Category: Financial Terms

What is portfolio turnover? Portfolio turnover measures how often a fund buys and sells its holdings over a period (usually one year). It’s calculated by dividing the lesser of total purchases or total sales by the fund’s average assets for the period. The result is expressed as a percentage and indicates how actively a fund…

Portfolio Runoff — Definition, How It Works, and Examples Key takeaways Portfolio runoff occurs when assets with finite terms are allowed to mature without being replaced, shrinking the asset base that generates returns. Runoff can affect banks, fixed-income portfolios (ABS, MBS), insurers, and central-bank balance sheets. It reduces investment income over time and can be…

Portfolio of Financial Assets What is a financial portfolio? A financial portfolio is a collection of investments—stocks, bonds, cash and cash equivalents, commodities, ETFs, closed-end funds, and alternative assets such as real estate, art, or private investments—held and managed as a single unit to meet an investor’s objectives. Key takeaways A portfolio’s core building blocks…

Understanding Portfolio Managers: Roles, Types, and Key Responsibilities A portfolio manager is a financial professional who makes investment decisions and manages the day-to-day operations of investment portfolios for individuals or institutions. They design and implement investment strategies, monitor holdings, rebalance positions, and communicate with clients or stakeholders. Portfolio managers influence fund performance directly and are…

Portfolio Management: Definition, Types, and Strategies Key takeaways * Portfolio management is the process of selecting and overseeing a mix of assets to meet long-term financial goals within a given risk tolerance. * Active management attempts to outperform a benchmark through frequent buying and selling; passive management seeks to match a benchmark (indexing). * Asset…

Portfolio Investment Key takeaways * Portfolio investment means owning a mix of financial assets (stocks, bonds, cash equivalents, real estate, commodities, alternatives) to earn returns while managing risk. * Asset allocation—how much to hold in each class—should match your goals, risk tolerance, and time horizon. * Diversification across asset classes, sectors, and geographies reduces the…

Porter’s Five Forces: A Practical Guide to Industry Competition Key takeaways * Porter’s Five Forces is a framework for analyzing the competitive forces that shape an industry’s profitability: rivalry among existing competitors, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and threat of substitutes. * The model helps firms understand where…

Porter Diamond Model: What It Is and How It Works The Porter Diamond Model (Theory of National Competitive Advantage), developed by Michael E. Porter, explains why certain nations or regions become hubs for particular industries. It identifies four interrelated determinants—plus the role of chance and government—that shape a country’s competitive advantage in global markets. Businesses…

Pork Barrel Politics: Definition and Key Points Pork barrel politics refers to the practice of inserting funding for a specific local project into a larger budget or appropriations bill. These line items typically benefit a legislator’s home district and can be approved as part of a broader bill without the usual scrutiny applied to standalone…

Population: Definition and How to Measure It Definition In statistics, a population is the complete set of items, events, or individuals being studied. A sample is a subset of that population selected for measurement or analysis. When researchers cannot measure every member of a population, they use samples to make inferences about the whole. Key…

Pooled Funds Pooled funds collect capital from multiple investors into a single professionally managed portfolio. By combining resources, pooled funds provide access to diversified investments, economies of scale, and strategies that individual investors might not efficiently reach on their own. Key takeaways Pooled funds aggregate investor capital to gain diversification and lower per-dollar trading costs….

Ponzi Scheme: Definition, How It Works, History, and Red Flags What is a Ponzi scheme? A Ponzi scheme is a fraudulent investment operation that pays returns to earlier investors using funds contributed by newer investors, rather than from legitimate profits. It promises high returns with little or no risk and depends on a steady flow…

Political Risk Political risk is the possibility that political changes or instability in a country will reduce an investment’s returns or prevent capital repatriation. Also called geopolitical or jurisdiction risk, it becomes more significant the longer an investment’s time horizon. Why it matters Political events can directly affect asset values, operating costs, supply chains, and…

Political Economy Political economy is the study of how politics and economic systems interact: how political institutions, public policy, culture, and power shape economic outcomes—and how economic forces, in turn, shape political choices. Key points Political economy analyzes the mutual influence between political power and economic structures. Economic policy often shifts with changes in political…

Political Action Committees (PACs and Super PACs) Key takeaways * PACs are organizations that pool campaign contributions to support or oppose candidates, ballot initiatives, or legislation. * Federal rules govern formation, registration, contribution limits, and disclosure; different PAC types have different rules. * Super PACs can raise and spend unlimited funds on independent expenditures but…

Poisson Distribution Definition The Poisson distribution is a discrete probability distribution that models the number of times an event occurs in a fixed interval of time or space when events occur independently and at a constant average rate. Its single parameter, λ (lambda), represents the expected number of events in that interval. Formula The probability…

Poison Pill: A Corporate Defense Strategy A poison pill, or shareholder rights plan, is a tactic a public company’s board uses to deter hostile takeovers. It makes acquiring a controlling stake without board approval costly or impractical, forcing potential acquirers to negotiate with the board or abandon the attempt. How it works The board sets…

Point of Sale (POS): What It Is and Why It Matters A point of sale (POS) system is the combination of hardware and software merchants use to accept payments and record sales. Modern POS solutions go beyond checkout: they track inventory, analyze sales patterns, support loyalty programs, manage pricing, and gather customer data for marketing….

Point of Purchase (POP) What is a Point of Purchase? A point of purchase (POP) is the time and place where a retail transaction is completed — essentially where the customer, the product, and the payment converge. POP can be physical (a store checkout area) or virtual (an online shopping cart or checkout page). It…

Point-and-Figure (P&F) Chart Overview A Point-and-Figure (P&F) chart plots price movements without regard to time. Instead of plotting price at fixed time intervals (as with candlesticks or bars), P&F charts use columns of X’s and O’s to represent price moves of a predetermined size. X’s show rising prices; O’s show falling prices. Because small, irrelevant…

Plunge Protection Team (PPT): Definition and How It Works Overview The “Plunge Protection Team” (PPT) is the informal name for the President’s Working Group on Financial Markets. Created after the 1987 stock market crash, its official role is to advise the president and recommend steps to enhance the integrity, efficiency, orderliness, and competitiveness of U.S….

Plowback Ratio What it is The plowback ratio (also called the retention ratio) measures the portion of a company’s earnings that is retained and reinvested in the business rather than paid out as dividends. It is the complement of the dividend payout ratio. Why it matters Indicates management’s preference for reinvestment versus cash distribution. Higher…

Pledged Asset A pledged asset is property a borrower offers as collateral to secure a loan. Common pledged assets include cash, stocks, bonds, and other securities. The asset reduces lender risk, which can lower required down payments, reduce interest rates, or eliminate private mortgage insurance (PMI) for home loans. The borrower retains ownership and continues…

Platykurtic A platykurtic distribution is a probability distribution with negative excess kurtosis. Compared with the normal distribution, platykurtic distributions have thinner tails and lower probability of extreme outcomes (both large gains and large losses). The opposite is leptokurtic, which has positive excess kurtosis and fatter tails. Key takeaways Platykurtic distributions have negative excess kurtosis (kurtosis…

Platinum: What It Means and How It Works Key takeaways * Platinum is a chemical element (symbol Pt, atomic number 78) and a precious metal used in jewelry, automotive catalysts, and various industrial applications. * It is rarer and generally harder and more durable than gold, with a silvery-white appearance that resists tarnishing. * Investors…

Planned Obsolescence What it is Planned obsolescence is a business strategy that intentionally limits a product’s useful life or desirability so consumers will replace it sooner. This can be done by introducing superior models, designing products to fail after a set period, or making newer software and features incompatible with older hardware. Common strategies Functional…

Plain Vanilla Plain vanilla refers to the simplest, standard version of a financial instrument or strategy—one without special features, customizations, or embedded complexities. It contrasts with exotic instruments that include nonstandard payoffs, conditions, or structures. Key takeaways Plain vanilla instruments are basic and transparent, typically carrying lower complexity and risk than exotic counterparts. Common plain…

Pivot Point: Definition and Purpose Pivot points (PPs) are technical analysis levels calculated from the previous trading period’s high, low, and close. They provide objective support and resistance reference points that help traders identify market sentiment, potential reversals, breakouts, and trend confirmation. Key ideas: * The central pivot point (P) is the primary reference level….

Pitchbook: Definition, How They Work, Types, and an Example A pitchbook is a sales and presentation document produced by an investment bank, asset manager, or advisory firm to summarize its capabilities, products, or a specific transaction. It serves as a concise, visual guide for bankers, sales teams, or advisors when pitching services to prospective clients…

Pip (Forex): Definition, Value, and Examples What is a pip? A pip (percentage in point or price interest point) is the standard unit used to measure the change in value between two currencies in the foreign exchange (forex) market. For most currency pairs a pip equals 0.0001 (one ten‑thousandth). It is the smallest whole-unit movement…

Piotroski Score The Piotroski Score is a nine-point checklist that evaluates a company’s financial strength using items from its financial statements. Developed by Joseph Piotroski, it helps investors identify potentially attractive value stocks by assigning one point for each favorable accounting signal. Scores range from 0 to 9; higher scores indicate stronger financial health. Key…

Pink Sheets (Pink Market) — Overview “Pink sheets” is an older term for stocks that trade over‑the‑counter (OTC) rather than on a major U.S. exchange. The name comes from the color of the paper on which OTC quotes were once published. Today the marketplace is electronic and organized by OTC Markets Group, but the colloquial…

PIMCO (Pacific Investment Management Company) Overview PIMCO (Pacific Investment Management Company) is a global investment management firm best known for its expertise in fixed-income securities. The firm manages over $2.2 trillion in assets and serves institutional clients, high-net-worth individuals, and retail investors through mutual funds and managed accounts. Origins and growth Founded in 1971 in…

PIIGS PIIGS is a derisive acronym that refers to five eurozone countries once seen as the weakest during the European sovereign-debt crisis: Portugal, Italy, Ireland, Greece, and Spain. The label highlighted concerns about slow growth, high unemployment and deficits, and elevated sovereign-debt risk that threatened financial stability in the euro area. Key points PIIGS stands…

Pigovian Tax A Pigovian tax is a levy on activities or goods that create negative externalities—costs imposed on third parties or society that are not reflected in market prices. By taxing the activity that causes the external harm, the tax aims to align private costs with social costs and reduce socially undesirable behavior. Key takeaways…