Exchange Traded Products & Indexing Guide Switzerland 2013

glossarY
ny to execute an investment strategy and then they pay again
to a competing fund to do the exact same work.
GOLD FUND
A type of mutual fund or ETF designed to give exposure to
gold related securities or to physical gold itself. Gold securities
can include stocks in companies engaged in the production,
processing, or mining of gold. Funds that track the price of
gold itself will generally acquire and store physical gold or
gold derivatives. Gold funds are often used to hedge against
inflation and currency risks.
GRANTOR TRUST
This type of fund structure distributes dividends directly to
shareholders and allows investors to retain their voting rights
on the underlying securities within the fund. The original fund
components of the index remain fixed and this ETF structure
is not registered under the SEC Investment Company Act of
1940. Merrill Lynch’s HOLDRs follow this format.
GROWTH AND INCOME FUND
A mutual fund, closed end fund, or ETF with both the growth
of capital and income as the primary investment objective.
GROWTH FUND
A mutual fund, closed end fund, or ETF with the growth of
capital as the primary investment objective.
HEDGING
A strategy used to reduce financial risk or the possibility of
loss. For example, an investor owning 100 shares of an S&P 500
stock fund could hedge that long position by owning a short
position or put options on the S&P 500 index.
INCOME FUND
A mutual fund, closed end fund, or ETF that has generating
income, as the primary investment objective. Income can be
derived from various sources, including interest payments,
dividends, and capital gains.
INDEX
A statistical measure used to track the aggregate performance
of stock, bond and commodities markets. Widely followed indexes
include those developed and managed by Standard &
Poor’s, NYSE, NASDAQ, Russell, MSCI, or STOXX.
82 ExchangE TradEd ProducTs & IndExIng guIdE Switzerland 2013
INDEX FUND
A type of mutual fund or ETF that attempts to match the performance
of a stock, bond or commodity index. Index funds
are sometimes referred to as passive funds and are notorious
for their tax efficiency and low fees. Some index funds follow
traditional market cap indexes whereas others follow an equal
weight or fundamental indexing approach.
INDEXING
Investment strategy that seeks to match the exact performance
of a specific market or benchmark index.
INDEX OPTIONS
Calls and puts on stock or bond indexes. Index options allow
investors to trade a particular market sector or index of
securities, without having to make individual purchases of
each security in that sector. Index options are listed on various
exchanges, including the American, New York, and Chicago
Board Options Exchange.
INVERSE ETFS
(See Short ETFs)
INVESTMENT COMPANY ACT OF 1940
The U.S. Investment Company Act of 1940 regulates the organization
of companies, including mutual funds that engage
primarily in investing and trading in securities. The Act requires
these companies to disclose their financial condition and
investment policies to investors on a regular and timely basis.
INVESTMENT GRADE
Bonds whose issuers are rated AAA to BBB for safety and
ability to repay principal by Standard & Poor’s or Moody’s Investors
Service.
INVESTMENT STYLE
Indicates the approach of an investment manager in selecting
securities. For example, a certain manager may be value oriented
by emphasizing companies with low P/E or book-to-value
ratios, whereas another may emphasize earnings and profit
growth.
LARGE CAP
A large company or large cap stock generally refers to companies
with a market capitalization or size over $5 billion.