. Bear funds are considered tactical investments, but usually end up being lousy long-term investments for investors.

 

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DIVIDEND CLAWBACK

Today's word: DIVIDEND CLAWBACK
Theme for this fortnight: DIVIDENDS

An arrangement under which those financing a project agree to contribute, as equity, any prior dividends received from the project to cover any cash shortages.

When there is no cash shortfall, those investors who provided funding are able to keep their dividends. A dividend clawback arrangement provides incentive for a project to remain on budget so that investors do not have to return dividends received prior to a cost overrun.

 

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DIVIDEND DRAG

Today's word: DIVIDEND DRAG
Theme for this fortnight: DIVIDENDS

A disadvantage of the dividend structure of unit trust exchange-traded funds (ETFs) that results from SEC rules that stipulate that passively managed ETFs cannot reinvest dividends back into the portfolio. ETFs must instead accumulate the dividends in cash and pay them to holders at periodic intervals. During periods of rising markets, the dividends would be better served being reinvested in securities rather than held in cash. This leads the ETF to lag a portfolio that would be able to reinvest.

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SYNTHETIC DIVIDEND

Today's word: SYNTHETIC DIVIDEND
Theme for this fortnight: DIVIDENDS

A type of incoming cash flow that an investor creates with certain financial securities to produce a dividend-like payment stream that resembles the periodic cash receipts from a dividend-paying stock.

For example, suppose an investor owns shares in a company that does not pay a quarterly dividend. In order to create a cash-flow stream from the shares, the investor could write covered call options on the underlying stock. By doing so, he or she would receive the option premiums as an incoming cash flow, but would be obligated to sell the shares to the option-buyer should that person choose to exercise the options.

This situation, while limiting the potential price appreciation the investor can realize from his or her own shares, creates a dividend-like cash flow stream.

     

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SPILLOVER DIVIDEND

Today's word: SPILLOVER DIVIDEND
Theme for this fortnight: DIVIDENDS   

A type of dividend in which the payment year and the taxable year occur at different times. Most often, this occurs when the dividend has been declared near the end of the calender year (during the fourth quarter), but the actual distribution date of the dividend payment does not occur until the first quarter of the following year.

 

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LOOK THRU

Today's word: LOOK THRU
Theme for this fortnight: DIVIDENDS

 

A complex provision defined in section 954(c)(6) of the U.S. Internal Revenue Code that lowered taxes for many U.S. multinational companies. The look thru rule gave qualifying U.S. multinationals a lower global effective tax rate by providing a special accounting method for calculating taxes owed on income from controlled foreign corporations. The rule was originally effective from Jan. 1, 2006 through Dec. 31, 2009, but the 2010 Tax Relief Act extended the rule through Dec. 31, 2011.

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DIVIDEND PUZZLE

Today's word: DIVIDEND PUZZLE
Theme for this fortnight: DIVIDENDS

The question concerning why companies pay dividends. According to some theorists, investors should not need dividends as an incentive to purchase stock in a company. Thus the question of why some firms pay dividends is a puzzle.

 

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HOMEMADE DIVIDEND

Today's word: HOMEMADE DIVIDEND
Theme for this fortnight: DIVIDENDS

A form of investment income that comes from the sale of a portion of shares held by a shareholder. This differs from dividends that shareholders receive from a company according to the number of shares the shareholder has.

The existence of homemade dividends is the reason some financial analysts believe that looking at a companies dividend policy is not important. If investors desires an income stream they will either sell their shares when they want the income or they will invest in other income-generating assets.

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CUTTING A MELON

Today's word:  CUTTING A MELON
Theme for this fortnight: DIVIDENDS

A slang term used to describe when a board of directors declares an additional dividend in addition to the regular distribution. The additional dividend can be in the form of cash, stock or property. The board of directors (BOD) is responsible for deciding how it will share the company's earnings with shareholders in the form of dividends. In most cases, dividends are issued in accordance to a set policy and are paid on preset schedule, such as annually or quarterly.
                The BOD is cutting a melon when the company has earned additional income, this is the melon and distributes a portion of it to shareholders. The bigger the melon, the sweeter it tastes to investors!

 

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BIRD IN HAND

Today's word:  BIRD IN HAND
Theme for this fortnight: DIVIDENDS

 

The belief that investors prefer stocks that are currently paying dividends to stocks whose value may grow through capital appreciation. The belief is based on the assumption that most people prefer certainty (dividends) to speculation (capital appreciation).

 

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PIPELINE

Today's word:  PIPELINE
Theme for this fortnight: VENTURE CAPITAL 

An investment company whose purpose is to collect investment funds from a pool of individual investors and invest them in financial securities. It is the flow of upcoming underwriting deals.

 

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INCUBATOR

Today's word:  INCUBATOR
Theme for this fortnight: VENTURE CAPITAL 

A firm engaged in the business of fostering early-stage companies through the developmental phases until such time as the company has sufficient financial, human and physical resources to function on its own.
                The firm can be either a non-profit or a for-profit entity, and it can provide assistance via any or all of the following methods: 1. access to financial capital through relationships with financial partners, 2. access to experienced business consultants and management-level executives, 3. access to physical location space and business hardware or software and 5. access to informational and research resources via relationships with local universities and government entities.

 

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