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Shares
A share is a part of a company that can be bought and sold. Owning shares makes you a partial owner in the company. Shares tend to be longer term investments due to their volatility.
They are also known as equities and stocks.
Yield is a measure of the income return on holding a security. Yield is usually expressed as a percentage based off the investment cost (whether at face or current market value). Yields may be known or anticipated depending on whether the security experiences major fluctuations.
Yield is associated with risk, the higher the risk, the higher the yield as investors demand a higher return in exchange for taking on more risk. A lot of the time listed yields are not guaranteed but are instead an estimate of future returns.
Types of yield calculations differ depending on asset.
Stock yields
Stock dividend yields come in two varieties, cost yield and current yield.
If the you bought a stock for $20 and the dividend is $2, the cost yield is ($2/$20). If the stock is now valued at $22, and the current yield is ($2/$22). As the stock price increases, yield goes down as there is an inverse relationship between price and yield.
Bond yields
There are multiple bond yields.
The main ones are current yield, coupon yield and yield to maturity.
Coupon yield is the annual interest rate paid on the principal amount of a bond fixed at issuance. Current yield is the coupon yield on a bond at a specific point in the time before the bond maturity. The current yield is expressed as the bond interest rate as a percentage of the current price of the bond. A yield to maturity of a bond is the internal rate of return on a bond's cash flow, including the cost of the bonds, coupons, if paid, and the return of the principal at redemption. The yield to maturity is an estimate of what an investor will receive if the bond is held to its maturity date.
Dividends are a portion of the company's profits that is paid to shareholders. If a company makes a profit, they might issue a dividend. Dividends are paid up to four times a year, after each quarter. Usually dividends are grouped into "interim dividends" and "final dividends".
Dividends are paid out to shareholders in proportion to how many shares they own as dividends are issued as per share. This is known as a pro-rata basis. Companies that issue dividends regularly are sometimes called "income stocks" as they historically provide shareholders with a regular income, as opposed to growth stocks, which often forgo dividends in order to reinvest and grow the business.These are often companies that are high growth, new and smaller compared to those that issue dividends regularly, which tend to be more established.
Some investors may take advantage of "dividend reinvestment plans" where the shareholder receives additional shares in lieu of a dividend.
When you invest in an Active ETF you are investing in a portfolio of many different assets. The Active ETF is actively managed by a portfolio manager and investment team. You will receive distributions of the fund’s net income.
Active ETFs are actively managed by a portfolio manager and investment team to generate alpha and outperform a set benchmark. To invest in an Active ETF you will need to buy some units using your broker. You will also pay a management fee which is usually included in the unit price and in return for investing in the Active ETF you will receive distributions of the Active ETF's net income.
Investing in an Active ETF means that you will own units in the fund but not the underlying securities or derivatives themselves.
They provide access to a range of asset classes and investment strategies that non-institutional investors may not ordinarily have access to, for example international equities, fixed income securities and currency markets. By investing in an Active ETF/EQMF you can achieve a level of diversification that would normally be too difficult to realise investing in each asset individually. Active ETFs/EQMFs also have no minimum investment requirements which makes them more accessible. They benefit investors who prefer an active investing strategy and want their money to outperform the benchmark.
Furthermore, Active ETFs/EQMFs are a way of investing in an actively managed fund without the hassle of the paperwork required by traditional unlisted managed funds. With no waiting times and the ability to choose which price you invest in the fund, Active ETFs/EQMFs make investing more accessible. Investing more money is as simple as purchasing new units. Investments in Active ETFs/EQMFs are more liquid than traditional managed funds making them a more flexible choice.
A traditional unlisted managed fund often has minimum investment requirements that an Active ETF does not have. Managed funds are not listed on the exchange, and thus require much more paperwork to invest in the fund. Active ETFs, on the other hand, can be traded easily through a broker. Active ETFs can be traded like ordinary shares unlike managed funds.
The increased paperwork associated with traditional unlisted managed funds means that you may have to wait before your money gets invested. Active ETFs make investing more accessible by allowing you to invest quickly and hassle free with the help of your broker. This also means that investments in Active ETFs are more liquid than traditional unlisted managed funds.
Nothing, they are different names for the same investment vehicle. They are also sometimes known as listed managed funds, exchange quoted managed funds (EQMFs) or quoted managed funds.
An Active ETF is a managed fund traded on a stock exchange. They function like managed funds, but traded like shares which can be bought and sold during trading day on the stock exchange. Active ETFs are actively managed by fund managers to generate alpha and outperform relevant benchmarks.
Active ETFs will aim to beat the benchmark using a number of active investing strategies. They operate in a similar way to traditional managed funds but have the benefit of transparent, live intra-day pricing and market making ability which ensures liquidity
Investors invest in the Active ETF by using a stockbroker as if they were buying a share. Similarly, liquidating the investment follows a similar process to selling a share. This means that your Active ETF can be monitored and reported like any of your other shares.
Active ETFs are similar to the passively managed ETFs. Instead of using a passive investment strategy mimicking an index or other benchmark, Active ETFs have a fund manager who makes active decisions about what to invest in. Active ETFs aim to beat the benchmark or index whereas ETFs aim to follow the benchmark or index as closely as possible. Whilst Active ETFs will try to avoid falls in the benchmark, ETFs will go down when their benchmarks fall. As a result of an active investing strategy, Active ETFs will have higher fees to pay for the skill and experience of the fund manager.
Active ETFs and ETFs share similarities in that they are both listed on the exchange and investments in them are made through purchasing units via a broker.
