Glossary

Active Share  quantifies how much a portfolio differs from its benchmark, and it is based on the portfolio’s holdings and their corresponding weights compared to the weights of the same holdings in the benchmark. Annual Turnover is calculated by dividing the average of the absolute value of assets purchased and sold during the year by the average assets in the portfolio over the same year.

Alpha measures the performance of a portfolio versus its benchmark on a risk-adjusted basis as measured by Beta.  It is calculated by subtracting the portfolio’s expected return based on its Beta from the actual return of the portfolio. A positive Alpha indicates a portfolio that has performed better than its relative volatility would predict.

Beta measures the sensitivity of a portfolio to the movement of its benchmark.  It is calculated as the slope of a regression of historical portfolio returns against the returns of the benchmark. A Beta less than 1.00 indicates a portfolio that has exhibited less volatility than its benchmark, while Beta greater than 1.00 has been more volatile.

Dividend growth refers to the compound annual growth rate in dividends per share that a company has paid to its shareholders over the cited period (e.g., 3 years or 5 years).

Down-capture ratio is calculated by dividing a portfolio’s compounded returns during periods when its benchmark was falling by the benchmark’s compounded returns during those same periods.  A down-capture ratio of less than 100 indicates that the portfolio outperformed its benchmark during periods when the benchmark had negative returns. See also, Up-capture ratio,

Forward Price/Earnings (P/E) ratio is calculated by dividing a company’s current share price by its estimated future earnings per share.

Free cash flow yield is calculated by dividing a company’s annual free cash flow per share by its market price per share.

iShares MSCI USA Momentum Factor ETF (MTUM) The iShares MSCI USA Momentum Factor ETF (MTUM) is designed to track the performance of the MSCI USA Momentum Index, a subset of the MSCI USA Index which captures large- and mid-cap stocks of the US market emphasizing stocks with high price momentum, while maintaining reasonably high trading liquidity, investment capacity and moderate index turnover.

iShares Russell 1000 Growth ETF (IWF) The iShares Russell 1000 Growth ETF seeks to track an index composed of U.S. large- and mid- cap stocks selected using metrics such as growth forecasts and sales growth. The fund provides targeted exposure to U.S. large- and mid-cap growth stocks.

iShares Russell 1000 Value ETF (IWD) The iShares Russell 1000 Value ETF tracks the performance of the Russell 1000 Value Index, measuring the performance of the companies among the 1,000 largest companies in the Russell 3000 Index exhibiting value characteristics. It is provided as a broad market comparator for large-cap value stocks.

iShares Russell 2000 Growth ETF (IWO) The iShares Russell 2000 Growth ETF seeks to track an index composed of U.S small-cap stocks, selected using metrics such as growth forecasts and sales growth to illustrate a broad strategy targeting exposure to U.S. small-cap growth stocks.

Median Market Cap is the midpoint of market capitalization (market price multiplied by the number of shares outstanding) of the stocks in a portfolio. Half the stocks in the portfolio will have higher market capitalizations; half will have lower.

Russell 2500 Index™ The Russell 2500 Index™ measures the performance of the smallest 2,500 stocks in the Russell 3000® Index. The index serves as a barometer of the performance of small- to mid-cap US equities, commonly referred to as “smid-cap”.

Sharpe ratio is calculated by dividing a portfolio’s excess return (portfolio return minus benchmark return) by its volatility as measured by standard deviation.  The higher the Sharpe ratio, the better a portfolio’s historical risk-adjusted performance.

SPDR S&P Dividend ETF (SDY) The State Street SPDR S&P Dividend ETF, tracks the performance of the S&P High Yield Dividend Aristocrats Index and is provided as a benchmark to illustrate a broad strategy targeting a dovodend-focused investment universe.

Standard deviation is a measure of volatility and represents the variability of individual returns around the mean, or average annual, return. A higher standard deviation indicates more return volatility. This measure serves as a collective, quantitative estimate of risks present in an asset class or investment. Some risks may be underrepresented by this measure. Standard deviation is an underlying calculation for many other performance-based statistics including alpha, beta, and Sharpe ratio.

Total Debt/EBITDA is calculated by dividing a company’s total debt (short-term plus long-term) by its earnings before interest, taxes, depreciation and amortization (EBITDA).

TTM (Trailing Twelve Month) Dividend Yield is calculated by dividing the total dividends paid out over the previous 12 months by the current market price of the stock.

Up-capture ratio is calculated by dividing a portfolio’s compounded returns during periods when its benchmark was rising by the benchmark’s compounded returns during those same periods.  An up-capture ratio of more than 100 indicates that the portfolio outperformed its benchmark during periods when the benchmark had positive returns. See also, Down-capture ratio

Use of ETFs as Benchmarks ETF fees and expenses are lower (e.g., 0.10% – 0.35% expense ratios being common) than is typical for a managed account (up to 1% managed directly and up to 3% in a wrap account). The deduction of fees and expenses reduces returns over time.