Explore definitions of investment terms, financial measurements, indexes, and other terminology referenced throughout the Cromwell Funds website and investment materials.
Alpha
The amount by which an investment’s return exceeds or trails the return of its benchmark.
Basis point
One one-hundredth of one percentage point. For example, 100 basis points equal 1%.
Beta
A measure of an investment’s volatility relative to its benchmark. A beta above 1 indicates greater historical volatility, while a beta below 1 indicates lower historical volatility.
Bloomberg U.S. Aggregate Bond Index
A broad base bond market index representing intermediate term investment grade bonds traded in the U.S. Indices are unmanaged, are not available for investment and do not incur expenses.
Capital expenditure
Money spent by a company to acquire, improve, or maintain long-term physical assets such as buildings, infrastructure, or equipment.
Capitalization-weighted index
An index in which companies with larger market values represent a greater percentage of the index.
Cash flow
The amount of cash and cash equivalents moving into and out of a business.
Compound annual growth rate (CAGR)
The annualized rate at which an investment, financial measure, or business result grew over a specified period, assuming growth occurred at a steady rate.
Correlation
A statistical measure of how closely two investments move in relation to one another. A correlation of 1 indicates that they moved in the same direction, while a correlation of 0 indicates little or no relationship.
Debt-to-EBITDA
A measure of financial leverage that compares a company’s debt to its earnings before interest, taxes, depreciation, and amortization (EBITDA).
Diversification
The practice of spreading investments across different securities, asset classes, industries, or regions to reduce dependence on any single investment. Diversification does not assure a profit or protect against loss.
Down-market capture ratio
A measure of how an investment performed relative to its benchmark during periods when the benchmark declined. A ratio below 100 indicates that the investment historically declined less than the benchmark.
Dow Jones U.S. Select REIT Index
An index that measures the performance of publicly traded U.S. real estate investment trusts. Indices are unmanaged, are not available for investment and do not incur expenses.
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
A financial measure used to evaluate a company’s operating performance before certain financing, tax, and noncash expenses.
Earnings growth
The increase in a company’s profits over comparable periods of time.
Environmental, social, and governance (ESG)
Factors related to a company’s environmental practices, treatment of employees and communities, and corporate leadership and oversight.
Exchange-traded fund (ETF)
An investment fund whose shares trade on a stock exchange. An ETF may trade above or below the value of its underlying investments.
Forward price-to-earnings ratio
A valuation measure that compares a company’s current share price with its forecasted earnings per share.
Free cash flow
Cash generated by a company after accounting for expenditures needed to support operations and maintain or expand its capital assets.
FTSE Nareit All Equity REITs Index
An index of U.S. equity REITs. Constituents include all tax-qualified REITs with more than 50% of total assets in qualifying real estate assets other than mortgages secured by real property. Indices are unmanaged, are not available for investment and do not incur expenses.
ICE BofA 1–3 Year BB Cash Pay High Yield Index
An index of U.S. dollar-denominated, below-investment-grade bonds rated from BB? through BB+ with three years or less remaining until maturity. Indices are unmanaged, are not available for investment and do not incur expenses.
ICE BofA U.S. 3-Month Treasury Bill Index
An index designed to reflect the performance of purchasing a single T-Bill issue at the beginning of the month and holding it for a full month. Indices are unmanaged, are not available for investment and do not incur expenses.
Initial public offering (IPO)
The first sale of a private company’s shares to public investors.
Infrastructure company
A company that owns, operates, develops, or maintains assets and services essential to economic activity, such as utilities, transportation networks, energy systems, communications assets, and data centers.
Large-cap company
A company with a relatively large market capitalization. Market-data providers may use different size ranges when classifying companies.
Long position
Ownership of a security based on the expectation that its value may increase.
Long/short strategy
An investment strategy that combines securities owned through long positions with securities sold through short positions.
Market capitalization
The total market value of a company’s outstanding shares, calculated by multiplying its share price by the number of shares outstanding.
Master limited partnership (MLP)
A publicly traded partnership commonly associated with energy infrastructure and other businesses that generate recurring cash flows.
Mid-cap company
A company whose market capitalization generally falls between that of a small-cap and large-cap company. Exact classifications differ among index providers.
Net asset value (NAV)
The per-share value of a mutual fund or ETF, generally calculated by subtracting liabilities from assets and dividing the result by shares outstanding.
Net exposure
In a long/short portfolio, the difference between the percentage invested in long positions and the percentage represented by short positions.
Non-diversified fund
A fund that may invest a greater portion of its assets in a smaller number of issuers than a diversified fund.
Overweight
A portfolio allocation to a security, industry, or sector that is greater than its allocation in the portfolio’s benchmark.
Real estate investment trust (REIT)
A company that owns, operates, or finances income-producing real estate and generally distributes a significant portion of its taxable income to shareholders.
Russell 1000 Index
An index measuring the large-cap segment of the U.S. equity market and representing approximately the largest 1,000 companies within the Russell 3000 Index. Indices are unmanaged, are not available for investment and do not incur expenses.
Russell 3000 Value Index
An index composed of U.S. companies within the Russell 3000 Index that exhibit relatively stronger value characteristics, such as lower price-to-book ratios and lower expected growth rates. Indices are unmanaged, are not available for investment and do not incur expenses.
Russell Midcap Index
An index measuring the mid-cap segment of the U.S. equity market. It is a subset of the Russell 1000 Index. Indices are unmanaged, are not available for investment and do not incur expenses.
S&P 500 Index
A capitalization-weighted index of 500 leading U.S. companies commonly used to measure the performance of the large-cap U.S. stock market. Indices are unmanaged, are not available for investment and do not incur expenses.
S&P Global Infrastructure Index
An index designed to track publicly traded companies from around the world that represent the listed infrastructure industry. Indices are unmanaged, are not available for investment and do not incur expenses.
Short position
A position created by selling borrowed shares with the expectation that they can later be repurchased at a lower price. Losses on short positions can exceed the original amount invested.
Standard deviation
A statistical measure of the historical variability or volatility of an investment’s returns.
Treasury bill
A short-term debt obligation issued by the U.S. government.
10-year U.S. Treasury note
A debt security issued by the U.S. government with an original maturity of 10 years.
Underweight
A portfolio allocation to a security, industry, or sector that is smaller than its allocation in the portfolio’s benchmark.
Yield curve
A line showing the interest rates of bonds with similar credit quality but different maturity dates.