Passive Management
DefinitionPassive management is an investing strategy that tracks a market-weighted index or portfolio. The most popular method is to mimic the performance of an externally specified index by buying an index fund. By tracking an index, an investment portfolio typically gets good diversification, low turnover, and low management fees. With low fees, an investor in such a fund would...
Paper Profit (Paper Loss)
What is 'Paper Profit (Paper Loss)' Unrealized capital gain (or capital loss) in an investment. It is calculated by comparing the market price of a security to the original purchase price. Gains or losses only become realized when the security is sold. Explaining 'Paper Profit (Paper Loss)' Investors commonly justify bad investment decisions because...
Passive Activity
What is 'Passive Activity' Passive activity is activity in which the taxpayer did not materially participate in during the tax year. Internal Revenue Service (IRS) defines two types of passive activity: trade or business activities not materially participated in, and rental activities even if the taxpayer materially participated in them (unless the taxpayer is a real estate...
Pairing Off
DefinitionPairing Off is an album by saxophonist Phil Woods' Septet recorded in 1956 and released on the Prestige label. Pairing Off What is 'Pairing Off' An illegal practice of a brokerage firm offsetting short and long positions between house accounts by collecting cash payments without physically delivering the securities. Explaining 'Pairing Off' Pairing off can...
Pension Fund
DefinitionA pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income. Pension Fund A pension fund is a fund that is established by an employer and consists of periodic contributions made by an employee as well as the employer. The retirement funds are invested in stable investment avenues...
Palisades Water Index
DefinitionThe Palisades Water Index is a modified equal-dollar weighted stock market index. It is designed to track the performance of companies engaged in the global water industry such as pump and filter manufacturers, water utilities, and irrigation equipment manufacturers. The index was set at 1000 as of December 31, 2003. Palisades Water Index What is 'Palisades Water Index'...
Paradox Of Thrift
DefinitionThe paradox of thrift is a paradox of economics. The paradox states that an increase in autonomous saving leads to a decrease in aggregate demand and thus a decrease in gross output which will in turn lower total saving. The paradox is, narrowly speaking, that total saving may fall because of individuals' attempts to increase their saving, and, broadly...
Patent Cliff
DefinitionThe term patent cliff refers to the phenomenon of patent expiration dates and an abrupt drop in sales that follows for a group of products capturing high percentage of a market. Usually, these phenomena are noticed when they affect blockbuster products—a blockbuster product in the pharmaceutical industry, for example, is defined as a product with sales exceeding 1 billion...
Passbook Loan
What is 'Passbook Loan' A personal loan extended to a savings-account holder by the custodial bank. Passbook loans use the balance of the savings account as collateral for the loan. The amount of the loan therefore cannot exceed the savings-account balance. Explaining 'Passbook Loan' Passbook loans are considered low-risk transactions due to the accessibility...
Participation Mortgage
DefinitionA participation mortgage or participating mortgage is a mortgage loan, or sometimes a group of them, in which two or more persons have fractional equitable interests. In this arrangement the lender, or mortgagee, is entitled to share in the rental or resale proceeds from a property owned by the borrower, or mortgagor. The mortgage is evidenced by the bank...