A gauge of risk-adjusted outperformance relative to a benchmark.
Measures the volatility of a security or portfolio in relation to the market, usually as measured by the S&P 500 Index. A beta of 1 indicates the security will move with the market. A beta of 1.3 means the security is expected to be 30% more volatile than the market, while a beta of 0.8 means the security is expected to be 20% less volatile than the market.
Bloomberg Barclays US Aggregate Bond Index (the Agg)
A market-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most US traded investment grade bonds are represented. Municipal Bonds and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes Treasury, Government agency bonds, Mortgage-backed bonds, Corporate bonds and a small amount of foreign bonds traded in the US.
Creation and Redemption Mechanism
The process by which ETF shares are created and redeemed. The creation process involves authorized participants (APs) buying underlying shares and delivering those shares to the fund sponsor in exchange for equally valued ETF shares. The redemption process is the reverse, wherein the AP removes ETF shares from the market and exchanges those ETF shares with the ETF sponsor for an equally valued amount of the ETF’s underlying shares. These in-kind transfers help explain the tax efficiency of ETFs as well as their relative.
Stands for the Committee on Uniform Securities Identification Procedures. Formed in 1962, this committee developed a system that identifies securities, specifically U.S. and Canadian registered stocks, U.S. government and municipal bonds, exchange-traded funds and mutual funds.
The income produced by an investment, typically calculated as the interest received annually divided by the investment’s price.