10 Finance Terms You Need to Know

Hey, everyone! Today, we’re discussing 10 finance terms that every fund manager should know!

Terminology of Hedge Funds

Finance terms can sometimes be tricky, but let’s discuss some essential ones!

Let’s start it off with…

#1 Mutual Funds

They are a group of people that buy stocks or bonds that are grouped together.

They’re good because it’s diversified, but the attached fees are generally very high.

#2 Exchange Traded Funds (ETFs)

It’s a huge collection of stocks/bonds that are managed by computers.

The fees are low and there are many different ETFs to choose from.

Interestingly, Warren Buffet said that when he dies, he wants all his money invested in broad market ETFs.

#3 Carried Interest

This term is specific to funds. Put simply, carried interest is profit share on the portfolio.

Typically, the returns on a fund are 80% to the investors and 20% to management.

Returns on a fund = carried interest

#4 Re-Balancing

In a certain fund, for example, a particular percentage of the money goes to X and the other goes to Y.

After progress is made, the percentages are thrown off.

Quarterly or semi-annually, fund managers re-balance the investment percentages by selling some winners and buying some losers.

#5 Fund of Funds

This is a fund where the capital goes into other funds!

Why is this done?

  • Discounts – generally given to investors when the investment amount is large
  • Exclusivity – it gives regular people the chance to inadvertently invest in big funds
  • Diversification – you can invest in multiple funds!

Check out my video to see these 5 other finance terms that you must know!

  • Liquidity
  • High Water Marks
  • Arbitrage
  • Asset Allocation
  • Due Diligence

That’s it for today!


Bridger Pennington

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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.

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