Term Definition
Asset allocation Apportioning a portfolio's assets according to risk tolerance and investment goals.
Asset Anything having commercial or exchange value that is owned by a business, institution or individual.
Capital Refers to the financial assets, or resources, that a company has to fund its business operations.
Diversification The practice of investing in a variety of assets. This is a risk management technique where, in a well-diversified portfolio, any loss from an individual holding should be offset by gains in other holdings, thereby lessening the impact on the overall portfolio.
Inflation The rate of increase in the cost of living. Inflation is usually quoted as an annual percentage, comparing the average price this month with the same month a year earlier.
Liquidity A company is considered highly liquid if it has plenty of cash at its disposal. A company's shares are considered highly liquid if they can be easily bought or sold since large amounts are regularly traded.
Risk The chance that an investment's return will be different to what is expected. Risk includes the possibility of losing some or all of the original investment.
Risk management The term used to describe the activities the fund manager undertakes to limit the risk of a loss in a fund.
Volatility The degree to which a given security, fund, or index rapidly changes. It is calculated as the degree of deviation from the norm for that type of investment over a given time period. The higher the volatility, the riskier the security tends to be.