Glossary

Equity (Common stock / Ordinary shares) are common shares that grant voting rights and entitle the holder to dividends and assets after creditors.

Preferred stock / Preference shares are preferred shares with a guaranteed fixed dividend, but without voting rights.

Voting vs non-voting shares: shares with voting rights at meetings vs those without such rights (cheaper, but with no influence).

ADR (American Depositary Receipt) is an American depositary receipt for a foreign share (for example, Yandex in the USA).

Government bonds / Treasuries are government debt notes (for example, US Treasury or Russian OFZ)

Corporate bonds are company debts that guarantee to return money plus interest at a specific time

High-yield bonds / Junk bonds are risky bonds with high interest (from non-creditworthy companies)

Puttable bonds are bonds that you can return early to the company if rates have risen

Structured notes — a bond with an embedded derivative (for example, a bond with a coupon depending on an index)

Principal protected notes — guarantee to return at least the principal amount, the rest depends on the asset

Reverse convertibles — a bond that becomes a company’s share if the price drops below a certain level

Credit-linked notes — a bond where the interest/principal depends on a credit event

Private equity Investments in private (non-public) companies for development or turnaround

Hedge funds Actively managed funds with aggressive strategies (long/short, leverage, etc.)

Real estate (commercial, residential, REIT) Real estate directly or through investment funds (REIT)

Commodities (gold, oil, agricultural) Commodities (gold, oil, grain), traded through futures or ETFs

Advanced Long/short equity strategies involve simultaneously taking long positions (betting on growth) and short positions (betting on decline) on different stocks.

Arbitrage (statistical, merger, convertible) profits from price differences of the same asset in different places.

Pair trading involves taking a long position on a strong company and a short position on a weak company within the same sector.

Factor investing means investing in risk factors (value, momentum, quality, size).

High-frequency trading (HFT) extremely fast trading in milliseconds via supercomputers

Mean reversion assumption that the price will return to its mean (sell when there’s an upward spike)

P/E ratio (Price-to-Earnings) — share price / earnings per share (20 = the price is 20 times higher than earnings)

P/S ratio (Price-to-Sales) — price / revenue per share (less subject to manipulation than earnings)

EV/EBITDA — enterprise value / earnings before tax, interest, and depreciation (comparable between companies)

ROIC (Return on Invested Capital) — profit on invested capital (main indicator of business quality)

C-Corporation A standard company, pays tax, then shareholders pay tax on dividends (double taxation)

S-Corporation An American partnership-type company (conditionally, one owner, taxed once)

LLC (Limited Liability Company) A company with limited liability (popular in the USA, taxed as a partnership)

LLP (Limited Liability Partnership) A partnership with limited liability (for professionals: lawyers, doctors)

Irrevocable trust — an irrevocable trust (stronger protection, but you lose control)

Living trust — a trust created during one's lifetime (vs. testamentary, created in a will)

DIFC/ADGM Foundation — a foundation in a Dubai/Abu Dhabi free zone (no shareholders, autonomous)

Charitable foundation — a charitable foundation (benefits, but mandatory charity)

ETF (Exchange-Traded Fund) A fund that is traded on an exchange like a stock (cheaper, more liquid)

Closed-end fund A fund with a limited number of shares, traded on the secondary market

Unit investment trust A trust where you have units (shares) in a portfolio, cannot be reallocated

Hedge fund An actively managed fund with high fees and complex strategies (long/short, etc.)

Capital market trading of long-term instruments (stocks, bonds of more than 1 year)

Concierge services — concierge services (reservations, children's education, etc.)

Fiduciary duty — the obligation to act in the interest of the client (higher than suitability)

Suitability standard — the product must be suitable for the client (standard for brokers)

Best interest standard — to act in the best interest of the client (higher than suitability)

Accredited investor — investor with income >200K or assets >1M (can invest in hedge funds)