Fiduciary – A person or entity legally appointed and authorized to manage assets in trust for another party. The fiduciary must manage the assets with the best interest of the asset owning party at all times.

Formula Investing – Investing by rigid adherence to a formula, which governs both asset allocation and timing.

Quantitative Trading – Trading strategies based on quantitative and technical analysis that relies on mathematical computations based on tremendous amounts of aggregate data and current trends.

Securities – Financial investment instruments which are expected to represent value (stocks, bonds, ETFs, derivatives, etc.).

Stocks – Represent fractional ownership of companies and for profit organizations. Can also be referred to as equities.

Bonds – A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

Mutual Funds – A pooling of funds collected from many investors, which are in turn invested per the objectives of the fund. While they allow small investors access to professionally managed portfolios, funds typically have fees and are less liquid than ETFs.

ETFs – Exchange Traded Funds are similar to Mutual Funds in that they are pools of investments, but are dissimilar because they are not actively managed. ETFs are without fees and trade like stocks. In true laymen’s terms each ETF share represents fractions of the many shares/bonds that each ETF holds.

Leveraged ETFs – ETF’s in which the performance of the underlying investments (indices) is amplified by a more volatile asset, identified by a ratio. Leveraged ETFs like their normal siblings are generally either bullish or bearish in flavor. A 2:1 S&P 500 ETF will grow by 2% on the days the S&P 500 gains 1%, it will lose 2% when the S&P loses 1%.

Portfolio – A combination of investment instruments, such as those listed above, designed to meet investment objectives while giving consideration to risk tolerance.

Risk Tolerance – The degree of uncertainty or downside (loss in value) that an investor is willing to accept in their portfolio. Lower risk investments, such as bonds, have less upside and downside potential. Higher risk securities such as high beta stocks, have more upside and downside potential.

Risk Premium – The amount of return or reward that is probable in exchange for taking on risk above the risk free rate. Risk premium is the compensation for tolerating greater risk.

Unsystematic risk is the risk of individual industries or companies: systematic risk is the risk the entire market or “system” faces. If a new fabric was created that needed no cleaning it would be unsystematic risk to laundry detergent stocks but would not have impact on steel nor baby food ones. Conversely, if the treasury changed interest rates, that would represent a systematic risk, affecting all stocks.

Diversification – The objective of diversification is to eliminate unsystematic risk. Like the old saying “don’t put all your eggs in one basket” diversification seeks to minimize losses should any single basket or in our case investment fail.