Financial Glossary


H

Haircut. See Underwriter's Cutback.

Hedge. A protective manouver; a transaction intended to reduce risk of loss from price fluctuations.

Hedge Fund. An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors.

High-Yield Bonds. Bonds that are rated as below investment grade. The issuers of these bonds -- which are judged to be at a higher risk of default -- have to pay an attractive dividend to compensate investors for the additional risk. 

High-Yield Fund. A mutual fund that invests in bonds with low credit ratings. Because of the risky nature of high-yield bonds, high-yield funds have greater volatility than the average bond fund.

Holding Company. A company that has voting control of two or more other companies.

Holding Period. The period of time an investor is treated as the owner of a security for purposes of calculating the results under, or availability of, treatment of the security under the Internal Revenue Code or SEC rules.

Home Equity Loan. Also called an "equity loan" or a "second mortgage," a home equity loan is a line of credit secured by your home. When you use this credit line to buy something, the financial institution giving you the line of credit places a second mortgage loan on your home until the debt is paid off. Once the credit line is paid off, it may again be used to buy something else. The interest rate on such loans is usually lower than on standard second mortgages or credit cards. Like any mortgage, if a home equity loan is not paid off, your home may be sold to satisfy the debt. 

Household Income. The combined income of all workers in your household.