Actual Expense Ratio (AER)
The actual expense ratio is the actual expenses incurred by the portfolio. The AER is the TER plus scrip lending income less brokerage expenses.
Basket
A portfolio of securities comprising all the component securities of the relevant index in the same weighting as they are held on that index.
Constituent
A constituent is a stock which is part of a larger portfolio.
Central Securities Depository Participant (CSDP)
Institution established to hold securities and to affect transfer under section 32 of the Securities Services Act, No 36 of 2004 between accounts, typically by book-entry.
Distribution
Accrued income less portfolio expenses, which is distributed to investors.
Financial advisors
A person who provides financial advice or guidance to investors for a fee. Financial advisors can provide a variety of services regarding investing. They must carry an appropriate license in order to conduct business with the public.
Fundamental indexation™
Fundamental Indexation is simply changing the basis for weighting the stock in an index. Companies are weighted by market capitalisation, which can lead to an overweighting of overvalued companies and an underweighting of undervalued ones. Fundamental indices focus on metrics such as sales, making it easier to identify the most undervalued companies.
JSE – Johannesburg Stock Exchange (JSE)
Liquidity
Liquidity is the ease of buying and selling a financial instrument for cash without causing any significant change in its price.
Market capitalization
The total value of a company. The number of share multiplied by the share price.
Market makers
The market makers will attempt to maintain a high degree of liquidity through continuously offering to buy and sell participatory interests at prices around the NAV, thereby ensuring tight buy and sell spreads.
Net Asset Value (NAV)
The NAV is the total assets of the portfolio less the liabilities. The NAV is given per ETF share that is outstanding by dividing the total value of the fund by the number of shares that are issued.
Rebalancing
Rebalancing is when the asset manager buys and/or sells constituents in a portfolio in order to bring the portfolio in line with the index being tracked.
Primary market
The primary market is that part of the capital markets that deals with the issuance of new securities.
Scrip lending
The lending of securities from one party (being the holder of the securities) to another party (the borrower). The borrower provides collateral for the securities borrowed.
Secondary markets
A secondary market is where investors purchase securities or assets from other investors, instead of from issuing companies themselves. Stock exchanges such as the Johannesburg Stock exchange is a secondary market.
Securities
An instrument representing ownership (stocks), a debt agreement (bonds) or the rights to ownership (derivatives).
Spread
The difference between the price at which a market maker is willing to buy a security and the price at which the seller is willing to sell it (the difference between the bid and ask for a given security).
Stockbrokers
A stockbroker can execute your purchase or sale order through the JSE’s trading system (stockbrokers need to be registered members of the JSE). As with any share transaction, your broker will attempt to find a sell order for your securities in the market that match against your buy order.
Strate
The electronic settlement system utilised by the JSE and administered by Strate, which facilitates the electronic clearing and settlement for all transactions concluded on the JSE.
Total expense ratio(TER)
The TER is a standard measure used by the unit trust industry to illustrate costs of portfolios on a comparitive basis