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Definitions from A to Z

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Investment Dictionary

Your quick guide to investment terms, from A to Z.

A

Asset

An asset is something containing economic value or future benefit. An asset can often generate cash flows in the future, such as a piece of machinery, a financial security, or a patent.

 

Personal assets may include a house, car, investments, artwork, or home goods. Investment assets can be unit trusts, stocks, bonds, or cash.

Asset allocation

Usually the asset allocation is the implementation of an investment strategy that aims 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.

Asset class

An asset class is a grouping of investments that have similar characteristics, and are often subject to the same laws and regulations. Example of asset class: stocks, bonds, and money market.

Asset manager

An investment expert or professional who is tasked with managing your funds. Also known as ‘investment manager’ or ‘fund manager’.

 

Asset managers in Singapore are regulated by MAS.

B

Buy

Buy is the short term of “buy order”. Buy order is an instruction to the asset management company to purchase the agreed investment on your behalf.

Bond

A fixed income security.

C

Capital

When someone asks you how much capital you have, it usually means ‘how much cash / money do you have that’s available for use’. Not to be mistaken with assets.

Capital Markets Service License

Having a Capital Markets Service License basically means that a company is authorised to conduct activities licensed by the Monetary Authority of Singapore (MAS).

 

GrabInvest has a Capital Markets Service License for fund management.

Compounding

The process in which an asset’s returns are reinvested to generate additional returns over time. If you invested $100 and made $2 of returns this year, then next year you will earn a return on $102.

 

This may seem small initially, but over time this is very powerful and a major driver of your returns in the long run.

Coupon

In relation to a bond, the interest that is paid to the investor.  The coupon is a percentage of the notional amount and expressed as the interest per year, even if the payment frequency can be more often. 

 

Not to be mixed up with yield, which takes into account the price of the bond.

Current value

The sum of the market value of the investment funds in your investment plan Current value = sum of {units ✕ latest market price of the individual investment fund}

Custody

Holding of a client’s funds or securities under the protective care of an assigned financial institution.

D

Deposit (verb)

The act of putting money into your bank account.


Not to be confused with the downpayment you make that’s sometimes refundable when you buy something.

Diversify

If you’ve ever heard of the saying, ‘don’t put all your eggs in one basket’, this is what ‘diversify’ means. When you diversify, you’re splitting up your investments into different things. Diversification helps to bring about more consistency in your returns.

Drawdown

The move in prices from the high to the low, usually during a market correction. Low risk assets have much smaller drawdowns than high risk assets. Money market funds can even have no drawdown because they invest in high quality assets with a short maturity.

F

Fact sheet

A document that gives an overview of a fund. Each fund will have its own fact sheet.

Fixed income

Used to describe bonds, or borrowings from companies and governments. The bond market is actually bigger than the stock market.

 

Because bonds have a maturity date when you get your money back and a fixed coupon, the term “fixed income” is used.

 

Maturities up to 3 years are generally considered short term. Maturities from 10 years and longer are considered long term. There are even 30 year and 50 year bonds!

 

Most borrowers have ratings that are assigned by rating agencies.

I

Inception date

This refers to the date that your investment actually begins. For unit trusts, this is the date where it was set up.

Inflation

Measure of the rise in general price levels in an economy.

Invest

When you invest in something, you’re putting your money in a product which you believe has the potential to make a return.

 

Every investment has its own risks, some higher than others.

Investment objective

An investment objective is a set of goals an investor has for their portfolio. You can have personal investment objectives, like growing your wealth or earning income.

 

In the context of a unit trust, the investment objectives clearly define the rules for the asset manager. They will set out the market that can be invested in, the currencies, rating limitations of the assets, maturity limitations and maybe even industry and country limits, the target risk and return profile, and provide a benchmark against which the asset manager will be measured.

Investor

As long as you have money placed in an investment product, no matter how big or small, you’re an investor!

L

Liquid securities

​Investment products or assets that you can easily turn into cash, with no lock-up period.

M

MAS

Monetary Authority of Singapore. It’s Singapore’s central bank and financial regulatory authority. It administers the various statutes pertaining to money, banking, insurance, securities and the financial sector in general, as well as currency issuance.

Maturity date

In relation to a bond or fixed income instrument, the maturity date is the date on which the investor is scheduled to receive back the notional amount (that’s the face value) from the issuer.

Market

In the context of investing, when someone says the ‘market’, they are usually referring to the capital market. In the capital market, you can trade stocks, bonds, foreign exchange, and commodities (like palm oil).

Money Market Fund

​It is a fund that invests only in highly liquid short-term instruments. As a result, these funds offer high liquidity with a very low level of risk to invest in. The MAS has set a strict criteria for what can qualify as a money market fund.

P

Portfolio

A collection of your investments is called a portfolio. You can have multiple portfolios with different investment objectives.

Prospectus

A prospectus is a document detailing the investment objectives and strategies of a unit trust or fund, as well as the detailed points of the fund’s past performance, managers, related parties, and financial information.

 

The prospectus is required to be filed with MAS if it should be offered to retail investors in Singapore. 

 

You can access the prospectus of all the funds in your portfolio through the “Portfolio” section in the AutoInvest screen.

R

Rating

A classification or quality score given to borrowers in the fixed income market by rating agencies which reflects the ability of the borrower to repay the money. 

 

The ratings scale ranges from investment grade categories for the highest quality borrowers to high yield categories for companies with more debt to service or deemed a higher risk of non-repayment.

Rating Agency

Independent providers of ratings. The biggest ones are Moody’s, Standard & Poor’s, and Fitch Group.

 

Ratings are used to assess the credit worthiness of a borrower.

Rebalancing

​The process of selling and/or buying assets to restore your portfolio to your target allocation, in order to control the risk and maintain the desired returns.

Redemption

Refers to the selling of your investment(s).

Retail

When someone describes an investment product as ‘retail’, it means it’s available to everyday folks on the street.

 

MAS regulations require retail investors to be assessed for investment knowledge and/or experience prior to making an investment

Returns

Profits you earn from an investment. Returns are not guaranteed. For the return calculation we use time weighted returns.

Risk

When you make an investment, there is always a certain level of risk that you may lose money.

 

Prices can fluctuate in the market and go up or down. To learn more about risks, refer to the General Risk Disclosures under the GrabInvest Terms and Conditions here.

S

Securities

A security is a tradable financial asset. This can be a bond or a stock.

Short term fixed
income fund

Funds that invest in the part of the fixed income market that focuses on shorter maturities of up to 3 years on average. Due to the short maturity, the funds have a high degree of certainty about the investment.

 

Prices are more stable compared to funds that include longer maturity ranges because:

  • Market fluctuation in yields is less (since it deals with less uncertainty)
  • Any change in yield affects the prices less (since the effect on prices from yield changes is compounded every year)

A further sub section of short term fixed income are money market funds which focus on maturities of 1 year or less and have additional criteria for the quality of the borrowers.

 

Money market funds are even more stable (because the instruments are even shorter) but short term fixed income funds have a higher return.

Stock

Refers to the unit of ownership which the investor has in a business. Often also known as ‘share’ and ‘equity’.

Subscription

Refers to buying into investment(s).

T

Target allocation

The optimal allocation of money into the various funds. We regularly update this based on market conditions. 

 

Your specific portfolio allocation may differ slightly from the target allocation due to market price movements in the underlying funds. We rebalance the portfolios on a quarterly basis.

Time in the market

The length of time you are holding your investment before selling it.

Timing the market

An investment strategy of deciding whether to buy or sell an investment product based on predictions on whether its price would go up or down.

When assets have fallen in price, ‘timing the market’ would be when you find out exactly when the prices would go up again. It is difficult, probably impossible, to accurately predict market movements consistently over time.

Time-weighted returns

The time-weighted rate of return is a measure of the rate of growth in a portfolio. It accounts precisely for the timing of inflows (Transfer-in) and outflows (Withdrawal) and is the preferred measure for portfolios that see active movements. 

 

The time-weighted return breaks up the return on an investment portfolio into daily intervals based on whether money was added into or withdrawn from.

Trade

​Just a fancy investment word that means ‘to buy and sell’.

Total Expense Ratio

The total cost of the fund to the investor expressed as a percentage of its total assets, on an annual basis. A total expense ratio of 0.45% p.a. means the cost is $0.45 per year for every $100 invested.

 

The main cost item is typically the management fee of the asset manager, as well as smaller cost items including auditors, accountants and legal fees and other operational expenses

 

These fees are automatically included in the daily calculation of the value of the fund. That means that the return of the fund that you can see on the screen is measured after taking into account all costs.

U

Units

Just as stocks represent the extent of equity ownership in a company, units represent your extent of ownership in a fund. You are investing by buying units of the investment fund.

Unit trust

A unit trust fund pools money from investors to meet a specific financial objective. 

 

The investment decisions are made by a licensed asset manager and the assets are held by a licensed custodian. A licensed trustee oversees that all rules are being adhered to. 

 

MAS reviews the documentation of all unit trusts that are sold to the public.

V

Volatility

Describes how much the price of an asset moves. It is often used as a measure of the riskiness of an asset. 

Y

Yield

The actual return of an investment. For bonds, we often use the yield to maturity which takes into account the current market price and assumes it is held to the maturity date and all coupons are received as planned.

Komsan Chiyadis

GrabFood delivery-partner, Thailand

Komsan Chiyadis

GrabFood delivery-partner, Thailand

COVID-19 has dealt an unprecedented blow to the tourism industry, affecting the livelihoods of millions of workers. One of them was Komsan, an assistant chef in a luxury hotel based in the Srinakarin area.

As the number of tourists at the hotel plunged, he decided to sign up as a GrabFood delivery-partner to earn an alternative income. Soon after, the hotel ceased operations.

Komsan has viewed this change through an optimistic lens, calling it the perfect opportunity for him to embark on a fresh journey after his previous job. Aside from GrabFood deliveries, he now also picks up GrabExpress jobs. It can get tiring, having to shuttle between different locations, but Komsan finds it exciting. And mostly, he’s glad to get his income back on track.