Financial dictionary

An acquisition is a process in which one company gains control over another company by purchasing its shares or assets. The goal of an acquisition may be business expansion, entry into new markets, acquisition of new technologies, or an increase in market power. An acquisition can be "friendly" if both parties agree to it or "hostile" if it occurs against the will of the target company's management.

Annualized return is the average annual return on an investment over a specific period, adjusted to a yearly basis. It allows for the comparison of investment performance across different timeframes. Annualized return accounts for the compounding of returns over time, providing a more realistic view of an investment's long-term profitability.

An asset class is a category of financial instruments that share similar characteristics, market behavior, and risk profiles. The main asset classes include equities, bonds, real estate, commodities, and cash or cash equivalents. Each asset class responds differently to economic conditions and has distinct potential returns and risks. Diversification across different asset classes is an important component of an investment strategy, as it can help reduce the overall risk of a portfolio and increase its stability in various market conditions.

An asset deal is a transaction in which the buyer acquires specific assets of a company (e.g., real estate, equipment) instead of its shares. This approach allows the buyer to avoid taking on the company's liabilities and to acquire only the assets that are important to them. This type of transaction provides greater control over the acquired assets but may be less tax-advantageous for the seller.

Asset management is the professional management of investments such as stocks, bonds, real estate, and other securities, aiming to achieve the best possible returns for clients. Asset managers analyze financial markets, assess risks, and actively make decisions about buying or selling assets within a portfolio. Asset management services can be provided for a fee to individuals, institutions, and businesses.

An asset management company is a financial institution that manages investments on behalf of its clients. It pools funds from individuals or institutional investors and allocates them across various assets, such as stocks, bonds, real estate, or other securities. The goal is to optimize returns while adhering to investment objectives and considering clients' risk profiles. Asset management companies typically charge fees based on the amount of assets under management (AUM).

A total return of a fund since its inception is the percentage increase in the value of the investment in the fund from its establishment to the current date. This return takes into account all changes in the value of the fund, including any dividends, interest, and asset appreciation. It provides investors with an overview of the fund's long-term performance and helps them assess how effectively the fund has utilized invested capital over time.

Backtesting is the process of evaluating an investment strategy or model using historical data to determine how it would have performed in the past. It allows investors to assess the effectiveness and reliability of a strategy before applying it in real market conditions. While positive backtest results do not guarantee future success, they can help identify weaknesses and optimize investment approach.

Bank bonds are debt securities issued by banks to raise funds from investors. The bondholder lends money to the bank for a fixed period, and in return, receives regular interest payments (coupons). At maturity, the bank repays the bond's nominal value. These bonds can be secured by the bank's assets or issued as unsecured, and they are used to finance banking operations or to increase liquidity.

A bear market is a period when the prices of financial assets, particularly stocks, decline by 20% or more from their previous highs. This period can last from several months to years and is often accompanied by investor pessimism, economic issues, or a recession. During a bear market, investors typically seek safer investments or reduce their exposure to riskier assets.

A benchmark is a reference value against which the performance of an investment or portfolio is compared. It is usually an index that represents a specific market or sector, such as the S&P 500 for U.S. stocks. A benchmark helps investors assess whether their investments are performing better or worse than the market and can serve as a basis for making decisions regarding investment strategies.

Blockchain is a decentralized digital database that stores records of transactions in chronological order. Each block contains transaction details, a timestamp, and a link to the previous block, creating a secure and immutable chain. Blockchain technology is the foundation of cryptocurrencies like Bitcoin but is also used in other areas where transparency, security, and immutability of data are needed, such as financial services, supply chains, and healthcare.

Brick & mortar refers to traditional physical stores or businesses that have premises where customers can shop or use services in person. This term is used to distinguish them from online stores (e-commerce), which operate exclusively on the internet. Brick & mortar businesses often integrate digital channels to reach a broader audience and offer customers the option to shop according to their preferences.

A bull market is a period when the prices of financial assets, particularly stocks, rise by 20% or more from their previous lows. This growth is often accompanied by positive investor sentiment, optimism, and improving economic conditions. A bull market can last from several months to years and may be associated with a period of economic growth and low unemployment.

CAGR (Compound Annual Growth Rate) shows the average annual return on an investment over a specific period, assuming this return was evenly distributed across each year. It is a useful tool for comparing the performance of different investments or projects, as it takes into account the effect of compound interest. It helps both investment professionals and individuals understand how their investments have developed over time.