When investing, you will come across several complex concepts. Don't worry, you will come to understand this "investment language" very quickly. We'll help you with our dictionary.
Account of the holder of book-entry units kept by the depositary. All unit certificates owned by the unitholder in individual mutual funds are recorded in this account.
The aim of the investment is to diversify the portfolio between different types of assets, such as shares, bonds, cash equivalents, precious metals, real estate, and receivables. In terms of risk and return, different asset classes behave significantly differently. For example, shares offer the highest returns, but they also carry the highest risk of losses. Bonds are not so lucrative, but they offer much more stability than shares. The asset allocation strategy makes it possible to achieve an optimal risk-return ratio.
An auditor is an independent person or company that has the authority to audit the accounts of a company and mutual funds. The auditor verifies the financial statements and annual reports of the management company as well as of each mutual fund for which the company keeps separate accounts.
The weighted average of the ratings of issuers of the securities (local currency) in the fund's portfolio.
Backtesting is the verification of investment strategies using historical data.
A bear market is a stock market where stocks are generally declining.
An indicator that represents the market in which the fund invests. The benchmark is usually one of the market indices, or a combination thereof. By comparing the fund's performance with the benchmark's performance, the quality of fund management can be assessed.
Blue chips is a group of shares of key companies from various regions which have been achieving good results over the long-term. Investing in these shares is generally considered the least risky in the group.
A security with which the owner's right to demand the repayment of the amount due and the payment of proceeds (coupons) on a certain date and the issuer's obligation to meet these obligations are associated. By acquiring the bond, the investor lends funds to the issuer. The yield of a bond (coupon) can be set as fixed or variable. The value of the mutual fund's assets invested in such bonds decreases as interest rates rise. If interest rates fall, the price of such bond or the fund's price increases.
A person who mediates the purchase and sale of securities to investors.
A broker is a trader in securities or other financial instruments that trades on the stock exchange on behalf of a client. A broker is a legal entity that receives a financial commission for closed trades on a trusted account.
A bull market is a stock market where stock prices are generally rising.
CPPI - Constant Proportion Portfolio Insurance method, which is used in hedge funds for the tactical management of the share of equity investments. This method calculates on an ongoing basis how high the maximum percentage of equity investments in a mutual fund can be in order to achieve the fund's investment policy objective, using a constant variable in this calculation (in the case of the DPI model, a variable is used).
The capital market is a subset of the financial market, and serves mainly to finance medium and long-term investments. The capital market brings together issuers and investors who trade in financial instruments that have a maturity of more than one year, respectively, with those that have no maturity date (shares) or have a very long maturity date (bonds).
The central bank is a financial institution that regulates the circulation of money in a state. It issues money, sets credit conditions, and regulates the activities of commercial banks. In the Eurozone (including Slovakia) it is the European Central Bank (ECB), and in the USA the Federal Reserve System (FED).
A short-term debt security issued by a bank. Issued to the owner and states the due date and interest rate. The maturity is usually from one month to several months.
Interest paid by the issuer on a bond.
A credit default swap is a credit derivative. It represents the CDS seller's obligation to compensate the buyer in the event of a credit default of an entity.
Credit risk is an indication of the risk of default by the issuer. By credit risk, we mean a situation in which the client cannot or does not want to repay his/her liabilities in full and within the due date. The credit risk of the fund's portfolio is lower the higher the average rating of the fund's portfolio.
The risk of changes in the fund's price due to movements in the euro's exchange rate relative to the currency in which the fund has denominated assets. E.g. the weakening of the euro against the US dollar has a positive effect on the price of a fund which has assets denominated in US dollars (growth of the fund's price), as the value of these investments converted into euros increases.
The current decrease expresses the maximum amount of decrease in the value of the investment that the investment strategy could reach during the recommended investment horizon in 95% of measured cases.
The current unit price for book-entry units is equal to the current unit price.
A bank or a branch of a foreign bank that has a permit from the National Bank of Slovakia to perform the activities of a depositary. Among other things, the depositary is responsible for the correct determination of the net asset value of the mutual fund and the resulting share price.
A security whose value is derived from the performance or movements of another security, index, or other investment. Derivatives can be used for short sales of securities or to hedge the fund's portfolio against downside risk.
Diversification is the distribution of an investment into multiple securities or other assets. We refer to diversification as a tool for reducing the level of risk of the entire mutual fund's portfolio, which increases its security and also the security of the unit owner's investment.
The dividend represents the unitholder's share in the joint-stock company's profit. This share is paid by the company to its unitholders according to a set percentage of the nominal value of the share. The amount of the dividend is variable and is based on the net profit of the company, whose general meeting decides on its payment.
An indicator that helps measure the sensitivity of the value of a bond (or a fund investing in bonds) to changes in interest rates. The higher (lower) the duration, the higher (lower) the interest rate risk of the bond or bond fund. It is expressed in years.
Financial instruments traded on the stock exchange whose advantages include cost and tax efficiency. Many mutual funds therefore use them as underlying instruments.
The average interest rate of the reference banks at which these banks are willing to lend (EURIBOR) or borrow (EURIBID) on the interbank market.
The fee that the investor pays when purchasing a unit certificate. It includes distribution costs, consultation, documents, and subsequent service.
Equity risk is the risk that the share price will change. Investing in shares is associated with a higher degree of risk than investing in bonds. Investing in blue chips is usually characterized by a lower degree of risk than investing in shares of smaller start-up companies, or companies in developing or dynamic markets.
The European Central Bank is the central bank of the euro area. It is responsible for managing the euro and ensuring price stability in the EU. It is based in Frankfurt, Germany. The ECB is also responsible for formulating and implementing EU economic and monetary policy.
The fee that the investor pays when paying out the unit certificate.
The US central banking system, which consists of the Federal Reserve Board and 12 Federal Reserve Banks. Often the abbreviation FED also means the FOMC - the Federal Open Market Committee, which decides whether to keep or change interest rates.
Comprises two consecutive markets - money and capital, which directly affect and complement each other. The financial market is where investors offer their free financial capital to entities that need this capital to finance their investments.
A mutual fund that invests in other mutual funds.
It expresses the net asset value of the fund per unit.
An analysis that deals with the intrinsic value of a share, which is compared to the market price and determines whether the share is overvalued, undervalued, or valued correctly. The models of this analysis are based on fundamental data (profits, sales, expected growth of profit and dividends, etc.).
An agreement to buy or sell a pre-agreed quantity of a commodity or security at a specified time in the future at a price currently agreed between the seller and buyer. It is a pledge of the actual execution of a transaction. Futures are classified as securities (derivatives).
Private investment associations whose basic task is to maximize profits through the use of risky investment speculative strategies and derivative securities. Unlike mutual funds, which operate within strict regulatory standards and cannot conduct high-risk operations, hedge funds are very flexible in their choice of investment strategies and instruments. The minimum size of investment in these funds is usually USD 1 mil.
The process by which a company first publicly offers its shares on the capital market.
International Securities Numbering System. This special code number is assigned to each publicly traded security.
It measures the fund's over-performance above the benchmark. It is calculated as the ratio of the fund's performance adjusted for the benchmark performance and tracking error. A high value information ratio means that the fund consistently outperforms the benchmark, and the surplus that the fund achieves is characterized by a reasonable degree of risk.
It means the risk of loss resulting from changes in interest rates and their impact on the value of assets in the mutual fund.
Investment period. The investment horizon can be short-term up to 1 year, medium-term from 1 to 5 years, and long-term from 5 years. Each mutual fund has its recommended investment horizon, which represents the minimum period during which the investor should remain in the fund in order to achieve the objective of the fund's strategy.
Rules for investing assets collected in a mutual fund which must comply with the rules for limiting and spreading risk specified by the law.
An entity that issues securities for the purpose of raising funds.
A document that every standard mutual fund must have. It must be provided to an investor before entering into a contractual relationship, and the aim is to enable investors to make an informed investment decision. The document describes the fund's objectives and investment policy, risk and return profile, fees, past performance, and other practical information.
Liquidity risk is the risk that in the event of market emergencies it will not be possible to invest, sell, monetize, or close a financial instrument through another transaction at their market price at the initiative of the management company at no additional cost and in a sufficiently short time.
A brokerage company, or market maker, setting buying and selling rates.
It trades financial instruments that have a maturity of less than one year (short-term bonds, certificates of deposit, bills of exchange, etc.).
The management fee is based on the average annual value of the mutual fund's assets. It covers the costs of the management company for the management of the mutual fund. It is a cost of the fund.
Net Asset Value (NAV) The total value of the fund's assets (value of securities, pre-emptive rights arising from these securities, cash in current and deposit accounts, receivables, other rights) less the fund's liabilities.
The amount for which a security is issued and which is indicated on a security.
All payments from assets in the mutual fund that are stipulated by law or the mutual fund statute and are listed in the KIID.
An agreement that gives the investor the right, but not the obligation, to buy or sell a share or other instrument at a pre-agreed price within a pre-agreed period of time. A call option is a right to buy a security, while a put option is a right to sell.
A quantity that expresses the appreciation of the fund's assets for the relevant time period. The past performance of the fund may be helpful to the investor in deciding to purchase fund units, but does not guarantee the same performance in the future. It can decrease, but also increase. We present the performance of our funds in detail in individual mutual funds.
A portfolio is a set of securities or other assets in which it is possible to invest in accordance with the Act on Collective Investment. The portfolio is also a distribution of investment resources in order to reduce risk and maximize profits when investing in mutual funds.
A portfolio manager uses information provided by financial analysts to compile and manage a portfolio of financial assets. The activity of the portfolio manager consists mainly in creating an investment strategy, attracting investors, and expanding the portfolio.
The part of the securities market in which securities currently exposed (issued) to their first holder are sold.
An independent assessment of the debtor's ability and willingness to repay its future obligations properly and on time.
The redemption of shares denotes the right of a unitholder at any time to request the resale or redemption of his/her share certificate at its current price. After submitting a redemption application, the investment is simultaneously terminated.
The option for a unitholder, in the case of some funds, to receive income as disbursed funds or to reinvest them by acquiring additional fund units.
Remuneration for the performance of the depositary's activities is based on the average annual value of the mutual fund's assets and is a cost of the fund.
For each investment, there is a degree of risk that can be expressed as a deviation from the expected return, upwards or downwards. When investing, the higher the return you want to achieve, the higher the level of risk you have to take.
The document that must be held by each standard mutual fund and which must contain the information necessary for investors to form a correct judgment about the investment option offered. Its content is determined by law.
A security is a money-valuable registration in the form provided by law, which is associated with rights under the Securities Act and under special laws, in particular the right to demand certain property performance or to exercise certain rights against persons designated by law. It may be in paper or book form, issued in the name of the owner or on behalf of the owner.
An operation in which the person selling the securities receives an adequate amount of money for them on the trading day of the sale, and the buyer receives the corresponding number of securities.
The basic document of the mutual fund, the content and changes of which are approved by the National Bank of Slovakia, forming part of the contractual relationship with the unitholder. It is a document that characterizes the type of mutual fund.
A stock exchange is where securities or other financial instruments are traded regularly and at a specified time. Trading on the stock exchange takes place in accordance with the applicable rules and exchange regulations. Permission from the National Bank of Slovakia is required for the establishment and operation of a stock exchange.
It is part of a roof fund consisting of two or more sub-funds. The individual sub-funds are accounting separated, differing in their investment strategy.
Short-term debt security issued mainly by the state to cover a temporary shortage of funds.
It can be a paper or book-entry security in the name of a unitholder, which may be for one or more units of the fund, to which the investor's right to a corresponding share in the fund's assets and the right to participate in the income from these assets is attached. The units of our mutual funds are book-entry, and one unit certificate is added to one share of the mutual fund's assets.
Units of each mutual fund or sub-fund may be issued in several issues, which may differ from each other, e.g. the type of investors to whom the issue is addressed, the amount of the entry or exit fee, the amount of the minimum invested amount, the amount of the management fee, the currency in which the unit value is expressed, the method of payment of mutual fund assets, or a combination of these characteristics.
A natural or legal person who has used his/her funds to acquire a fund unit.
Account of the owner of book-entry unit certificates opened and maintained by the depositary. All unit certificates owned by the unitholder in individual mutual funds are registered in the unitholder's account.
It determines the degree of uncertainty - risk. Volatility is a natural feature of investments. It holds that the higher the expected returns, the higher the risk.