Investment Terms Glossary
Here is a list of common investment terms for you to reference. This glossary is not comprehensive; the list is intended to help you understand some of the more common terms you may encounter on the Parnassus website.
Average Weighted Market Cap
The average capitalization of all stocks in the portfolio, weighted by each holding's size in the portfolio. Capitalization, or market value of an entire company, is calculated by multiplying the number of shares outstanding by the price per share.
Alpha
A coefficient measuring risk-adjusted performance, considering the risk due to the specific security, rather than the overall market. A large alpha indicates that the stock or mutual fund has performed better than would be predicted, given its beta.
Beta
A measurement of a fund's trailing 36-month returns in relation with the market as a whole. A beta of 1 means that the share price moves exactly inline with the market. A beta over 1 suggests that the share price will typically be more volatile than the market, and conversely, a beta below 1 indicates that the share price will typically be less volatile than the market
Portfolio Turnover
A measurement of how frequently assets within a fund are bought and sold by the managers. It is calculated by taking either the total amount of new securities purchased or the amount of securities sold - whichever is less - over a particular period, divided by the total net asset value (NAV) of the fund. The measurement is usually reported for a 12-month time period.
Price/Earnings (P/E) Ratio
A ratio of a stock's current price to its per-share earnings over the past 12 months (or "trailing" 12 months). This gives us an idea of how "expensive" a stock may be. For a fund, the price/earnings ratio is the weighted average P/E ratio of the stocks it holds.
R-Squared
A measurement of how closely the portfolio's performance correlates with the performance of a benchmark index such as the S&P 500.
SEC Yield
A standard yield calculation developed by the Securities and Exchange Commission (SEC) that allows for fairer comparisons of bond funds. It is based on the most recent 30-day period covered by the fund's filings with the SEC. The yield figure reflects the dividends and interest earned during the period, after the deduction of the fund's expenses. This is also referred to as the "standardized yield."
Sharpe Ratio
A ratio used to measure risk-adjusted performance. It is calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.
Standard Deviation (SD)
A calculation used to measure variability (risk) of a portfolio's performance.