Glossary
Active Management Aggressive Growth Fund Annual Return Asset Allocation
Authorised Funds Balanced Fund Beta Bid-offer Spread
Bond Fund Closed-end Fund Contribution Daily Valuation
Defined Benefit Plan Defined Contribution Plan Diversification Dividend Distributions
Dollar-cost Averaging Emerging Markets Fund Employee Contribution Equity Fund
Fixed-income Fund Front-end Fee Fund Manager Global Fund
Growth and Income Fund HKIFA Income Fund Index Fund
Investment Adviser MPF Management Fee Mandatory Contributions
Mutual Fund Net Asset Value (NAV) Offer Price Offshore Fund
Open-end Fund Pension Plan Portfolio Prospectus
Redemption Redemption Fee Redemption Price/Bid Price Regional Fund
Reinvestment Risk Tolerance Risk-adjusted Return Sector/Theme Fund
Share Time Horizon Trustee Unauthorized Fund
Unit Unit Trust Volatility Voluntary Contributions
Warrant Fund      

 

Active Management
An investment strategy which aims to outperform a particular market or sector. Active managers have full flexibility in deciding what securities to buy and sell based on investment research, market forecasts, and their own judgment.

Aggressive Growth Fund
An investment strategy that focuses on investing in stocks, which the fund manager expects will experience substantial growth in earnings per share in the near term. The companies in question are generally small or mid capitalization in size.

Annual Return
The average annual profit or loss realized by an investment at the end of a specified calendar period.

Asset Allocation
An investment that has a low statistical correlation of its risks and returns with traditional investments such as stocks or bonds.

Authorised Funds
A unit trust or mutual fund that meets the requirements of the Hong Kong Securities & Futures Commission and is allowed to be sold in Hong Kong. Authorisation does not imply recommendations by the SFC.

Balanced Fund
A unit trust or mutual fund that aims to provide some combination of growth, income, and conservation of capital by investing in a mix of stocks, bonds, and/or money market instruments.

Beta
Beta is a historical measure of an investment's sensitivity when compared to a benchmark. It represents the percentage change in a fund's value for each 1% change in the fund's benchmark. If the beta is more than 1, the investment typically moves (which can be up or down) more than the benchmark. Generally, the higher the correlation is between the investment and its benchmark (as measured by R-squared), the more meaningful the measure of beta.

Bid-offer Spread
The difference between the fund's buy and sell price.

Bond Fund
A unit trust or mutual fund that invests in debt securities issued normally by corporations and government. Bond funds generally emphasise on regular income stream.

Closed-end Fund
A unit trust or mutual fund that has a fixed number of shares, usually listed on a major stock exchange.

Contribution
Regular investments made into a unit trust savings plan or the Mandatory Provident Fund Scheme.

Daily Valuation
The calculation of the latest market value of a fund's underlying assets on each business day.

Defined Benefit Plan
A retirement plan that promises to pay a certain amount, usually based on the number of years of service and on the average salary in the period before retirement. Employers generally bear all investment risks.

Defined Contribution Plan
A retirement plan offering a benefit that depends on the total contributions made by the employer and the employee, and on the investment returns earned by those contributions. Employees generally bear the investment risk.

Diversification
The process of which a fund and its management company is subject to when a potential investor tries to evaluate a fund for investment. This normally involves one or more interviews with the fund manager, understanding the investment strategy and process undertaken by the fund, and a complete review of the offering documentations and the fund structure.

Dividend Distributions
Payments to unit trust holders of gains realized during the year on securities that the fund has sold at a profit, minus any realized losses.

Dollar-cost Averaging
Investing equal amounts of money at regular intervals over time. This technique ensures that an investor buys fewer shares when prices are high and more shares when prices are low. Historically, this has proven to reduce the overall cost of the investment.

Emerging Markets Fund
A unit trust that invests primarily in developing markets in Asia, Latin America, or Eastern Europe. Considered as a higher risk investment in view of size, liquidity, and development cycle of these markets.

Employee Contribution
An employee's own investment into the company's MPF or retirement plan. Under MPF, an employee is required to contribute 5% of his/her relevant income up to a maximum of HK$1,000.

Employer Contribution
The amount an employer contributes to the employee's MPF or retirement plan. Under MPF, an employer is required to contribute 5% of an employee's relevant income up to a maximum of HK$1,000.

Equity Fund
A unit trust that invests in local and/or overseas stocks. The objective is primarily to seek capital growth.

Fixed-income Fund
A unit trust that seeks current income by investing in fixed-income securities such as bonds.

Front-end Fee
A sales commission charged at the time of purchase and paid to the distributors.

Fund Manager
The person or persons responsible for making investment decisions of a unit trust or mutual fund.

Global Fund
A unit trust or mutual fund that invests in securities worldwide.

Growth and Income Fund
A wide range of investment funds that seeks to make investment gains that are not related to movements in the markets of the underlying securities in which the fund invests.

HKIFA
The Hong Kong Investment Funds Association. The professional body that represents the fund management industry in Hong Kong.

Income Fund
A unit trust or mutual fund that seeks current income rather than capital growth, investing mainly in bonds.

Index Fund
A passively managed unit trust or mutual fund that seeks to mirror the performance of a particular market index.

Investment Adviser
A person or organization that makes the day-to-day decisions regarding a portfolio's investments, either on behalf of a unit trust or mutual fund (fund manager) or individuals (intermediary).

MPF - Mandatory Provident Fund Scheme
A retirement scheme for employees required by the HKSAR government.

Management Fee
The amount a unit trust or mutual fund pays to its fund manager for the work of overseeing the fund's holdings. Normally charged daily to the fund and reflected in the fund's net asset value.

Mandatory Contributions
Investments made by the employer and employee to a MPF or retirement plan as required by the government. Employer and employee each has to contribute a maximum of 5% relevant income into fund(s) of the employee's choice.

Mutual Fund
An investment company that pools the money of like-minded investors and invests it in a variety of securities with a specific objective. Also known as unit trust in Hong Kong.

Net Asset Value (NAV)
The market value of a unit trust or mutual fund's total assets, minus liabilities, divided by the number of units or shares outstanding. The value of a single share is called its unit or share price.

Offer Price
The sales price of a fund which equals the net asset value plus a front end fee, if any.

Offshore Fund
A unit trust or mutual fund which is domiciled outside Hong Kong. Most unit trusts or mutual funds available in Hong Kong are domiciled in overseas jurisdictions such as Luxembourg, Bermuda, or Dublin.

Open-end Fund
A unit trust or mutual fund that has an unlimited number of shares available for purchase.

Pension Plan
A retirement plan that holds investments of a company's employees for the purpose of providing retirement benefits when the employee retires or leaves the company.

Portfolio
All the securities held by a unit trust or mutual fund or the total investment holdings of an individual or an institution.

Prospectus
A legal document that gives prospective investors information about an investment, including its investment objectives and policies, risks, costs, and past performance. Before investing in a unit trust or mutual fund one should read the prospectus.

Redemption
The sale of a unit trust or mutual fund.

Redemption Fee
A sales fee charged by some unit trusts or mutual funds when an investor sells his/her investments in the fund.

Redemption Price/Bid Price
The price at which a unit trust or mutual fund's shares are redeemed, or bought back, by the fund, determined by deducting a redemption fee from the net asset value (NAV) per unit or share.

Regional Fund
A unit trust or mutual fund that invests in securities of a particular region such as Europe, Asia etc.

Reinvestment
Use of dividend distribution to buy additional securities. Many unit trust or mutual fund offer the automatic dividend reinvestment option to unitholders.

Risk Tolerance
An investor's ability to endure declines in the prices of investments while waiting for them to increase in value.

Risk-adjusted Return
A measure of how much risk a fund takes to make its returns. Usually given as a number or a rating. The more return per unit of risk, the better.

Sector/Theme Fund
A unit trust or mutual fund that concentrates on a relatively narrow market sector, such as technology or healthcare funds. These funds can experience higher share-price volatility than some diversified funds because sector funds are subject to issues specific to a given sector.

Share
A unit of ownership in a mutual fund.

Time Horizon
The amount of time, usually expressed in years, that an investor expects to hold an investment.

Trustee
The party named in a trust or plan who is authorized to hold the assets of the trust or plan for the benefit of the beneficiaries or participants.

Unauthorized Fund
A unit trust or mutual fund that has not been approved for sale to the general public in Hong Kong by the Securities & Futures Commission.

Unit
A unit of ownership in a unit trust/mutual fund.

Unit Trust
A collective investment vehicle that pools the money of like-minded investors and invest into securities with a specific objective. Same as mutual fund.

Volatility
The degree of fluctuation in the value of a unit trust or mutual fund, or index, volatility is often expressed as a mathematical measure such as a standard deviation or beta. The greater a fund's volatility, the wider the fluctuations between its high and low prices.

Voluntary Contributions
Additional investments in a retirement plan from either the employer or the employee. A common way for people to save more for their retirement nest egg.

Warrant Fund
A unit trust or mutual fund that invests in warrants - the entitlement to purchase a certain amount of common stock at a set price over a period of time. Normally considered as a high-risk investment.
 


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