The Sharpe Ratio is a financial equation invented by Bill Sharpe, a recipient of the Nobel Prize For Economics. It serves as a rough guide to whether the ends justify the means in an investment (the higher the ratio, the better the risk-adjusted returns). In other words, whether the potential rewards from an investment justify the amount of risk involved.
Archive for the ‘Daily Definition’ Category
The Sharpe Ratio is…
Friday, June 18th, 2010Annuities are…
Friday, June 18th, 2010Annuities are contracts, or a form of investment, between two parties. The investor makes an investment and the financial institution (usually an insurance company) agrees to repay the investor, with interest, over different time intervals. Typically, you would make either one lump-sum payment or a series of payments to your insurance company, and in return the insurance company would pay back your investment at agreed points in time and an agreed interest rate. There are three types of annuities: fixed, variable and equity-indexed annuities.
An Escrow Account is…
Wednesday, June 16th, 2010An escrow account is a kind of “neutral zone” for people completing some monetary transaction. It’s a bank account that isn’t owned by anyone participating in the transaction, so the money doesn’t have to change hands until all the details have been hammered out. Putting money into an escrow account shows you’re serious about making the transaction, but it protects everyone in case the agreement falls through.
Escrow accounts are often used in real estate deals to prevent a client’s money from mingling with other funds. When the deal is closed, the money in the escrow account is transferred to its ultimate owner – in this case, the seller.
Purchasing Power is…
Tuesday, March 23rd, 2010Purchasing power measures of the amount of goods and services that can be exchanged for a unit of currency, such as the dollar, as compared with how much could be exchanged for that amount in a previous time. For example, the number of sodas you could buy now for $1.00 compared to the amount you could buy 50 years ago for $1.00.
Biofuels are…
Monday, March 8th, 2010Biofuels are liquid fuels and blending components (i.e., a mixture of components used to produce motor gasoline) produced from biomass feedstock — organic matter used as a renewable energy source. Biofuels are used primarily for transportation purposes. Basically, these are fuels derived from an organic source that you can use to fuel your various vessels of transportation. Biofuels primarily serve as an alternative to other fuels, such as oil and its derivatives.
An Exchange-Traded Fund (ETF) is…
Monday, March 8th, 2010An exchange-traded fund (or ETF) is a fund that owns a basket of financial instruments (e.g., stocks or commodities) that reflect the composition of a market index (e.g., the Dow Jones Industrial Average). Somebody looking to buy ETF shares would do so the same way he or she would buy stocks, that is, on a stock exchange, with the help of a broker who charges a nominal fee.
Outsourcing is…
Monday, March 8th, 2010Outsourcing is the practice of using third-party service providers. Companies typically outsource in order to reduce costs or enhance their product, as other companies or service providers may be more experienced or effective in that particular area of production.
Philanthropic Committed Funds are…
Thursday, December 17th, 2009Committed funds are money that a grantmaker has pledged to a nonprofit, but has yet to pay.
Program Cost is…
Thursday, December 17th, 2009We’re not talking about printing the glossy pamphlets with head-shots of your favorite Broadway actors here. For the purposes of TILE, “program cost” refers to the cost of all the work a charity or nonprofit actually does to try to make the world a better place – as opposed to the costs of its fundraising and administrative activities. Program activities for a health-focused nonprofit might include administering medicine or doing research on a rare disease – throwing a benefit gala and sweeping up the office of headquarters would be considered administrative or fundraising costs.
A Community is…
Tuesday, December 15th, 2009A community is a group of people with shared interests. Community can refer to a physical neighborhood; it can also describe other types of groups – like the “investment community” or even the “TILE community” – that share interests, values and concerns, and work together to further common goals.