ETF Glossary - Tax Loss Harvesting - Yield Spread

Tax loss harvesting

This market strategy focuses on selling a portfolio's worst performing security to 1) offset realized capital gains of winning securities, and 2) to reinvest the sale proceeds into securities with a similar investment objective or correlation.

Transparency

Refers to the visibility level of securities holdings within a given portfolio or fund. Generally, the transparency of an index fund will be greater than an actively managed fund. This is due to the fact that holdings within an index fund are openly disclosed and available.

Technichal analysis

An attempt to predict the performance of a security by spotting trends in price, without regard to the underlying fundamentals, such as cash flow and balance sheet. Sometimes referred to as "charting".

Ticker symbol

The lettering system used to identify a stock, mutual fund, or ETF on an exchange. Also called trading symbols.

Turnover

Relates to the frequency with which a money manager is buying and selling securities within a fund portfolio. High turnover translates into higher trading costs, which fund investors must pay. Low portfolio turnover is better because it lessens the impact of trading and tax related costs.

12b-1 fee

12b-1 fees, also known as distribution fees, are one component of a mutual fund's annual fund operating expenses and can be thought of as an alternate way of paying sales-related expenses, such as compensating investment professionals. A fund can have 12b-1 fees only if its board of directors has approved a 12b-1 plan authorizing their payment.

Unit investment trust

This type of fund structure does not reinvest dividends in the fund and pays them out via a quarterly cash distribution. In order to comply with diversification rules, this ETF structure will sometimes deviate from the exact composition of a benchmark index. This type of fund is registered under the SEC Investment Company Act of 1940. The "DIAMONDS", NASDAQ-100 QQQs, and S&P 500 "SPDRs" follow this format.

Volatility

The rise and fall price movement of a security. Securities that rise or fall rapidly within a short time frame are considered more volatile than those that don't. (See Beta)

Volume

Total number of shares or contracts traded for a given security. Volume data is tracked and reported daily by major stock exchanges around the world.

Window dressing

Denotes the selling weak of performing stocks or bonds by money managers just before the end of each reporting quarter, so they don't appear as significant investment positions. This selling activity is often accompanied with buying activity of strong performing stocks and bonds. After quarterly reports are issued, the portfolio will reveal holding positions in strong performing stocks and bonds, despite the fact that the majority of the capital gains in these were never experienced by shareholders. Window dressing is a cosmetic affect and adds little or no value.

Year-to-date (ytd)

The period beginning at the start of the calendar year up until the most current date.

Yield curve

A graph that illustrates the relationship between the yields of bonds with the same credit quality, but with varying maturities. A positive yield curve means short term interest rates are lower versus long term rates. A negative yield curve is just the opposite, whereas a flat yield curve shows little variance in the yields of short term bonds and long term bonds.

Yield spread

The difference in yield between bonds.