| President Trump sent out an unfinished tweet that seemed to be complaining about the press early Wednesday morning, Despite the constant negative covfefe” - the word “covfefe” most likely meant to say “coverage” erupted on twitter with a fury of confusion and speculation.
While the tweet has since been deleted, it was live long enough for “covfefe” to start trending – and now can be found on t-shirts, has a formal definition in the urban dictionary is a top trending hashtag. While the typo is in itself not a big deal, the unpredictability of POTUS coupled with the natural unease of not knowing what something means is likely what caused the stir.
On a different scale, but generally just as mystifying, the notion of acronyms and technical industry terms can cause similar feelings of confusion – so today we’re going to break down some of the top financial code words:
EPS: Earnings Per Share This is the ratio of the net annual earnings of a company to the number of shares, i.e. the profitability ratio. It is one of the common financial measures that all companies include in their annual reports, and is used to calculate the price earnings ratio.
REIT: Real Estate Investment Trust REITs were designed to provide investors with the opportunity to participate directly in the ownership or financing of real estate projects. REIT funds own, and often operate, income-producing real estate such as shopping centers, office buildings, hotels, apartments, and warehouses.
VIX: COBE Volatility Index VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking, is calculated from both calls and puts, and is a widely used measure of market risk, often referred to as the "investor fear gauge."
MER: Management Expense Ratio The MER is the total of the management fee, operating expenses (or administration fee) and GST/HST charged to a fund each year, expressed as a percentage of a fund’s average net assets for that year. All mutual funds have an MER. You won’t ever receive a bill for the fee, the returns you earn as an investor reflect performance data that is reported after the fund’s MER is deducted.
ETF: Exchange-Traded Fund In the simplest terms, ETFs are funds that track indexes like the S&P/TSX Composite, S&P 500, Dow Jones, etc., a commodity or a basket of assets – but they trade like a stock on an exchange. When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of the underlying index. ETFs generally have lower MERs compared to mutual funds because there is no human ‘portfolio manager’ or management team salary to pay for the active management you would forgo with a passive ETF strategy. ETFs have been around since the early 1980s, but they've become far more popular and diversified within the past 10 years.
YTM: Yield to maturity YTM is the total return anticipated on a bond if the bond is held until the end of its lifetime. Yield to maturity is considered a long-term bond yield, but is expressed as an annual rate. In other words, it is the internal rate of return of an investment in a bond if the investor holds the bond until maturity and if all payments are made as scheduled.
DRIP: Dividend Reinvestment Plan A plan offered by a corporation that allows owners of their stock to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date (rather than receiving the dividend as cash). This is an excellent way to increase the value of your investment as most DRIPs allow you to buy shares commission free and at a significant discount to the current share price.
IPO: Initial Public Offering The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but they can also be done by large privately owned companies looking to become publicly traded. Investors (but not necessarily all investors) are being offered shares at a start-up price. A document called a prospectus is issued as part of the exercise to enable investors to assess the value of the offering.
DCA: Dollar-Cost Averaging & PAC: Pre-Authorized Contributions Setting up automatic PACs to any or all of your investment accounts (such as your Tax Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) help you to not only save your disposable income more efficiently but it establishes the technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price – this way, you purchase more shares when prices are low and fewer shares when prices are high. DCA lessens the risk of investing a large amount in a single investment at the wrong time - eventually, the average cost per share of the security will become smaller and smaller..
With so much going on and information coming at us from every angle, it's sometimes hard to keep your finger on the pulse of what's happening. In an effort to keep you in-the-know and provide you with some conversation nuggets for the weekend, I've compiled the following hit list to fill your conversation pipeline.
Now you are in-the-know with Word on the Street.
Enjoy the weekend,
D. |