Passive management is an investing strategy that tracks a market-weighted index or portfolio. Passive management is most common on the equity market, where index funds track a stock market index, but it is becoming more common in other investment types, including bonds, commodities and hedge funds.
An index fund is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that it can replicate the performance ("track") of a specified basket of underlying investments. While index providers often emphasize that they are for-profit organizations, index providers have the ability to act as "reluctant regulators" when determining which companies are suitable for an index. Those rules may include tracking prominent indices like the S&P 500 or the Dow Jones Industrial Average or implementation rules, such as tax-management, tracking error minimization, large block trading or patient/flexible trading strategies that allow for greater tracking error but lower market impact costs. Index funds may also have rules that screen for social and sustainable criteria.
A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe, and the open-ended investment company (OEIC) in the UK.
An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product, i.e., it is traded on stock exchanges. ETFs own financial assets such as stocks, bonds, currencies, debts, futures contracts, and/or commodities such as gold bars. The list of assets that each ETF owns, as well as their weightings, is posted on the website of the issuer daily, or quarterly in the case of active non-transparent ETFs. Many ETFs provide some level of diversification compared to owning an individual stock.
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. All forms of value investing derive from the investment philosophy taught by Benjamin Graham and David Dodd at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis.
Franklin Resources, Inc. is an American multinational holding company that, together with its subsidiaries, is referred to as Franklin Templeton; it is a global investment firm founded in New York City in 1947 as Franklin Distributors, Inc. It is listed on the New York Stock Exchange under the ticker symbol BEN, in honor of Benjamin Franklin, for whom the company is named, and who was admired by founder Rupert Johnson Sr. In 1973, the company's headquarters moved from New York to San Mateo, California.
Value Line, Inc. is an independent investment research and financial publishing firm based in New York City. Founded in 1931 by Arnold Bernhard, Value Line is best known for publishing The Value Line Investment Survey, a stock analysis newsletter that tracks approximately 1,700 publicly traded stocks.
Market timing is the strategy of making buying or selling decisions of financial assets by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis. This is an investment strategy based on the outlook for an aggregate market rather than for a particular financial asset.
Active management is an approach to investing. In an actively managed portfolio of investments, the investor selects the investments that make up the portfolio. Active management is often compared to passive management or index investing.
Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. The focus is on the characteristics of the overall portfolio. Such a strategy contrasts with an approach that focuses on individual assets.
Investment style, is a term in investment management, referring to how a characteristic investment philosophy is employed by an investor or fund manager. Here, for example, one manager favors small cap stocks, while another prefers large blue-chip stocks. The classification extends across asset classes — equities, bonds or financial derivatives — and within each further weighs factors such as leverage, momentum, diversification benefits, relative value or growth prospects.
A stock fund, or equity fund, is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities. This may be a mutual fund or exchange-traded fund. The objective of an equity fund is long-term growth through capital gains, although historically dividends have also been an important source of total return. Specific equity funds may focus on a certain sector of the market or may be geared toward a certain level of risk.
Style investing is an investment approach in which securities are grouped into categories, and portfolio allocation is based on selection among "styles" rather than among individual securities.
Dodge & Cox is an American mutual fund company, founded in 1930 by Van Duyn Dodge and E. Morris Cox, that provides professional investment management services.
Socially responsible investing (SRI) is any investment strategy which seeks to consider both financial return and social/environmental good. The areas of concern recognized by the SRI practitioners are sometimes summarized under the heading of environmental, social and governance (ESG) issues: environment, social, and corporate governance. Impact investing is subset of SRI that is generally more proactive and focused on the conscious creation of social impact through investment. Eco-investing is SRI with a focus on environmentalism.
Dimensional Fund Advisors, L.P. is a privately-owned investment firm headquartered in Austin, Texas. Dimensional was founded in Brooklyn in 1981 by David Booth, Rex Sinquefield and Larry Klotz. The company has affiliates within 15 offices in the U.S., Canada, U.K., Germany, Netherlands, Australia, Singapore, and Japan. Dimensional maintains additional U.S. offices in Charlotte, North Carolina and Santa Monica, California and has affiliate offices globally. The company is owned by its employees, board members and outside investors.
Thomas H. Forester is an American mutual fund manager. He was the only long-focused United States stock mutual fund manager to make a profit in 2008. He turned a profit in the third quarter of 2002, during the stock market downturn of 2002 and was first in his asset class year-to-date through November 1, 2004.
Harris Associates L.P. is a Chicago-based investment company that has $104 billion under management as of December 31, 2023. Harris manages long-only U.S. equity, international equity, and global equity strategies which are offered through its mutual fund company, the Oakmark Funds, and other types of vehicles. Harris is wholly owned by Natixis Investment Managers, an American-French financial services firm that is principally owned by BPCE. Harris Associates retains full control of investment decisions, investment philosophy, and day-to-day operations.
Returns-based style analysis (RBSA) is a statistical technique used in finance to deconstruct the returns of investment strategies using a variety of explanatory variables. The model results in a strategy's exposures to asset classes or other factors, interpreted as a measure of a fund or portfolio manager's investment style. While the model is most frequently used to show an equity mutual fund’s style with reference to common style axes, recent applications have extended the model’s utility to model more complex strategies, such as those employed by hedge funds.
Style drift occurs when a mutual fund's actual and declared investment style differs. A mutual fund’s declared investment style can be found in the fund prospectus which investors commonly rely upon to aid their investment decisions. For most investors, they assumed that mutual fund managers will invest according to the advertised guidelines, this is however, not the case for a fund with style drift. Style drift is commonplace in today’s mutual fund industry, making no distinction between developed and developing markets according to studies in the United States by Brown and Goetzmann (1997) and in China as reported in Sina Finance.
