Glossary of Terms
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or check the investment dictionary at Investopedia.com.
absolute return - "Absolute return" is a stand alone measure of investment performance, irrespective of
traditional performance benchmarks, such as major market indexes (S&P 500, Dow Jones 30 Industrials, Russell 2000, etc.).
Mutual funds typically choose an index that invests in substantially similar securities to benchmark their performance against.
They are comparing "relative return".
Our "absolute return" strategies mimic those used by some hedge funds, attempting to profit in
bull and bear markets. They
are not closely correlated with any traditional benchmarks. We do this by actively trading indexed mutual funds that invest on
both sides of the market. Some of the funds are "long" and some are "short" the various market indexes. In addition, we
invest in various sector index funds, some of which are not closely correlated to the major market indexes.
On our performance graphs, we do show you how the S&P 500 index performed over the same time period, however you should not
expect to see any direct correlation between the performance of the S&P 500 and our model portfolios.
asset allocation - "Asset allocation" is a process of dividing a portfolio into different asset classes in order to
diversify and reduce risk. For example, one asset allocation model, which we particularly like, divides a portfolio into 30%
Domestic Stocks; 30% International Stocks; 10% High Grade Bonds; 10% High Yield Bonds; 10% Treasury Inflation Protected
Securities (TIPS); 5%
Real Estate Investment Trusts (REITs); and 5% Precious Metals. This is more of a general allocation which would be suitable for younger
investors. Investors nearing retirement would probably want to weigh their portfolios heavier in the fixed income
asset classes.
In the near future we plan to unveil our own version of an "asset allocation"
model which is suitable for larger portfolios. It will be diversified
across many asset classes, and use
long and short funds in every asset class.
hedge fund - "Hedge funds" are investment pools that use many different trading strategies in an attempt to make
profits regardless of market direction. Typically (but not always), they use aggressive strategies such as options, commodities,
futures, derivatives, long and short, etc. in an attempt to maximize their returns, and to achieve results that are not closely
correlated to the major markets.
Hedge funds are generally investment partnerships that are open only to "accredited" (high net worth) experienced
investors. They typically have high minimums that can exceed $1,000,000 or more.
swing traders - "Swing traders" generally attempt to capture profits from short term trades, which can span 1 or 2 days
to several weeks, or even longer. It is a style of trading, generally based on some form of technical analysis, that is designed
to capture profits from smaller price movements. The AccuFundTrader model portfolios fall into this category of trading.
tactical asset allocation - "Tactical Asset allocation" differs from asset allocation in that with this strategy, you would overweight the asset classes that are poised to benefit from market trends, such as rising or falling interest rates, and underweight, or short the asset classes that are likely to be adversely affected. For example, if interest rates were predicted to rise, you might underweight your portfolio allocation to 30-Year Treasury Bonds. You could also short the asset class, or purchase one of the funds that move inversely to 30-Year Treasury Bonds, such as ProFunds Rising Rates Opportunity (RRPIX).
total return - "Total return" is the rate of return over any given time period. It is not an annualized figure.
For example, if an investment earned 10% over a 6 month time period, it would have a total return of 10% for that period, but
an annualized rate of return of 20%.
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