Broker Check

Velocity Glossary

We believe you deserve to understand every aspect of your portfolio and financial choices. Don’t understand a word or phrase used on our site? Learn the definition with our Velocity Glossary.

Alpha: the investment’s excess return over the benchmark, after adjusting for risk. A positive value implies that the investment has performed better than expected, relative to its risk. The benchmark used for alpha calculation in our reports is the S&P 500 Index Total Return.1

Backfill: when an investment is created later than a reporting period, the reported return uses data from a similar investment to fill the missing performance details, where indicated. For example, a mutual fund class with a long history can be used to backfill the history of another class that has a recent start date.

Beta: the investment’s volatility compared to its benchmark volatility. A value lower than 1 indicates that the investment is less volatile than the benchmark. A value greater than 1 indicates a higher volatility. The benchmark used for beta calculation in our reports is the S&P 500 Index Total Return.2

Cash and Equivalents: these are short-term, high-credit-quality, and highly liquid investments, such as money market funds.

Correlation: a measure of association between two investments. A positive value indicates that the investments tend to move up and down at the same time. A negative value indicates that the investments tend to move in opposite directions. The maximum value is 1; the minimum value is -1.

Dividend Income: the amount of money an investment pays out to its investors (“shareholders”).

Expense Ratio: a measure of the amount of money it costs a company to operate a mutual fund, as reported in its prospectus.3

Information Ratio: a risk-adjusted measure that captures excess or active returns and relates them to excess or active risk. The higher the information ratio, the better.4

Institutional Mutual Fund Shares: many brokerage firms offer institutional share classes of certain funds—often tagged as “I” or “Y” shares. These investments are typically only available to investors who have big bucks to invest—around $1 million or more—and usually have the lowest expenses in the mutual fund world. You can most often only invest in these funds through a financial advisor.

If you participate in a retirement plan at work and your employer is a good-sized company—or you work with an Institutional Investment Advisor—you probably have access to the institutional share class of a given fund.

Maximum Drawdown: the largest percentage loss from an investment's peak (highest) value to its valley (lowest) value for a given period.5

Retail Mutual Fund Shares: mutual fund shares sold to the general public. Brokerage firms often market these shares as "no transaction fee,” because there is no ticket charge to buy them. These shares are available with low-minimum balance requirements, and consequently, generally have higher annual expenses than Institutional class shares. Investors can purchase shares without a sales load.

Risk (Standard Deviation): a measure of the returns as compared to their historical average. The higher the standard deviation, the more widely the investment's returns vary over time.6

Risk-Adjusted Return: the amount of an investment’s return after measuring the level of risk involved in creating that return, usually expressed in a number value.7

Sales Load: a fee often charged by mutual funds that compensates the professional or institution that sells the share. Investors either pay these fees when you buy the shares (“upfront”) or when you sell them (“back end”). Loads can be as much as 8.5% of the money you invest into the share.

Sharpe Ratio: compares the investment return against the risk-free return (US Treasury Bill), after adjusting for risk. The greater the Sharpe Ratio, the better the investment’s risk-adjusted performance.8

Sortino Ratio: a modified Sharpe Ratio, using downside deviation for the risk adjustment instead of standard deviation. The downside deviation only considers periods of negative returns.9

Up/Down Capture Ratio: shows the portion of a market performance captured by an investment in up and down markets.10

Volatility: how much a security’s trading price increases or decreases based on a given set of returns.

Yield 12-Month: the sum of all money distributed from the asset(s) over 12-trailing months, divided by the current market price of the asset(s).

Yield SEC: for fixed-income investments, the annual rate of the investment’s income based on the 30-day period ending on the previous month’s last day.


  1. http://www.investopedia.com/terms/a/alpha.asp
  2. http://www.investopedia.com/terms/b/beta.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
  3. http://www.investopedia.com/terms/e/expenseratio.asp
  4. http://www.investopedia.com/terms/i/informationratio.asp
  5. http://www.investopedia.com/terms/m/maximum-drawdown-mdd.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
  6. http://www.investopedia.com/terms/s/standarddeviation.asp
  7. http://www.investopedia.com/terms/r/riskadjustedreturn.asp
  8. http://www.investopedia.com/terms/s/sharperatio.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
  9. http://www.investopedia.com/terms/s/sortinoratio.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
  10. http://www.investopedia.com/terms/u/up-market-capture-ratio.asp