Two and twenty is a typical fee structure of hedge funds, or other alternative investment vehicles, where the annual management fee is 2% of assets and there is also a performance fee of 20% of investment returns.
Archive for the ‘Daily Definition’ Category
Two and Twenty is…
Friday, August 21st, 2009A Time Deposit is…
Friday, August 21st, 2009A time deposit is a type of savings account from which you cannot withdraw funds before a specified date or without giving written notice of your intention to take out money. To compensate for this drawback, time deposits usually offer high rates of interest and extremely low risk.
A Valuation is…
Friday, August 21st, 2009A valuation is an estimate of something’s worth (in finance, it usually refers to a company’s worth). There are many ways to value a company or asset – Net Present Value, Price to Cash Flow, Price to Earnings, Price to Growth, etc. Valuations are typically performed by professionals (people who are specially trained and whom you can hire to perform specific valuations for you).
A CD is…
Friday, August 21st, 2009A CD is a Certificate of Deposit, which is basically a savings account with a higher interest rate. In return for the higher rate, you aren’t allowed to touch your money for a set period of time. In general, shorter periods of time (like three months) have lower interest rates, while the longer time periods have much higher ones.
An Expense Ratio is…
Friday, August 21st, 2009An expense ratio, in the context of mutual fund investing, is a measure of how much it costs a financial institution to manage a mutual fund for every dollar it manages. If management of the fund costs $1 for every $100 managed, the expense ratio is 1%. This ratio is important to look at if you want to invest in a mutual fund, because higher expense ratios can eat into your returns. An expense ratio can also relate to the amount of money a company spends to produce $1 of revenue.
A Monopoly is…
Friday, August 21st, 2009A monopoly is a company that has control over all sales and distribution of a product – to the extent that no other company can compete with it. For example, if your cable or utility companies are the only sellers of their service and you can’t really choose another company to buy from, they hold a monopoly on that particular service. Remember the game Monopoly? The goal was to own EVERYTHING.
R&D is…
Friday, August 21st, 2009R&D is an abbreviation for “research and development.” This is the investment an organization makes to investigate and create new goods, services, or other techniques to gain an advantage over its competitors.
The S&P 500 is…
Friday, August 21st, 2009The S&P 500 (or Standard & Poor’s 500) is an index of 500 stocks that are used to measure the performance of the domestic stock market in the U.S. The S&P 500 was created to represent the major common stock of public American companies.
A Bailout is…
Friday, August 21st, 2009A bailout is major financial support from a government to a failing business so that it doesn’t collapse and cause even greater harm to the economy as a whole. Usually the business will be subject to tighter government regulation as a result of accepting the financial support.