What is an Allocation Effect

1. Allocation Effect

Measuring ability of an investment manager to allocate the assets of a portfolio to different segments. The allocation effect determines whether the overweighting or under weighting of sectors relative to a benchmark contributes negatively or positively to an account's overall return.

2. Asset Class or Asset Classes

It is a group of different securities that have similar characteristics, similar behaviour in marketplace and are subject to similar laws. Stocks, equities, bonds, fixed income and money market instruments are the main asset classes.

3. Benchmark

Benchmark is a standard that is used to measure the performance of your portfolio. While evaluating performance of your investment or portfolio, it is important to use a benchmark to compare it.

4. Calmar Ratio

Calmar ratio is used to compare average annual return rate and maximum risk of the drawdown. High calmar ratio means that the investment work better on the risk-adjusted basis and vice versa. It is traditionally based on short term and recent data.

5. Cumulative Return

An aggregate amount that is gained or lost from an investment over time. Cumulative return is not dependent on the time period involved. It is also usually presented as percentage.

6. Downside Deviation

The standard deviation for all negative returns in your portfolio in the specific time. There are some limitations in Downside Deviation since it treats positive and negative deviations as same. Downside deviation focuses only on the downside risks.

7. Max Drawdown

The maximum loss percentage of a portfolio from the peak to trough before new peak is reached. Max Drawdown can be used as stand alone measure as well as an input to other metrics. It is indicator of the downside risk over some certain period of time.

8. Mean Return

It is the mean or expected value of all returns from the investments in a portfolio. It attempts to define relationship between risks of portfolio of securities as well as its returns.

9. Money Weighted Return (MWR)

It is used to measure rate of return for an portfolio of asset or an asset during certain report period. MWR is influenced by the time of decisions to contribute or to withdraw funds as well as the decisions made by the portfolio manager of the fund.

10. Net Asset Value (NAV)

Net asset value is the total value of the investor's account. It is calculated once a day on the bases of closing prices of the market of securities in portfolio.

11. Peak-to-Valley

Peak-to-valley is the time period during which the largest cumulative percentage decline in the NAV has occurred. It is a statistical evaluation method used for different investment strategies . Funds that have existed for long time periods usually have more than one peak-to-valley drawdowns.

12. Period Return

It is a performance measure that is used to calculate the return any investor has received over a specific period of time. It refers to time between the purchase and sale of an asset.

13. Recovery

It is the total time that took for the Net asset value of investor's account to recover from the valley back to peak.

14. Sector

Sectors are different parts or areas of a business like financial sector, communication sector and so on. Typically, different sectors of a business are interconnected with each other.

Get your money managed with leading scientific models

15. Selection Effect

A percentage that is used to measure the ability of selecting different securities within a sector relative to a benchmark.

16. Sharpe Ratio

It is a standard measure used in the industry to calculate the risk adjusted returns. This ratio is used to measure how well the returns compensate the investors account for the risk that is taken. The sharpe ratio is also used to explain if the excess returns from a portfolio is due to the smart decisions made regarding investment or result of a lot risk involved.

17. Sortino Ratio

Sortino Ratio is an important tool to evaluate return for bad risk of a given level. It is very useful for the investors, portfolio managers and analysts to conduct evaluation. Sortino Ratio uses downside deviation as risk measure, addressing the standard deviation, as the upside volatility is important and beneficial to investors.

18. Standard Deviation

It is used to measure the variability. In financial terms, it is term used for annual rate of the return on some investment to measure its volatility. It shows how much variation or dispersion there is from the average. There are three variables used for the standard deviation. The basic concpet of risk is that with its increase, expected return should also increase.

19. Time Period Return

The time period return is used to calculate loss or gain an investor’s portfolio has made during a specific period of time. Time period performance is presented as a percentage.

20. Time-Weighted Return (TWR)

The Time period return is used for comparing the results of the investment managers. TWR measures the percent return produced over time independent of contributions or withdrawals. TWR eliminates the impact of the timing of inflows and outflows.

21. Value-Added Monthly Index (VAMI)

A statistical figure that tracks the daily/monthly/quarterly performance of a hypothetical investment. VAMI charts total return that is gained by investor from the reinvestment of dividends.

22. Bank capital

Bank capital represents the total assets of the bank. It can be also defined as the difference between bank's liabilities and assets. If the bank has more capital, it means bank has more potential to absorb losses.

23. Capital Asset Management

Capital assets can be defined as the assets that include properties such as stocks, bonds, homes and investment, etc. Capital Asset Management is required to reduce money risk, increase benefits and provide palatable levels of service to clients in a supportable way.

24. Capital Financial

It to the financial values of assets that are required by a company to supply with goods or services. It also deals with facilities like the apparatus used for the manufacturing of the goods.

25. Captive Finance Company

It is a company who provides financing to the customers buying products of the parent company. Having a Captive Finance Company is a way of increasing the sale of the parent company without taking any risk of extra financial burden in the form of handling loans.

26. Dividend growth Investors

A dividend growth investor is a person who invests his money in top notch organizations which have a proven and proficient long haul record of development and stability.

27. Family Office

It offers a complete outsourced solution for managing investment financial side of a family or affluent individual. There are two types of family office Single Family Office and Multi Family office.

28. Forex Managed Accounts

The accounts in which the funds are managed by the money manager on the behalf of the client. These accounts are like hiring some investment advisor who manages investment account of bonds and equities.

29. Global Capital Investment

The main use of the global capital investment is the consumption of the capital for using it in long term. The companies make global capital investment in other companies in form of the equity stake for the sake of building business partnership.

30. Certified Public Accountant

CPA, Certified Public Accountant is the official designation given to people who clear a exam and also meet the requirement of work experience. This designation is given by American institute of Certified Public Accountants.

31. AEOI-automatic-exchange-of-tax-information

It is a standard set internationally that is used to govern how all the tax authorities that are participating. All the information that is related to the bank and keeping safe accounts of the taxpayer, is reported to domestic tax authorities by banks.

32. FATCA-foreign-account-tax-compliance-act-for-us-citizen-by-IRS

It is a independent US tax law made to curtail the potential evasion of the tax by the US taxpayers. It requires all the institutes to provide the information about the supposed US accounts to the tax authorities of the US.

33. Financial management corporation

It is application of the financial principles in a corporation to create and maintain the value through proper resources management and decision making. It aims to maximize the profit of the company and to maintain it.

34. Managed trust company

Managed trust company is not the owner of the assets that are assigned to it by its customer for the management. It can be an associated company or a division company of the commercial bank.

35. Property Inventories

Property Inventories are a written total of all the personal property a taxpayer owns. Property inventories are only effective if they are accurate and have all the defects noted. They should be update periodically.

36. Settlement arrangement

Settlement arrangement is designed in order to help the individuals dealing with serious financial problems and cannot clear their debts. Using Settlement arrangement helps them to clear from all debts and take a fresh start.

37. Tax Minimization

Tax Minimization is a way minimizing the annual tax on one’s business or property. It is a key part of wealth planning process. People with huge income in order to avoid tax opt for it.

38. Wealth creation advisors.

They are professionals who are capable of finding legal and effective means for the investors through which they can increase their wealth.