Governance factors evaluate the company’s leadership, transparency, accountability, and ethical practices.

ESG investing aims to align investment decisions with values and ethics while still seeking competitive returns.

Derivatives are financial instruments whose prices depend on underlying assets such as stocks, bonds, commodities, or interest rates. Examples include options, futures, and swaps.

Bonds are fixed-income securities, not derivatives. Derivatives include futures, options, swaps, and forwards, which derive value from other assets.

Commodity derivatives include futures and options based on physical commodities like gold, oil, and agricultural products.

Hedging is a strategy used to reduce financial risk by taking an offsetting position in a related security, such as using derivatives to protect against price movements.

Inflation-indexed bonds, like TIPS (Treasury Inflation-Protected Securities), adjust their principal value based on inflation, protecting against rising prices.

Futures contracts are standardized and traded on regulated exchanges, while forwards are private agreements traded over the counter (OTC) without exchange standardization.

Swaps are financial agreements where two parties exchange cash flows, such as interest rate swaps (fixed vs. floating rate) or currency swaps (different currencies).

A short position means an investor sells a financial instrument first (e.g., a stock or derivative) in anticipation that its price will decline, allowing them to buy it back at a lower price.