Exchange Traded Products & Indexing Guide Switzerland 2013

glossarY
TARGET DATE FUND
A type of mutual fund or ETF that automatically adjusts its
mix of stocks, bonds and other assets based upon a specified
year or target date. Typically, a target date fund will reduce its
exposure to stocks as it approaches its planned target date and
maintain a fixed allocation for the remainder of time.
TICKER SYMBOL
The lettering system used to identify a stock, mutual fund, or
ETF on an exchange. Also called trading symbols.
TREASURY INFLATION PROTECTED
SECURITIES (TIPS)
TIPS are U.S. government debt indexed to inflation. The principal
of a TIPS either increases with inflation or decreases
with deflation, as measured by the Consumer Price Index.
At maturity you are paid the adjusted principal or original
principal, whichever is greater. TIPS pay interest twice a year,
at a fixed rate. The rate is applied to the adjusted principal;
so, like the principal, interest payments rise with inflation and
fall with deflation.
UNIT INVESTMENT TRUST
This type of fund structure does not reinvest dividends in the
fund and pays them out via a quarterly cash distribution. In
order to comply with diversification rules, this ETF structure
will sometimes deviate from the exact composition of a benchmark
index. This type of fund is registered under the SEC
Investment Company Act of 1940. The Dow DIAMONDS (DIA),
PowerShares QQQ (QQQQ) and the S&P 500 SPDRs (SPY) follow
this product format.
VOLATILITY
Volatility is determined by the price movement (rise or fall) of a
security. Securities that experience sharp increases or declines
within a short time frame are considered more volatile than
those that don’t. (See Beta)
VOLUME
Total number of shares or contracts traded on a security. Volume
data is tracked and reported daily by major stock exchanges
around the world.
WINDOW DRESSING
Denotes the selling of underperforming securities by money
managers just before the end of each quarter, so these holdings
85 ExchangE TradEd ProducTs & IndExIng guIdE Switzerland 2013
don’t appear in shareholder reports as significant investment
positions. This selling activity is often accompanied with buying
activity of strong performing securities. After quarterly
reports are issued, the portfolio will reveal positions in strong
performing securities, despite the fact that the majority of the
capital gains in these were never experienced by shareholders.
Window dressing is a cosmetic affect and adds little or
no value.
YEAR-TO-DATE (YTD)
The period beginning at the start of the calendar year up until
the most current date.
YIELD CURVE
A graph that illustrates the relationship between the yields of
bonds with the same credit quality, but with varying maturities.
A positive yield curve means short term interest rates are
lower versus long term rates. A negative yield curve is just the
opposite, whereas a flat yield curve shows little variance in the
yields of short term bonds and long term bonds.
ZERO COUPON BOND
A zero coupon bond is bought at a discounted price to its face
value and the principal is repaid at the bond’s maturity date.
Unlike conventional bonds which make semi-annual payments,
zero coupon bonds do not make periodic interest payments.
U.S. Treasury bills, U.S. savings bonds and any other
bond thats been stripped of its coupons are all examples of
zero coupon bonds. Investors earn a return from zero coupon
bonds after compounding interest is paid at maturity plus the
difference between the discounted price of the zero bond and
its par or redemption value.