Overview

Discover our comprehensive A-Z Financial Glossary, featuring over 80 essential investment and finance terms. From ‘Alpha’ to ‘Zombie Fund’, this resource covers fundamental concepts like bonds and dividends, to advanced topics like quantitative easing and derivatives. Whether you’re a novice investor or seasoned professional, this glossary serves as your quick reference guide to understanding modern financial terminology.

A

• Alpha

  A measure of an investment’s performance relative to a benchmark index.

• Asset Allocation

  The process of dividing an investment portfolio among different asset categories.

• Arbitrage

  The simultaneous purchase and sale of an asset to profit from a difference in price.

• Annual Percentage Yield

  The real rate of return earned on an investment, taking into account the effect of compounding interest.

B

• Bear Market

  A market condition where prices are falling or are expected to fall.

• Beta

  A measure of a stock’s volatility in relation to the overall market.

• Blue Chip Stocks

  Shares in large, reputable, and financially sound companies.

• Bonds

  Debt securities issued by entities such as governments and corporations to raise capital.

C

• Capital Gains

  The profit realized from the sale of a capital asset, such as stocks or property.

• Commodities

  Basic goods used in commerce that are interchangeable with other goods of the same type.

• Compound Interest

  Interest calculated on the initial principal and also on the accumulated interest from previous periods.

• Credit Rating

  An evaluation of the credit risk of a prospective debtor, predicting their ability to pay back the debt.

D

• Derivative

  A financial security whose value is derived from an underlying asset or group of assets.

• Diversification

  A risk management strategy that mixes a wide variety of investments within a portfolio.

• Dividend

  A portion of a company’s earnings distributed to shareholders.

• Dow Jones Industrial Average

  A stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States.

E

• Earnings Per Share

  A company’s profit divided by the outstanding shares of its common stock.

• Equity

  The value of an ownership interest in a corporation.

• Ex-Dividend Date

  The date on which a stock begins trading without the value of its next dividend payment.

• Exchange-Traded Fund

  A type of investment fund and exchange-traded product that holds assets such as stocks, commodities, or bonds.

• Expense Ratio

  The fee that an investment fund charges for managing the fund’s investments.

F

• Federal Reserve

  The central banking system of the United States.

• Fiduciary

  A legal or ethical relationship of trust between two or more parties.

• Fixed Income

  An investment that provides regular interest payments and returns the principal at maturity.

• Forex

  The market in which currencies are traded.

G

• Golden Parachute

  An agreement that provides substantial benefits to top executives if the company is taken over.

• Green Investing

  Investing in companies or funds that have positive environmental impacts.

• Gross Domestic Product

  The total value of goods produced and services provided in a country during one year.

• Growth Stock

  A stock from a company that is expected to grow at an above-average rate compared to other companies.

H

• Hedge Fund

  An investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets.

• High-Yield Bond

  A bond that offers a higher yield due to its higher risk of default.

• Holding Period

  The duration of time that an investment is held by an investor.

• Home Equity

  The portion of a property’s value that is not mortgaged.

I

• Index Fund

  A type of mutual fund with a portfolio constructed to match or track the components of a financial market index.

• Inflation

  The rate at which the general level of prices for goods and services is rising.

• Initial Public Offering

  The first time that the stock of a private company is offered to the public.

• Interest Rate

  The amount charged by a lender to a borrower for the use of assets.

J

• J-Curve

  A curve that shows the development of a variable over time.

• Joint Venture

  A business arrangement in which two or more parties agree to pool their resources for a specific task.

• Junior Equity

  Equity that is subordinate to other equity in terms of claim on assets and earnings.

• Junk Bond

  A high-yield, high-risk security typically issued by companies seeking to raise capital quickly.

K

• K-1 Form

  A tax document issued for an investment in a partnership.

• K-Score

  A statistical measure used to evaluate the effectiveness of a company’s strategy.

• Keogh Plan

  A tax-deferred pension plan available to self-employed individuals or unincorporated businesses.

• Kite

  An investment strategy involving the creation of multiple identical trades.

L

• Leverage

  The use of various financial instruments or borrowed capital to increase the potential return of an investment.

• Limit Order

  An order to buy or sell a security at a specified price or better.

• Liquidity

  The ability to quickly convert an asset into cash without significant loss of value.

• Load Fund

  A mutual fund that charges a commission when shares are bought.

M

• Margin

  Borrowing money from a broker to purchase stock, using the purchased stock as collateral.

• Market Capitalization

  The total market value of a company’s outstanding shares.

• Money Market

  A segment of the financial market in which financial instruments with high liquidity and short maturities are traded.

• Mutual Fund

  A type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities.

N

• NASDAQ

  A global electronic marketplace for buying and selling securities.

• Net Asset Value

  The value per share of a mutual fund or an exchange-traded fund.

• Nominal Rate

  The interest rate before adjustments for inflation.

• Non-Performing Asset

  A loan or asset that is not currently generating income.

O

• Open-End Fund

  A type of mutual fund that does not have restrictions on the amount of shares the fund can issue.

• Options

  Financial contracts that give the buyer the right, but not the obligation, to buy or sell an asset at an agreed-upon price.

• Outstanding Shares

  Shares of a corporation that have been issued and are in the hands of investors.

• Over-the-Counter

  A security traded in some context other than on a formal exchange.

P

• Portfolio

  A collection of investments held by an investment company, hedge fund, financial institution, or individual.

• Preferred Stock

  A class of ownership in a corporation with a higher claim on its assets and earnings than common stock.

• Price-to-Earnings Ratio

  A ratio for valuing a company that measures its current share price relative to its per-share earnings.

• Private Equity

  Capital invested in a private company.

Q

• Qualified Dividend

  A dividend that meets the requirements to be taxed at the lower long-term capital gains tax rate.

• Quantitative Easing

  A monetary policy whereby a central bank buys government bonds or other financial assets to inject money into the economy.

• Quick Ratio

  A measure of a company’s ability to meet its short-term obligations with its most liquid assets.

• Quota

  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

• Real Estate Investment Trust

  A company that owns, operates, or finances income-producing real estate.

• Return on Investment

  A measure of the profitability of an investment.

• Risk Tolerance

  The degree of variability in investment returns that an investor is willing to withstand.

• Roth IRA

  An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year.

S

• S&P 500

  An American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.

• Securities and Exchange Commission

  An independent agency of the United States federal government that holds primary responsibility for enforcing the federal securities laws.

• Short Selling

  The sale of a security that the seller has borrowed.

• Stock Split

  An increase in the number of shares of a company’s stock without a change in the shareholders’ equity.

T

• Tax-Deferred

  Investment earnings such as interest, dividends, or capital gains that are not taxed until they are withdrawn.

• Technical Analysis

  A methodology for forecasting the direction of prices through the study of past market data.

• Trading Volume

  The number of shares or contracts traded in a security or an entire market during a given period.

• Treasury Bonds

  Government debt securities that are considered to be risk-free.

U

• Underwriting

  The process of raising capital through the sale of shares in an insurance company.

• Unrealized Gains

  The increase in the value of an asset that has not yet been sold for cash.

• Unsecured Debt

  Debt that is not secured by a specific asset, making it riskier for lenders.

• Utilities

  A category of stocks that provides utilities such as water, electricity, or gas.

V

• Value Investing

  An investment strategy where stocks are selected that trade for less than their intrinsic values.

• Venture Capital

  Financing provided to startups and small businesses with strong growth potential.

• Volatility

  The degree of variation of a trading price series over time.

• Volume

  The amount of shares or contracts traded in a security or an entire market during a given period.

W

• Warrant

  A derivative that confers the right, but not the obligation, to buy or sell a security at a certain price before expiration.

• Wealth Management

  A comprehensive service that combines financial planning, investment portfolio management, and additional financial services.

• Withholding Tax

  The amount of tax withheld by an employer from an employee’s earnings and paid directly to the government.

• Working Capital

  The capital available to a business for day-to-day operations.

X

• X-Efficiency

  The efficiency with which a company uses its resources to produce output.

• XIRR

  An internal rate of return that allows for irregular cash flows.

Y

• Year-End Dividend

  A dividend paid to shareholders at the end of a fiscal year.

• Yield

  The income return on an investment.

• Yield Curve

  A line that plots interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates.

• YTD

  The period starting from the beginning of the current calendar year and ending at the current date.

Z

• Z-Score

  A statistical measurement of a company’s financial health.

• Zero-Coupon Bond

  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.

• Zombie Fund

  A fund that continues to operate despite its inability to generate returns for its investors.

• Zoning

  The process of dividing a city or municipality into sections reserved for different purposes such as residence and business.