Glossary
A
A measure of an investment’s performance relative to a benchmark index.
The process of dividing an investment portfolio among different asset categories.
The simultaneous purchase and sale of an asset to profit from a difference in price.
The real rate of return earned on an investment, taking into account the effect of compounding interest.
B
A market condition where prices are falling or are expected to fall.
A measure of a stock’s volatility in relation to the overall market.
Shares in large, reputable, and financially sound companies.
Debt securities issued by entities such as governments and corporations to raise capital.
C
The profit realized from the sale of a capital asset, such as stocks or property.
Basic goods used in commerce that are interchangeable with other goods of the same type.
Interest calculated on the initial principal and also on the accumulated interest from previous periods.
An evaluation of the credit risk of a prospective debtor, predicting their ability to pay back the debt.
D
A risk management strategy that mixes a wide variety of investments within a portfolio.
A portion of a company’s earnings distributed to shareholders.
A stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States.
A financial security whose value is derived from an underlying asset or group of assets.
E
A company’s profit divided by the outstanding shares of its common stock.
A type of investment fund and exchange-traded product that holds assets such as stocks, commodities, or bonds.
The value of an ownership interest in a corporation.
The fee that an investment fund charges for managing the fund’s investments.
The date on which a stock begins trading without the value of its next dividend payment.
F
The central banking system of the United States.
A legal or ethical relationship of trust between two or more parties.
An investment that provides regular interest payments and returns the principal at maturity.
The market in which currencies are traded.
G
The total value of goods produced and services provided in a country during one year.
A stock from a company that is expected to grow at an above-average rate compared to other companies.
An agreement that provides substantial benefits to top executives if the company is taken over.
Investing in companies or funds that have positive environmental impacts.
H
An investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets.
A bond that offers a higher yield due to its higher risk of default.
The duration of time that an investment is held by an investor.
The portion of a property’s value that is not mortgaged.
I
The rate at which the general level of prices for goods and services is rising.
A type of mutual fund with a portfolio constructed to match or track the components of a financial market index.
The first time that the stock of a private company is offered to the public.
The amount charged by a lender to a borrower for the use of assets.
J
A high-yield, high-risk security typically issued by companies seeking to raise capital quickly.
A business arrangement in which two or more parties agree to pool their resources for a specific task.
A curve that shows the development of a variable over time.
Equity that is subordinate to other equity in terms of claim on assets and earnings.
K
A tax document issued for an investment in a partnership.
A tax-deferred pension plan available to self-employed individuals or unincorporated businesses.
An investment strategy involving the creation of multiple identical trades.
A statistical measure used to evaluate the effectiveness of a company’s strategy.
L
The ability to quickly convert an asset into cash without significant loss of value.
The use of various financial instruments or borrowed capital to increase the potential return of an investment.
An order to buy or sell a security at a specified price or better.
A mutual fund that charges a commission when shares are bought.
M
The total market value of a company’s outstanding shares.
A type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities.
A segment of the financial market in which financial instruments with high liquidity and short maturities are traded.
Borrowing money from a broker to purchase stock, using the purchased stock as collateral.
N
The value per share of a mutual fund or an exchange-traded fund.
A global electronic marketplace for buying and selling securities.
The interest rate before adjustments for inflation.
A loan or asset that is not currently generating income.
O
Financial contracts that give the buyer the right, but not the obligation, to buy or sell an asset at an agreed-upon price.
Shares of a corporation that have been issued and are in the hands of investors.
A security traded in some context other than on a formal exchange.
A type of mutual fund that does not have restrictions on the amount of shares the fund can issue.
P
A collection of investments held by an investment company, hedge fund, financial institution, or individual.
A ratio for valuing a company that measures its current share price relative to its per-share earnings.
A class of ownership in a corporation with a higher claim on its assets and earnings than common stock.
Capital invested in a private company.
Q
A monetary policy whereby a central bank buys government bonds or other financial assets to inject money into the economy.
A dividend that meets the requirements to be taxed at the lower long-term capital gains tax rate.
A measure of a company’s ability to meet its short-term obligations with its most liquid assets.
A government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period.
R
A measure of the profitability of an investment.
A company that owns, operates, or finances income-producing real estate.
The degree of variability in investment returns that an investor is willing to withstand.
An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year.
S
An American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.
An increase in the number of shares of a company’s stock without a change in the shareholders’ equity.
The sale of a security that the seller has borrowed.
An independent agency of the United States federal government that holds primary responsibility for enforcing the federal securities laws.
T
Investment earnings such as interest, dividends, or capital gains that are not taxed until they are withdrawn.
Government debt securities that are considered to be risk-free.
The number of shares or contracts traded in a security or an entire market during a given period.
A methodology for forecasting the direction of prices through the study of past market data.
U
The process of raising capital through the sale of shares in an insurance company.
The increase in the value of an asset that has not yet been sold for cash.
A category of stocks that provides utilities such as water, electricity, or gas.
Debt that is not secured by a specific asset, making it riskier for lenders.
V
The degree of variation of a trading price series over time.
Financing provided to startups and small businesses with strong growth potential.
An investment strategy where stocks are selected that trade for less than their intrinsic values.
The amount of shares or contracts traded in a security or an entire market during a given period.
W
A comprehensive service that combines financial planning, investment portfolio management, and additional financial services.
A derivative that confers the right, but not the obligation, to buy or sell a security at a certain price before expiration.
The amount of tax withheld by an employer from an employee’s earnings and paid directly to the government.
The capital available to a business for day-to-day operations.
X
An internal rate of return that allows for irregular cash flows.
The efficiency with which a company uses its resources to produce output.
Y
The income return on an investment.
A dividend paid to shareholders at the end of a fiscal year.
A line that plots interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates.
The period starting from the beginning of the current calendar year and ending at the current date.
Z
A bond that does not pay interest but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.
A statistical measurement of a company’s financial health.
A fund that continues to operate despite its inability to generate returns for its investors.
The process of dividing a city or municipality into sections reserved for different purposes such as residence and business.