Glossary of Terms (M - R)
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Monetary policy
This term refers to the actions undertaken by a central
bank, such as the Federal Reserve, to influence the availability
and cost of money and credit to help promote national
economic goals.
Money Market
The aim of money market funds is to keep the fund's net
asset value (NAV) at N1.00 per share, though there is
no assurance that they will do so. Money market funds
generally invest in short-term securities like bank certificates
of deposit, commercial paper and Nigerian government securities.
(A security is another term for a stock or bond.) An investment
in a money market fund is not insured or guaranteed by
the Nigerian Deposit Insurance Corporation (NDIC) or any
other government agency. It is possible to lose money
when investing in a money market.
Mutual Fund
An investment company that invests in a group of securities,
either stocks, bonds, or both, based on a stated investment
objective. People can invest in a mutual fund by buying
shares, which are units of ownership in the fund. A mutual
fund will hire an investment advisor, which is a company
that provides investment advice. In turn, that advisor
will assign investment professionals known as portfolio
managers to manage the fund's portfolio.Since all mutual
funds have expenses, all mutual funds charge fees to their
shareholders. Generally, fees are deducted from the fund's
assets prior to the calculation of an investment return.
Net Assets
For a company, net assets are the sum of the total value
of everything a company owns (assets) minus the total
value of a company's debts (liabilities). In other words:
Assets - Liabilities = Net Assets
Net Asset Value, NAV
The market value of one share of a mutual fund. A fund's
NAV is calculated by adding up the value of all of the
fund's securities, subtracting expenses and dividing this
sum by the total number of shares owned by the fund's
shareholders. Mutual funds calculate their NAVs at least
once a day, usually at the close of business.
No Load
A term used to describe mutual funds that have no sales
charges. It's important to remember that even though a
no-load mutual fund may not charge a sales charge, the
fund will still charge management fees in order to cover
its expenses. All fees are outlined in a fund's prospectus.
Portfolio
A group of stocks, bonds or other investments owned by
a mutual fund or individual investor.
Portfolio Manager
The person or group responsible for managing a pool of
investments.
Profit Income - Expenses = Profit (or Earned Income)
A sum of the money a company or individual earned minus
the money spent. Profit is a positive number. If a company
spends more money than it earned, then the sum is known
as a "loss."
Prospectus A legal document that offers a security for
sale. For a mutual fund, a prospectus describes the fund's
investment objective and policies, investment risks, services,
expenses and investment advisor. It also explains how
to buy and sell shares. By reading a prospectus carefully,
a potential investor can determine if the mutual fund
is an appropriate investment. A prospectus must be given
to a mutual fund customer prior to or at the time of sale.A
company will also issue a prospectus when it is offering
stock. This prospectus will include describes the plan
for a proposed business enterprise, or the facts concerning
an existing one, that an investor needs to make an informed
decision.
Proxy Statement
The document sent to shareholders containing detailed
information on any important proposal that will be voted
on during a shareholder's meeting. This can include electing
candidates to the board of directors. After reading the
proxy statement, shareholders then vote by "proxy,"
which means they send in their vote by mail or attend
the meeting to vote their shares in person.
Redeem
To sell mutual fund shares back to the fund for cash.
Reinvestment
To use dividends and capital gains distributions used
to purchase more shares.
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