Soft Patch

What Does it Mean?
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A period of economic slowdown amid a larger trend of economic growth. This buzzword is most often used in the financial media and by the U.S. Federal Reserve to describe a period of economic weakness.

Investopedia Says:
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This term gained popularity when former Federal Reserve Board Chairman Alan Greenspan used it in his review of the overall U.S. economy. Central banks often cut interest rates in an attempt to spur the economy through the soft patch. An example of a soft patch would be an economic slowdown due to rising commodity prices, which is believed to be short term, with the economy growing at a faster rate after the slow patch.

Graveyard Market

What Does it Mean?
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The period near the end of a prolonged bear market. In a graveyard market, long-time investors have taken large losses, while new investors prefer to stay liquid by sitting on the sidelines and keeping their money in cash or cash-equivalent securities until market conditions improve.

Investopedia Says:
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The term graveyard market is an apt description of this market phenomenon: the investors in a graveyard market can't get out of it, and the investors who aren't in it don't want to be. Therefore, until a positive outlook becomes more conclusive, the overall market conditions will be slow to improve

Witching Hour

What Does it Mean?
The last hour of stock trading between 3 p.m. (when the bond market closes) and 4 p.m. EST. It is typically controlled by large professional traders, program traders and large institutional traders, and can be characterized by higher than average volatility.

dry powder

The term "dry powder" originated during the days when military battles were fought with guns and cannons that used gun powder. The gun powder had to be kept dry in order for it to remain effective. Nowadays, the term "dry powder" is used metaphorically in various contexts and circumstances, including the world of finance.

Statement Shock

What Does it Mean?
The shock associated with opening an investment statement and seeing that the value of your portfolio has dropped more than what was expected. Statement shock is most commonly referring to an unexpected drop in value but can also be used to describe lower than expected returns.

Investopedia Says...
Statement shock can occur especially after large downturns in the market. Many investors will contribute to an investment fund and receive statements in the mail on a monthly, quarterly or annual basis

What are pro forma earnings?

What are pro forma earnings?
Great question, but it is not easily answered, because pro forma earnings figures are inherently different for different companies. There are no universal guidelines that companies must follow when reporting pro forma earnings, which is why the distinction between pro forma and earnings reported using Generally Accepted Accounting Principles (GAAP) is very, very important.
(See Full Answer)
What is a Ginnie Mae security?
A Ginnie Mae, or Government National Mortgage Association security, functions similarly to the process of lending someone money to purchase a house or business. Ginnie Mae buys home mortgages from banks and financial institutions, bundles them together, and then markets portions of these bundles to investors.

Value Averaging

What Does it Mean?
An investing strategy that works like dollar cost averaging (DCA) in terms of steady monthly contributions, but differs in its approach to the amount of each monthly contribution. In value averaging, the investor sets a target growth rate or amount on his or her asset base or portfolio each month, and then adjusts the next month's contribution according to the relative gain or shortfall made on the original asset base.

Investopedia Says...
For example, suppose an account has a value of $2,000 and the goal is for the portfolio to increase by $200 every month. If, in a month's time, the assets have grown to $2,024, the investor would fund the account with $176 ($200 - $24) worth of assets

Protest Divestment

What Does it Mean?
The intentional selling of stock or other assets on a large scale to create financial pressure on a corporation or government to force social change. Protest divestment is a form of shareholder activism.

Investopedia Says...
For example, in the late 1980s, students at many American universities lobbied their schools' endowment funds to stop investing in South Africa

Pilot Fishing

What Does it Mean?
A type of pre-marketing of an initial public offering (IPO) that involves testing investor sentiment to receive feedback on how the market may respond to an issue. Pilot fishing has led to much controversy because it could undermine the role of investment bankers by providing advice to clients about the price the IPO is launched at.

Investopedia Says...
Pilot fishing is practiced in Europe. However, SEC regulations about what can and cannot occur during the SEC's IPO approval process prevent this from happening in the US

Automatic Investment Plan (AIP)

Automatic Investment Plan (AIP)
An investment program that allows investors to contribute small amounts of money, such as $20 a month in regular intervals. Funds are automatically deducted from the investor's checking/savings account or paycheck and invested in a retirement account or mutual fund.

Automatic Investment Plan - AIP

Automatic Investment Plan - AIP

What Does it Mean?
An investment program that allows investors to contribute small amounts of money, such as $20 a month in regular intervals. Funds are automatically deducted from the investor's checking/savings account or paycheck and invested in a retirement account or mutual fund.
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Investopedia Says...
This is one of the best ways to save money. By "paying themselves first" many people find they invest more in the long run. Their investments are treated as another part of their regular budget.

Circulating Capital

Circulating Capital


What Does it Mean?
The portion of an organization's investment, which is continually used and replenished in ongoing operations. Circulating capital can consist of operating expenses, raw material stock, inventories of finished goods or physical capital on hand. This is in contrast to constant (fixed) capital.
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Investopedia Says...
By calculating circulating capital you will get a better understanding of how much capital is tied up to generate profit. Fixed capital, on the other hand are funds tied up, which isn't generating much profit... Read more.97.

Depreciation Recapture

Term of the Day


The gain received from the sale of depreciable capital property that must be reported as income. Depreciation recapture is assessed when the tax basis of an asset exceeds the sale price. The difference between these figures is thus "recaptured" by being reported as income.

Depreciation recapture is reported on Form 47

Bear Market

What Does it Mean?
A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market, selling continues, which then creates further pessimism. Although figures can vary, for many a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.
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Investopedia Says...
Not to be confused with a correction, which is a short-term trend that has a duration shorter than two months. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points as timing the bottom is very difficult to do.

Weighted Average Loan Age - WALA

What Does it Mean?
A dollar-weighted average measuring the age of the individual loans in a mortgage pass-through or pooled security, such as Ginnie Mae or a Freddie Mac security. The WALA is measured as the time in months since the origination of the loans, with the weighting based on each loan's size in proportion to the aggregate total of the pool.
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Investopedia Says...
The weighted average age will change over time as some mortgages get paid off faster than others. Based on the issuer of the mortgage-backed securities (MBS), the WALA may be weighted on the remaining principal balance dollar figure.

7 Hedge Fund Manager Startup Tips

7 Hedge Fund Manager Startup Tips
Hedge funds can be mentioned over 1,000 times a day in blogs, newspapers, magazines and on radio stations. As of September 2008, there were over 15,000 hedge funds in existence, with even more people interested in starting a hedge fund of their own. In this article, we'll explore the reasons why these funds are so popular and what you should take into consideration before starting up your own hedge fund.

Financial Education
More Education Articles

Keeping Up With Your Continuing Education
As the day drew to a close, Bob stared at the mound of paperwork on his desk and sighed. He had several client transactions to complete, and he still had a portfolio to design. Then, a memo appeared in his company email reminding him that the deadline for completing his continuing education requirements was pending in 30 days.

Insurance

What Does it Mean?
A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.
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Investopedia Says...
When shopping around for an insurance policy, look for the best priced package that is right for you - prices can vary from one