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Investing Glossary - L

    Laddering

    Definition: Purchasing bonds that mature at various intervals.  This provides the investor with greater regularity of income. TeenAnalyst Advice: Bond laddering works by purchasing bonds with different maturities.  For example, you might purchase 3 year, 5 year, and 10 year bonds.  By doing this, you are giving yourself greater liquidity because ...

    Laissez Faire

    Definition: This is an economic idea that the government shouldn't be involved in business affairs.  The term is French for "Let it be." TeenAnalyst Advice: Laissez-faire supporters believe the government shouldn't have any role in business.  This includes no trade restrictions, no corporate regulations, and no minimum wage laws. Laissez faire economics tends to be...

    Law of One Price

    Law of One Price - The law of one price relates to the theory that any commodity, asset or security will have the same price in more than one exchange. Should the price differ in anyway, then by what are called arbitrage opportunities an equality will be achieved. Essentially the arbitrageur will acquire said asset from one market. Then can sell it in another where the rate is higher. This allows for parity in the pricing so purchases in cheaper places will still enable the person to get the higher price. Thus allowing for it to fall under the term...

    Leveraged Buyout

    Definition: Leveraged buyouts are essentially takeovers that involve using lots of borrowed money.  These were made famous in the 1980's when corporate raiders would issue junk bonds, buy a conglomerate that was mismanaged, and sell of its parts. Advice:...

    Leading the Market

    Leading the Market - Leading the Market is moving in advance of the market as a whole. An illustration is a stock that begins to decline before a bear market. Numerous sources say that low quality stocks have led the recent United States stock market rally. While that may be true in terms of percentage change in price, looking at the question from the perspective of the slope of the primary trend, we draw a somewhat different conclusion about what is doing well. We calculate the percentage of companies in several categories with rising primary trends using a formula. The...

    Legal Monopoly

    Legal Monopoly – A legalized government mandated lone domination of the marketplace, allowed to happen and unfold, operate and thrive. It is done through statutory, de jure, legislated, on the books, by law, spirit, letter and intent, permissions, control and domination. These companies and entities are government regulated, run or independently,  protected by laws from competition (government, or state-owned), afforded exclusive rates, rights and protected territories. They enjoy favourable pricing  and policies regulations.  Best option  for government and citizens, for the greater good, initially and on an ongoing basis, like railroads, airlines and telecommunications for example (offering more access, availability,...

    Letter Of Intent

    Letter Of Intent – This is also known and abbreviated as an LOI. It contains the very confirmation of motivations, intentions, aims, goals, objectives, meaning and purpose, in writing. Fixed, focused and direct, they can be used to great success in things like abeyance, corporate actions, mergers, hostile takeovers, or will and testaments A formal agreement, detailing the execution of a planned corporate action. The executive, leadership, management and legal council, consult, word and inform of the intended action. In a will it is the specification of what should happen to and for the children upon the event of their...

    Letter Security

    Letter Security - Letter Security is an un-registered stock or bond, called letter bond, sold directly by the issuer to the purchaser who sends a signed letter, called a letter of intent, to the regulatory authorities that he or she is buying it for long-term investment only and will not resell it for a specified number of years. Letter securities cannot sell to the public for not qualifying for registration with the country's securities regulation agency. A security that is unregistered with the Security and Exchange Commission and therefore not sold publicly. These securities enter the portfolios of institutional investors...

    Level 1 Asset

    Level 1 Asset - Level 1 Asset as determined by FASB 157, an asset which has a reliable fair market value. Something you can look up and get a current price quote on a major exchange. Level 1 asset includes a variety of publicly traded stock, bonds, and funds. Level 1 asset is part of the bonds, mutual funds, stocks, and trading subjects. Financial assets and liabilities whose values, based on unadjusted, quoted prices for identical assets or liabilities in an active market, examples include active exchange-traded equity securities, listed derivatives, most United States Government and agency securities, and certain...

    Level 2 Asset

    Level 2 Asset - Level 2 Asset as determined by FASB 157, is an asset, or assets which do not have a fair market value that when looked up, but instead is able to calculate from other data points. A level 2 asset might list on a non-active market, or be valued by a specific pricing model. Financial assets and liabilities whose values are based on quoted prices in inactive markets, or whose values based on models, but the inputs to those models are observable either directly for substantially the full term of the asset or liability. Level 2 asset...

    Level 3 Asset

    Level 3 Asset - Level 3 Asset as determined by FASB 157 is an asset for which an accurate fair market value is not calculated. An outlay model may be able to provide an approximation, but are generally illiquid. A mortgage-backed protection might be a Level 3 asset. Financial assets and liabilities whose values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability. Examples include certain private equity...

    Level Load

    Level Load - The term level load is one that applies to the annual fee, which is calculated and then deducted from a given mutual fund’s assets that belong to any specific investors. It will relate to those investments where there are relevant costs for such things as the distribution and marketing expenses. These will incur as long as the investor continues to have the funds. Such charges are paid to those who act as intermediaries for the selling of a fund’s shares. They will we involved any time the mutual funds are sold as retail to the public....

    Leverage

    Definition: The use of various instruments to increase one's rate of return.  In regards to business, leverage refers to using heavy financing for various activities. TeenAnalyst Advice: Most people think of options and futures as a way to leverage your money.  The idea is that you essentially borrow money to increase ...

    Leveraged Employee Stock Ownership Plan (LESOP)

    Leveraged Employee Stock Ownership Plan (LESOP) - Leveraged Employee Stock Ownership Plan (LESOP) is an equity compensation system in which the sponsoring company typically leverages its credit to borrow money, which it then uses to fund the plan, in order to purchase company shares from the company's treasury. The shares used are for the purposes of the stock ownership plan, and the company pays back the original loan with annual contributions, as it is able. Typically, companies choose to use stock ownership plans or equity compensation systems I order to tie a portion of their employee interests to the bottom-line...

    Leveraged Investment Company

    Leveraged Investment Company - Leveraged Investment Company is a company whose charter allows it to borrow money for investing activities. A venture company or mutual fund entitled to borrow capital for its operations. It is an investment company that issues both income shares and capital shares. It is an investment company that uses borrowed money to acquire securities. Control asset companies produce more volatile returns for their shareholders than do investment companies not employing debt financing. It is a dual-purpose fund. It is an investment company or mutual fund entitled to borrow capital for its operations. It is a company...

    Leveraged Stock

    Leveraged Stock - Leveraged Stock is stock financed with credit, such as that purchased on a margin account. A certificate obtained on credit, especially on a margin account. Generally, one purchases a leveraged stock with one's broker's money, with the stock and cash as collateral. This increases the stockowner's profit when the net value goes up and increases his or her debt to the broker when it goes down. Stock backed with credit, as in a margin account. Although not, strictly speaking, leveraged stock, securities are convertible into common stock to provide an extra degree of the leverage when bought...

    Liabilities

    Definition: A financial obligation that a business is required to pay.  These include bonds, notes, accounts payable, etc. TeenAnalyst Advice: When a company owes somebody, it's called a liability.  These liabilities are recorded on the balance sheet.  Net worth is figured as assets - liabilities.  Therefore, liabilities take ...

    Life Cycle

    Life Cycle – It is abbreviated LC and forms part of any LCA (Life Cycle assessment) process and calculation in financial and investment contexts. These dynamic, life-cycle assessment, valuation  or analysis, involves the duration of, period from start to finish. It covers all steps, every stage, coming-and-going, full-circles, or full production cycles. It includes all the phases, stages, series, sequences, successions, rounds and rotations, initiation to completion, for product, process and manufacturing. It pertains to and covers, the consecutive, sequential, interconnected stages of a product system (Purchase of raw materials, other acquisitions, creation, natural resources, final to final disposal) add...

    Lifecycle Fund

    Lifecycle Fund - A lifecyle fund is a mutual fund that is diversified so it can be utilized to keep a given investor’s assets with appropriate risks. This is intended to apply to a multitude of given life circumstances that the investor might experience. Such funds afford varied forms of risk in their profiles whereby the investor can shift the funds between a number of different options. Thus it provides a more productive way to control investments as the investor changes from youth to the period retirement. The first goal is to grow the shares and then later to preserve...

    Limited Risk

    Limited Risk - Limited Risk is an investment whose loss cannot exceed a specific amount, usually the amount invested. Paradigm include options, buying stocks, and buying bonds. It is the opposite of an unlimited risk. The risk of an investment that has predetermined maximum downside potential, which is usually the initial amount invested. When deciding a limited-risk investment, the investor is fully aware of the potential amount he or she could lose. For example, entering into an extensive position in a stock has restricted possibility because the investor can lose no more than the initial amount invested. The option...

    Limited Voting Stock

    Limited voting stock - Limited voting stock is a class of stock providing its holders with smaller than proportionate voting rights in comparison with another class of stock issued by the same firm. Limited-voting shares allow another class of stock effectively controls the election of a firm's directors even though the limited-voting shareholders may have contributed a majority of the firm's equity capital. A class of stock providing its holders with smaller than proportionate voting rights in comparison with another class of stock issued y the same firm. Limited-voting shares allow another class of stock effectively to control the election...

    Limit Order

    Definition: A stock order placed with a broker in which you specify what price you want to pay for a stock.  If a stock was trading at $60 and you placed a limit order for $55, you are essentially telling the broker "I want to pay $55 or less per share for this stock."  ...

    Lipper Index

    Lipper Index – The Lipper Index is a name that specifically applies to a special form of rating system and also for a given type of mutual fund performance tracking system. Such a process will give any potential investor the possible means to analyze with a dependable ability any given fund in relationship to any number of other similar funds in the same industry. It can also be used on those investments of any similar style. This is also if they are in a variety of categories. Such an index assists the investor in selecting the best form of mutual...

    Lipper Leader

    Lipper Leader - Under the Lipper Rating System there are those mutual funds that are defined by the term Lipper leaders. Such mutual funds will have received a ranking on that system, which places them in the top 20% of the groups. This is based on certain specific forms of criteria that are understood by those who rely upon the Lipper Rating System. Such things will include items as constant return, tax efficiency, preservation, expenses and also total return. To be a leader the mutual fund will have to be ranked by at least one of those given items, but...

    Lipper Mutual Fund Industry Average

    Lipper Mutual Fund Industry Average - The Lipper Mutual Fund Industry Average is provided through regular reports by the New York based firm, Lipper Analytical Service. They will generate on a quarterly and annual basis their reports on the ranking of various growth funds. This will include income fund and aggressive growth fund items as appropriately defined. On this report that they generate will be indicated the performance average level of all mutual funds. It is common for mutual fund managers try to do what they can to be sure their funds are above the average and other funds in...

    Liquid Investment

    Liquid investment - Liquid investment is an investment that one has immediate access to, either the ability to buy or sell the investment, such as a stock or mutual fund, or the ability to access and withdraw funds, such as a savings account. A venture is anything that you buy with the hope that it will become more valuable over time. Stocks, and bonds, your home, and your collection of perfectly preserved baseball cards, paintings, gold, silver, even the cash you put in the bank, are all investments. Liquid investments, or liquid...

    Liquidity

    Definition: Liquidity refers to the ability of people to get into and out of investments.  A "liquid" stock is a stock with a lot of volume that is easy to buy and sell. TeenAnalyst Advice: A liquid investment is one that you can buy and sell easily and quickly.  An example of a liquid investment is...

    Liquidity Agreement

    Liquidity Agreement - Liquidity Agreement is an agreement that allows an asset holder to convert assets into cash. An agreement allows conversion of assets into cash allows a stockholder to convert investments in stock or debentures into cash. They usually appear as requirements in a written contract between a company and its investor. Liquidity agreements are common in venture capital financing, particularly when the investor is uncertain whether the company will ever be able to offer its stock for sale in the public markets. Since many venture capital investments end up being less successful than the business plan predicted, options...

    Liquidity Risk

    Liquidity Risk - Liquidity Risk generally varies over time and across markets, and currently we are experiencing extreme market liquidity risk. The most excessive form of market liquidity risk is that dealers are shutting down, no bids, which is currently happening in a number of markets such as those for certain asset-backed securities and convertible bonds. We are also encountering intense funding liquidity risk since banks are short on capital, so they need to scale back their trading that requires capital, and also scale back the amount of capital they lend to other traders such as hedge funds, now...

    Listing Requirements

    Listing Requirements - Listing Requirements is the listing on the New York Stock Exchange, a company will meet certain qualifications, and to be willing to keep the investing public knowledgeable on the progress of its affairs. The company must be a going trepidation, or be the successor to a going concern. In determining eligibility for listing, particular attention to such qualifications as the degree of national interest in the company. It is a set of conditions imposed by the stock exchange upon companies. It is the conditions sometimes to include a minimum number of shares outstanding, minimum market capitalization, and...

    Little Board

    Little Board - Little Board is a slang term referring to the American Stock Exchange (AMEX). It also described any exchange that is not the New York Stock Exchange (NYSE). Little board was to refer to the New York Consolidated Stock and Petroleum Exchange, which closed its doors in the 1920's. Diagonally across New Street from the New York Stock Exchange, the corner of Exchange Place stands a dull red building of queer proportions which is the Consolidated Stock and Petroleum Exchange of New York, familiarly known as the little board and disrespectfully referred to by habitus of New Street...

    Limited Liability Company (LLC)

    Definition: A corporate structure that limits the amount of liability the owners have. If the company is sued or goes bankrupt, the owners are not responsible for debts or settlements. TeenAnalyst Advice: Forming...

    Load-Adjusted Return

    Load-Adjusted Return – The load-adjusted return applies to any net return on an investment for a mutual fund. This is the adjusted amount returned after the load amount, along with some other specific charges, as with 12b-1 fees, which are associated with marketing and a calculated amount based on a given period of time. It applies more than anything to advertising and will adjust depending on the amount of a given return. This represents what is the amount the fund actually has as a return after the load percent is calculated. Thus the difference is the adjusted return to the...

    Load Fund

    Load Fund – The load fun refers to the cost related on the assessment of any given sales charge or a commission on a specific transaction. It is that load that is used to compensate anyone who handles the sales. Such intermediaries might include financial planners, brokers, investment advisors or others in such categories. The purpose of the load fund is to compensate the given individual for all his or her time and consultation services. This is in recognition of the part performed in making sure a given investor was able to locate an appropriate fund in which to invest....

    Loads

    Definition: Loads are sales charges issued by the mutual fund.  If you pay the charge up front, it's called a "front end load."  If you pay it when you sell your shares, it's called a back end load. TeenAnalyst Advice: As a young investor myself, I stay away from mutual funds with sales charges.  A mutual...

    Loan Crowd

    Loan Crowd - Loan Crowd is stock exchange members lending and borrow securities from one another in order to cover their customer's short positions. The term ?loan crowd? came from the fact that this group of people gathered at a designated area on the floor of the stock exchange. It is an endearing past term. In the 1920's and 1930's it refers to the group of members firms that lend or borrow securities needed to cover the positions o customers who have sold short securities. The crowd found was around the loan post. The massive multi-billion dollar write-downs are of...

    Loaned Flat

    Loaned Flat - Loaned flat is securities lent interest free between the brokers to cover customer's short sale positions. It is the practice of lending securities from one broker to another. This is to cover a customer's short sale with no interest charged by the lending broker. Selling securities, or commodities, futures and contracts not owned by the seller. The investor earns a profit when the market price of the security declines, and loses money when the purchase price is higher than the original selling price. To make a ?short sale?, the broker borrows stock and loans it to the...

    Loan Stock

    Loan Stock - Loan Stock is a type of fixed income security, a loan made to a company. Although the term loan stock might suggest otherwise, the holder of a fixed income security is merely the company's creditor and does not have any say in their business. There are two varieties of fixed income security, loan stock, and debenture. Loan stock is certificates granted in exchange for a loan. There are two essential kinds of loan stock. The unsecured loan stock means that the company receiving the loan offers no collateral to guarantee the loan. The second is unsecured loans...

    London Stock Exchange (LSE)

    London Stock Exchange (LSE) - London Stock Exchange (LSE) enables companies from geographic locations to raise money from the outside investors. Its main goal is to provide attractive, efficient, and well-regulated markets for companies, investors, and intermediaries. The London Stock Exchange is one of the worlds oldest and can trace its history back to coffee houses of 17lth Century London. For decades, the Exchange provided a trading floor where members could buy and sell shares. It is not only one of the oldest exchanges in the world; it is one of the most prestigious, supplying high-quality prices, news, and other...

    Long-Term Investor

    Long-Term Investor - Long-Term Investor is a person who makes investments for a period of five years in order to finance his or her long-term goals. Some hypothesis favor a one portfolio for all financier approach, emphasizing a best mix of assets program. The more traditional approach, which developed out of mean variance analysis some fifty years ago, tailors an individual's portfolio to his or her age, young investors should take more risk with stocks, and attitudes toward risk, conservative investors should hold more cash. Research suggests that long-term portfolio choice is a complex issue, and that some conventional wisdom...

    Long Bond

    Definition: A bond that matures in more than 10 years.  The term "long bond" typically refers to the 30-year treasury bond. Advice: Because bonds with longer maturity face greater risk of changing interest rates (and greater default risk, as...

    Long Position

    Long Position - Long Position is the buying of a security such as a stock, commodity, or currency, with the expectation the asset will rise in value. In the framework of options, it is the buying of an options contract. It is the opposite of ?short? or short position. For example, an owner of shares in McDonald's Corp. is ?long McDonald's? or ?has a long position in McDonald's?. The buying a call, or put, options contract from an options writer entitles you the right, not obligation to buy, or sell, a specific commodity or asset for a specified amount at...

    Long-Short Investing

    Definition: A strategy that involves buying shares of stock in one company while shorting another one.  Hedge funds often choose to buy shares in a company that is doing well while shorting its competitor who is doing the worst. Advice: This ...

    Low Load Fund

    Low Load Fund - This is the specific charge on a given sales by company that is an open-end investment firm. Their fees will generally be in the realm of 1 to 3% of the shareholder’s invested amount. It is in contrast to those regular load firms that often assess charges up to 9.3% on the same investments or those who have the option of no-load funds. This particular type of load fund became very popular during the mid-1980s. That was a period, which witnessed a rekindling of public attention in the nature and types of investment firms....

    Long-term Capital Management (LTCM)

    Definition: A hedge fund that used a risk arbitrage strategy to make very large, leveraged bets on credit spreads.Advice: LTCM was a very high-performing hedge fund for a number of years.  The fund created theoretically "riskless" profits but its incredible leverage and temporary market forces destroyed the hedge fund and lots its investors billions of dollars.  Because of the extreme leverage, the Federal Reserve and Wall Street investment banks had to bail the fund out in order to prevent widespread financial havoc.If you want to read a fantastic story about LTCM, we recommend you check out When Genius Failed.  ...

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    Definition of the Day Block Positioner

    Block Positioner - A block positioner is a member who is registered in the Securities and Exchange Commission, and who deals, sells, securities while taking a long or short position with stocks and bonds. A block positioner takes this stance with the hopes that he or she will net a...

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