Index Hugger

A managed mutual fund that tends to perform much like a benchmark index such as the S&P 500, which gives it the reputation of being a "closet index fund."The majority of actively managed funds are expected to outperform the so-called average performance produced by passively managed index funds.
Also known as a "closet tracker" or "pseudo tracker".
Investors pay fund investment managers higher fees to do better than index funds, although managers often fail to outperform the index.
A high R-squared factor, a mutual fund risk analysis measure, between 85 and 100 indicates that a managed fund's performance patterns are in line with the fund's benchmark index. If this is the case, investors may be better off investing in the index itself, which has lower portfolio turnover and lower expense ratio features.

Source: http://www.investopedia.com/terms/i/indexhugger.asp

Halloween Massacre

Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, announced that all income trusts would be taxed in a similar manner as corporations at a rate over 30% on taxable income, causing unit holders' values to decrease dramatically virtually overnight.
Income trusts, which were permitted to make distributions to unit holders on a pretax basis under old Canadian income tax laws, were a popular investment vehicle in the early 2000s, especially in Canada. The Canadian energy sector was hardest hit by the change, and suffered an estimated loss of about $35 billion to investors, giving rise to the term "massacre".
This change in the Canadian tax law, which was largely debated after the fact, was made to remedy a perceived loss of tax revenue.

Source: http://www.investopedia.com/terms/h/halloween_massacre.asp

Tight Monetary Policy

A course of action undertaken by the Federal Reserve to constrict spending in an economy that is seen to be growing too quickly, or to curb inflation when it is rising too fast. The Fed will "make money tight" by raising short-term interest rates (also known as the Fed funds, or discount rate), which increases the cost of borrowing and effectively reduces its attractiveness.
The Fed can sell Treasuries on the open market in order to absorb some extra capital during a tight monetary policy. This effectively takes capital out of the open markets as the Fed takes in funds from the sale with the promise of paying the amount back with interest. The Fed will often look at tightening monetary policy during times of strong economic growth.

Source: http://www.investopedia.com/terms/t/tightmonetarypolicy.asp

Correction

A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines, interrupting an uptrend in the market or asset.
A healthy market will correct from time to time.

Source: http://www.investopedia.com/terms/c/correction.asp

Moratorium

A period of time in which there is a suspension of a specific activity until future events warrant a removal of the suspension or issues regarding the activity have been resolved.
In bankruptcy law, a legally binding halt of the right to collect debt.
For example, if a company is going through rough times it might have a moratorium on advertising spending. In other words, to cut costs, it won't spend any money on advertising.
Such action may be imposed by a government, or taken voluntarily by a private business, usually in times of economic crisis such as an earthquake or flood, in order to provide people with time to stabilize their finances before dealing with potential problems such as a mortgage default and foreclosure.

Source: http://www.investopedia.com/terms/m/moratorium.asp

Alligator Spread

An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market movements. An alligator spread is usually used in the options market to describe a collection of put and call options that may not be profitable.
Pricing models and a more efficient market can help reduce the traditional spread on a security, but it is commissions that create the alligator spread, not market inefficiencies. The commissions are dependent on a transaction's brokers. Investors should check the commission schedules carefully to avoid having their profits devoured by the alligator spread.

Source: http://www.investopedia.com/terms/a/alligatorspread.asp

Overtrading

1. Excessive buying and selling of stocks by a broker on an investor's behalf in order to increase the commission the broker collects.

This situation has been known to arise when brokers are pressured to place a newly issued security underwritten by a firm's investment banking arm.

Also known as "churning".

2. A situation in which a company is growing its sales faster than it can finance them. This usually leads to enormous accounts payable or accounts receivable and a lack of working capital to finance operations.

Investopedia explains Overtrading
1. One way to protect yourself from overtrading (churning) is through a wrap account - a type of account that is manged for a flat rate rather than charging commission on every transaction.

2. Many businesses become insolvent because they try to accommodate everyone who wishes to purchase their products. This ultimately leads to not being able to pay for the financing costs used to produce the goods.

Source: http://www.investopedia.com/terms/o/overtrading.asp

Bucket Shop

A fraudulent brokerage firm that uses aggressive telephone sales tactics to sell securities that the brokerage owns and wants to get rid of. The securities they sell are typically poor investment opportunities, and almost always penny stocks.
A brokerage that makes trades on a client's behalf and promises a certain price. The brokerage, however, waits until a different price arises and then makes the trade, keeping the difference as profit.
Bucket shops are sometimes called the boiler room. The U.S. has laws restricting bucket shop practices by limiting the ability of brokerage houses to create and trade certain types of over-the-counter securities.
The second definition for a bucket shop comes from more than 50 years ago, when bucket shops would do trades all day long, throwing the tickets into a bucket. At the end of the day they would decide which accounts to award the winning and losing trades to.

Source: http://www.investopedia.com/terms/b/bucketshop.asp

Herd Instinct

A mentality characterized by a lack of individuality, causing people to think and act like the general population.
This term is used in the investing world to refer to the forces that cause unsubstantiated rallies or sell-offs.

Source: http://www.investopedia.com/terms/h/herdinstinct.asp

Mechanical Investing

Buying and selling stocks according to a screen based on predetermined criteria, usually with the help of technical indicators such as relative strength or momentum. This method allows traders to enter transactions without emotion and backtest their strategies by using historical data from any time period.

Investopedia explains Mechanical Investing

For example, one of the most common mechanical investing systems is called the Dogs of the Dow. This strategy involves buying the 10 stocks on the Dow Jones Industrial Average with the highest dividend yield at the beginning of each year. The portfolio is then adjusted each year to only include the 10 highest yielding stocks. Proponents of mechanical investing say that using this method of investing removes all emotion by allowing a computer to do the work of deciding whether investing in a certain asset is warranted.

Source: http://www.investopedia.com/terms/m/mechanicalinvesting.asp