Category: Investments glossary

The one-third rule estimates change in labor productivity based on changes in capital devoted to labor. The rule is used to determine the impact that changes in technology or capital have on production.

Wage expense is the cost incurred by companies to pay hourly employees. This line item may also include payroll taxes and benefits paid to employees. Wage expense may be recorded as a line item in the expense portion of the income statement. This is a type of variable cost.

Venture capital funds are investment funds that manage the money of investors who seek private equity stakes in startup and small- to medium-sized enterprises with strong growth potential. These investments are generally characterized as high-risk/high-return opportunities.

The OPEC basket is a weighted average of oil prices from the different OPEC members around the world. Members of the Organization of the Petroleum Exporting Countries (OPEC) contribute data which forms the basis of the basket. The basket is a benchmark, or reference point, for those monitoring the price of oil and the stability of the global oil market.

The relative strength index (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100. The indicator was originally developed by J. Welles Wilder Jr. and introduced in his seminal 1978 book, New Concepts in Technical Trading Systems.

A public good is a product that an individual can consume without reducing its availability to others and of which no one is deprived. Examples of public goods include law enforcement, national defense, sewer systems, public parks, and the air we breathe. As those examples reveal, public goods are almost always publicly financed.

A hybrid annuity is a retirement income investment that allows investors to split their funds between fixed-rate and variable-rate components. Investors can divide their savings between conservative assets that offer a low but guaranteed rate of return and riskier assets that offer the potential for higher returns. As in any annuity, the goal is to create a steady stream of income during retirement.

Total-debt-to-total-assets is a leverage ratio that defines the total amount of debt relative to assets owned by a company. Using this metric, analysts can compare one company’s leverage with that of other companies in the same industry. This information can reflect how financially stable a company is. The higher the ratio, the higher the degree of leverage (DoL) and, consequently, the higher the risk of investing in that company.

A fund of funds (FOF)—also known as a multi-manager investment—is a pooled investment fund that invests in other types of funds. In other words, its portfolio contains different underlying portfolios of other funds. These holdings replace any investing directly in bonds, stocks, and other types of securities.

Employment Insurance (EI) is an unemployment insurance program in Canada that allows individuals who have recently lost a job to receive temporary financial assistance. Employment insurance can also be extended to individuals who are unable to work because of illness or who are caring for a young child or a seriously ill family member. In addition to financial assistance, the program assists the unemployed with job search services.