Backtesting - The standard technique for determining how well a strategy or model would have performed ex-post. Backtesting examines the performance of a trading strategy using past data to determine its viability. If backtesting is successful, traders and analysts might feel confident using it in the future.
Balanced fund - Mutual funds that combine common stock, preferred stock, and bonds in their portfolios to pursue both growth and income. The businesses chosen are often located in various industry and places. Balanced funds typically adhere to a defined stock and bond asset allocation, such as 70% equities and 30% bonds. Bonds are debt products with typical returns that are stable and fixed. A balanced mutual fund typically has both growth and income as part of its investing aim, which contributes to the fund's balance. Investors seeking a blend of safety, income, and modest capital growth can choose balanced mutual funds.
Bar charts - Bar charts are made up of many price bars that each show how the price of a security or asset changed over a specific period of time. Although this can be changed to merely display the high, low, and close prices, each bar normally displays the open, high, low, and closing (OHLC) prices (HLC).
Bear market - A market is said to be in a bear market when prices continue to drop over time. Typically, it refers to a scenario in which widespread pessimism and unfavorable investor sentiment cause securities values to decline by 20% or more from recent highs. Bear markets are frequently connected with drops in an entire market or index like the S&P 500, but individual stocks or commodities can also be categorized as being in a bear market if they suffer a decline of 20% or more over a prolonged period of time, usually two months or more. Bear markets can also occur in conjunction with broader economic downturns like a recession. Bull markets that are moving upward can be contrasted with bear markets.
Benchmark index - A group of securities used for comparison when evaluating the performance of a mutual fund or portfolio. Benchmark Index is typically a standard and unmanaged index used to gauge the performance of other equities or securities on the market. Benchmark indices include the Dow Jones Industrial Average, the S&P 500, or the Russell 2000.
Best-in-class - A standout amongst others in a given field or peer group in terms of performance. investing in businesses that outperform their peer groups in terms of sustainability performance is a sustainable investment style.
Beta - Beta measures a security or portfolio's volatility, or systematic risk, in relation to the market as a whole (usually the S&P 500). Generally speaking, stocks with betas greater than 1 are thought to be more volatile than the S&P 500. If beta is smaller than 1 the stock(s) is less volatile. And if beta is equal to 1, then volatility is neutral.
The capital asset pricing model (CAPM), which analyzes the connection between systematic risk and projected asset returns, employs beta (usually stocks). The CAPM approach is frequently used to value hazardous securities and to predict projected returns of assets while taking into account both the risk of those assets and the cost of capital.
Bid - An offer to purchase an asset from a person or business is referred to as a bid. At auctions and on numerous markets, including the stock market, bids are frequently placed by buyers. Companies that compete for project contracts may also submit bids. When placing a bid, a buyer must specify both the amount they are willing to pay for the item and the amount they are willing to spend on it. 1 A market maker's willingness to purchase a security at a particular price is referred to as a bid. However, market makers are also required to display an ask price, unlike retail purchasers.
Bid and ask - A two-way price quotation that represents the best possible price at which a security can be sold and bought at a specific moment is referred to as "bid and ask" (also known as "bid and offer"). A buyer's maximum price that they are willing to pay for a share of stock or other security is represented by the bid price. The least amount a seller will accept for the identical security is represented by the ask price. When a seller is prepared to sell for the highest price or when a buyer is prepared to accept the best offer on the market, a trade or transaction happens. One important measure of an asset's liquidity is the spread, which is the gap between the ask and bid prices. Liquidity is often better the narrower the spread.
Bid-ask spread - The difference between the ask price and the bid price for a marketable item is known as the bid-ask spread. The difference between the highest price a buyer is ready to pay for an item and the lowest price a seller is willing to take is known as the bid-ask spread. The person who wants to sell will get the bid price, and the person who wants to buy will pay the ask price.
Binary option - A binary option is a financial contract in which depending on whether the option expires in the money, the participants to the transaction are allocated one of two outcomes. The name "binary" refers to the fact that binary options depend on the result of a "yes" or "no" proposition. If the binary option expires in the money, traders are paid out, and if it does not, they lose money.
Bitcoin - Decentralized digital currency that can be transferred on the peer-to-peer Bitcoin network. By acting as money and a means of payment independent of any one person, group, or entity, a cryptocurrency like Bitcoin eliminates the need for third parties to get involved in financial transactions. It is available for purchase on numerous platforms and is given to blockchain miners as compensation for their efforts in verifying transactions.
Blockchain - A blockchain is a shared distributed database or ledger between computer network nodes. A blockchain serves as an electronic database for storing data in digital form. The most well-known use of blockchain technology is for preserving a secure and decentralized record of transactions in cryptocurrency systems like Bitcoin. The innovation of a blockchain is that it fosters confidence without the necessity for a reliable third party by ensuring the fidelity and security of a record of data.
Blue chip - A high-quality, comparatively low-risk investment; the term typically refers to the stocks of sizable, well-known businesses that have delivered positive results over a protracted period of time. The phrase "Blue Chip" is taken from poker, where the most valued chips are blue.
Board of trustees - A board of trustees is a team of people who are either elected or appointed to run an organization on a broad scale. The board of trustees, which often serves as an organization's governing body, works to ensure that all management decisions are made with the interests of stakeholders in mind.
Book-to-market ratio - One metric for estimating a company's value is the book-to-market ratio. The ratio contrasts the market value and book value of a company. The historical cost, or accounting value, of a corporation is used to determine its book value. The market capitalization of a company, which is the sum of its share price on the stock market and the number of outstanding shares, determines the market worth of that company.
Book value - When calculating book value, businesses offset the asset's depreciation against the cost of carrying the asset on their balance sheets. Therefore, book value can also be viewed as a company's net asset value (NAV), which is determined by subtracting liabilities and intangible assets (such as goodwill and patents) from its total assets. For an initial investment, book value may be gross or net of costs like trading fees, sales taxes, service fees, and so forth. The total common shareholders' equity less the preferred stock is divided by the total number of the company's common shares to arrive at book value per share.
Bond - When issued by a business, community, or the federal government, a bond functions similarly to a loan or an IOU. The issuer offers to pay the investor a certain rate of return for the usage of the money at predetermined intervals as well as the whole amount of the loan on a specific date.
Bond fund - A mutual fund invested solely in bonds.
Breadth indicators - Technical indicator used to determine the level of participation in price fluctuations of a stock index. Breadth indicators use mathematical algorithms to count the volume of advancing and declining stocks. Breadth indicators can either validate stock index price trends or signal coming price reversals by looking at how many stocks are rising or falling in price and how much volume these stocks are trading.
Breakout - A breakout occurs when the price of an asset crosses above a resistance level or below a support area. Breakouts suggest that the price may begin to trend in the direction of the breakout. A breakout to the upside from a chart pattern, for instance, can signal that the price will begin to trend higher. High volume breakouts (compared to typical volume) demonstrate more conviction, which increases the likelihood that the price will trend in that direction.
Breakpoint - The sum of money required to buy shares in a load mutual fund that entitles the investor to a lower sales charge. Breakpoints give investors a discount in exchange for making bigger bets. Either a lump sum payment or spaced installments over a predetermined time period may be used to fund the purchase. A letter of intent must be used to support the latter type of investment acquisition in a fund (LOI).
Bull market - A financial market is said to be in a bull market when prices are rising or are anticipated to rise. The word "bull market" can refer to anything that is traded, including bonds, real estate, currencies, and commodities, however it is most frequently used to describe the stock market. The term "bull market" is normally reserved for prolonged periods in which a significant share of asset prices are rising. This is because prices of securities increase and fall practically continuously throughout trading. Bull markets frequently last for several months or even years. The opposite of a bear market.
Bullish engulfing - A bullish reversal pattern made of two candles. It can be recognized when a little red candlestick that represents a bearish trend is followed the next day by a large green candlestick. The large green candlestick opens lower than the previous day's finish and closes higher than the previous day's opening, with the body of the latter completely engulfing or overlapping the former. The bullish engulfing is a bullish reversal pattern, especially when there's presence of significant volume increase on the engulfing day.
Butterfly spread - Option strategy that combines both a bull and bear spread with a defined risk and capped reward. The most lucrative scenario for these spreads, which are meant to be market-neutral strategies, is for the underlying asset to remain stationary until option expiration. They either involve four puts, four calls, or a mix of both with three strike prices..
Buying on margin - When an investor purchases an asset using margin, they borrow the remaining funds from a bank or broker. The first payment made to the broker for the asset—for instance, 10% down and 90% financed—is referred to as buying on margin. The marginable securities in the investor's broker account serve as collateral. The entire dollar amount of purchases an investor is capable of making with any available margin capacity is reflected in their brokerage account's buying power. Margin is used by stock short sellers to trade shares.
Buyback - When a corporation buys its own outstanding shares. Commonly referred to as repurchasing shares, buyback lowers the number of shares that are accessible on the open market, often time causing the price to rise. Companies repurchase shares for a variety of purposes, including to boost the value of the shares still in circulation by cutting back on supply or to prevent other shareholders from acquiring a controlling interest.