custom indexing is the process of setting specific parameters on the stocks you’d like to invest money in, allowing you to personalize your investments based on your individual values, goals, preferences, risk tolerance and tax positioning.

direct indexing is an investing strategy that involves purchasing the individual stocks within an index, maintaining the same weights in the index.

active management involves an investment manager making investment decisions by tracking the performance of an investment portfolio.

passive management involves a fund’s portfolio mirroring a market index, by selecting stocks to be included in a portfolio, unlike active management.

A market index is a hypothetical portfolio that contains investment holdings. The value of a market index is based on the prices of the underlying holdings.

EHM, or efficient market hypothesis is a theory coined by Eugene Farma, which states that active managers can beat the market only for a given period of time, as their success is simply a matter of chance. EHM suggests that long-term passive management delivers better results than asset management.

active investing involves the ongoing buying and selling of securities by monitoring market index.

passive investing is a long-term strategy that involves buying securities that mirrors a market index.

thematic investing focuses on investing in long-term or macro-level trends. Examples of thematic investment themes include water, robotics & AI, gaming & e-sports, and space exploration.

ESG investing emphasizes on investments that prioritizes optimal environmental, social and governance outcomes.

factor investing is a type of portfolio management strategy that targets quantifiable metrics or factors that can explain differences in stock returns. These factors often include value, size, volatility, momentum, and quality.

exchange traded funds, or ETFs refer to a type of investment fund that is traded on a stock exchange. An ETF usually tracks a generic market index and allows an investor to potentially lower risks and exposure, while diversifying their portfolio.

A registered investment advisor, or RIA, is an individual or firm that advises clients on investment decisions and manages their investment portfolios.

backtesting allows an investor to test an investment strategy using historical data to assess how it would have performed before earning actual returns.

rebalancing involves the process of realigning the weightings of assets within a portfolio, by buying or selling the assets to maintain the original or desired level of asset allocation or risk.

a systematic portfolio contains securities that maintains a price higher than the predetermined level by a systematic manager. A systematic portfolio strategy invovvles trading decisions based on market price trends.

a rules-based investment strategy follows smart investment rules and aims to deliver active returns in a cost-efficient manner.

an active return is the percentage difference between a benchmark and the actual return.

an index provider is a firm that creates, calculates and maintains market indices based on any given investment strategy.

sustainable investing is a type of investment strategy that prioritizes environmental, social and corporate governance impacts before investing in a particular company, venture or fund. It is also called ESG investing or SRI.

an investment strategy is a set of principles that guide an investor to make sound investment decisions based on their financial goals, values, risk tolerance and preferences.

alpha strategies are active investment strategies that choose investments that have the potential to beat the market. Alpha is also known as “excess returns” or “abnormal rate of return.”

benchmarking is the process of setting a standard against which the performance of an investment strategy can be measured.

reconstitution is the re-evaluation of a market index to ensure that an index reflects up-to-date market cap and is balanced.

a bond is a type of security where the issuer of a bond owes the holder of the bond a debt, and the issuer is obligated to repay the principal of the bond at the maturity date, as well as interest on the bond.

asset allocation is the process of dividing an investment among different types of assets, such as stocks, bonds and cash.

quant, or quantitative analysis, is the process of using mathematical and statistical methods to make investment decisions.

index funds are a type of mutual fund or exchange-traded fund (ETF) that aim to replicate the performance of a specific market index.

a mutual fund is a type of investment fund that pools money from several investors to purchase securities.

derivative structured products are financial instruments that combine derivatives with other underlying assets to create investment products with unique risk and return characteristics.

similar to mutual funds, a hedge fund is a type of pooled investment fund that trades in relatively liquid assets. Hedge funds primarily use portfolio construction, complex trading and risk management techniques in an attempt to improve performance.

traders who watch market prices know when an index fund will update its components, allowing them to front-run the trade by buying or selling the shares to get ahead of the market and gain an edge. This is not considered illegal because it rewards individuals who pay close attention to information that already exists in the market. However, SEC Rule 17(j)-1 prohibits insiders from taking advantage of their knowledge of client trades for personal gain.