Financial Dictionary

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S&P Phenomenon

A situation when price of a stock temporarily increase in price in the moment when the stock is added to the S&P index. The price will rise because when the S&P adds the stock to the index, mutual funds and investors whose portfolios are following the index will also add the stock to their portfolios.

Safe Haven

An investment that is forcasted to retain its value or even increase its value in times of market turbulence. Safe havens are sought after by investors to limit their exposure to losses in the event of market downturns. However, what are considered safe havens alter over time as market conditions change, and what appears to […]

Salvage Value

Th value an asset upon its sale at the end of its useful life. This value can be determined either by the accounting method or by the IRS. Value is the determined by the IRS calculation when the asset is donated, and tax deduction is given to former holder.

Sandbag

A strategy used by management of one company to alienate other company from taking them over. Strategy is used in order to wait for a sympathetic company or to avoid hostile takeover.

Sandwich Lease

A situation when one person leases property from one party and than leases that property to another party. In this case, that person is a lessee and pays the rent for leased property, but is also the lessor who collects rent against leased property.

Scalability

The potential a company has, to maintain or improve current level of business quality and operational capacity while experiencing heavy business workload and large market demands. A well-scaled system will manage to improve its performance in the times of increased demands, such as increase in trading volumes for financial institutions and increase in sale volume […]

Scale In

The process of purchasing shares as the price decreases. To scale in means to set a target price and then invest in increments as the stock falls below that price. This buying continues until the price stops falling or the intended trade size is reached. Scaling in will, ideally, lower the average purchase price. If […]

Scale Order

An order created with purpose to maximize potential gains if the investor accurately predicts future price movement. Scale order combines limit orders at incrementally decreasing or increasing prices, depending if it is a sell scale order or buy scale order. If a trader predicts that a stock price will rise, he will engage sell scale […]

Scalping

An investment strategy that requests the trader to make many trades during one day while catching small price changes. Investors who implements this strategy will look for small upward price moves in stock in his portfolio and sell with insignificant, but many returns. By experiencing many small gains, investor could easy accomplish large cumulative return. […]

Scarcity Principle

A economic principle in which a limited supply of a good, coupled with a high demand for that good, results in a mismatch between the supply and demand equilibrium. In pricing theory, the scarcity principle suggests that the price for a scarce good should rise until an equilibrium is reached between supply and demand. However, […]

Scorched Earth Policy

A strategy of avoiding hostile taking-over. Targeted company can liquidate its valuable assets and inflate its liabilities in order to become unattractive to the acquiring company.

SEC Fee

Is a small fee charged by SEC in order to provide capital necessary to compensate expenditures of government regulation. Today, SEC fee is at 1% of one eight- hundredth of the value of sold equities, and charges only the sellers of the equities and equity related options, while debt instruments are excluded.

Second Mortgage

Another mortgage on the property which is already been pledged. In the case of default, second mortgage would receive proceeds from liquidation only after the initial mortgage is paid off. Because of higher risk on repayment, second mortgage will charge higher interest rate and lower amount of money is available for borrowing than in the […]

Secondary Listing

Refers to a listing of securities on any market other than primary exchange. Many companies are listed on multiple exchanges, but only one exchange is considered primary. Listing on other exchanges is usually done in order to develop presence in other country, or to raise more capital from new market when primary market is saturated.

Secondary Market

A security market, in which investors buy securities from existing security owners (other investors).

Secondary Stock

An expression for lower quality stock, which is inferior and riskier than blue chips. Secondary Stocks are inferior because of either lower market capitalization, high-related risk or being lower quality. Secondary Stock is also a term for small-cap.

Sector Fund

A fund that invests in one particular industry sector, and therefore depends solely on the market success of that sector. Sector funds suffer from the significant lack of diversification. These funds increase in price only if there is an increased need for those particular industry products or services. Conversely, sector funds will experience sharp decline […]

Secured Bond

A bond that is backed by some form of asset, which promises that the borrower will receive compensation in the case of default. Secured Bond is usually backed by a mortgage (real estate or physical equipment that can be liquidated), or a revenue stream created by a project. If the lender defaults, title of the […]

Secured Credit Card

A type of credit card that is linked to and backed up by savings account that is used as collateral. Money for the credit card is deposited in the savings account, and the limit of the credit card is based on the amount of deposited money, and is usually between 50% and 100% of the […]

Secured Loan

A loan that is backed up by some assets that belong to the borrower. The lender can seize these assets if the borrower is not able to make repayments to the lender.

Securities Analyst

A specialist, an employee of a mutual fund, bank or a brokerage who studies various industries, companies and markets and creates reports with fact-based buy, sell and hold recommendations. Often, these reports are available to public, so many investors, both institutional and individual, use these reports in order to look at the market from the […]

Securitization

A process when investor combines financial instruments into a negotiable security and offers them in the market. Mortgage backed securities are a good example of securitization.

SEDOL

Short for Stock Exchange Daily Official List. SEDOL is a seven-place alphanumeric code, assigned to all securities trading in United Kingdom and Ireland by the London Stock Exchange.

Seed Capital

The initial money or equivalent capital used to start the business, invested in market research and product development. Seed capital is often a small amount (up to $10.000) and usually come from the business founder himself. Founders often use mortgage money, savings and loans from friends and family.

Seigniorage

The difference between the costs necessary to produce the money and the value that money has. Seigniorage can be used to cover government expenditures without collecting taxes.