Vocabulary

• Asset – Something valuable that an entity owns, benefits from or has use of, in generating income.
• Bankruptcy – Legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts.
• Bonds – Fixed income instruments that represent a loan made by an investor to a borrower.
• Budget – An estimate of income and expenditure for a set period of time.
• Capital – Wealth in the form of money or other assets owned by a person or organization or available for a purpose such as starting a company or investing.
• Compound Interest – The addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest.
• Credit – Contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date.
• Debt – Money borrowed by one party from another.
• Diversification – Risk management strategy that mixes a wide variety of investments within a portfolio.
• Dividend – Distribution of some of a company's earnings to a class of its shareholders.
• Equity – Ownership interest in a corporation in the form of common or preferred stock.
• Expense – Outflow of cash or other valuable assets from a person or company to another person or company.
• Financial Planning – Process of defining one's financial goals, such as retirement, and devising a comprehensive plan for meeting those goals.
• Fixed Income – Type of investing for which real return rates or periodic income is received at regular intervals and at reasonably predictable levels.
• Gross Income – Individual's total earnings before taxes and other deductions.
• Inflation – General increase in prices and fall in the purchasing value of money.
• Interest – Charge for the privilege of borrowing money, typically expressed as an annual percentage rate.
• Investment – Asset or item acquired with the goal of generating income or appreciation.
• Liability – Company's legal financial debts or obligations that arise during the course of business operations.
• Liquidity – Availability of liquid assets to a market or company.
• Loan – Sum of money that is expected to be paid back with interest.
• Market Risk – Possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.
• Mutual Fund – Investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets.
• Net Worth – Amount by which assets exceed liabilities.
• Portfolio – Collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange-traded funds (ETFs).
• Profit – Financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.
• Rate of Return – Gain or loss made on an investment relative to the amount of money invested.
• Risk – Potential for uncontrolled loss of something of value.
• Savings Account – Bank account where one can deposit money, earn interest, and withdraw when needed.
• Securities – Tradable financial assets such as equities or fixed income instruments.
• Stock – Type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
• Tax – Mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.
• Volatility – Statistical measure of the dispersion of returns for a given security or market index.
• Yield – Income return on an investment, such as the interest or dividends received from holding a particular security.
• Real Estate – Property consisting of land or buildings.
• Exchange Rate – Value of one currency for the purpose of conversion to another.
• Bull Market – Phase of a financial market in which prices are rising or are expected to rise.
• Bear Market – Condition in which securities prices fall and widespread pessimism causes the negative sentiment to be self-sustaining.
• Financial Advisor – Professional who provides financial services to clients.
• Retirement Plan – Financial arrangement designed to replace employment income upon retirement.
• Pension – Regular payment made during a person's retirement from an investment fund.
• Insurance – Contract in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
• Mortgage – Loan used to purchase real estate.
• Credit Score – Numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of that person.
• Leverage – Use of various financial instruments or borrowed capital to increase the potential return of an investment.
• Commodity – Basic good used in commerce that is interchangeable with other commodities of the same type.
• Derivative – Financial security with a value that is reliant upon, or derived from, an underlying asset or group of assets.
• Arbitrage – Simultaneously buying and selling securities, currency, or commodities in different markets or in derivative forms to take advantage of differing prices for the same asset.
• Amortization – Paying off an amount owed over time by making planned, incremental payments of principal and interest.
• Hedge – Investment to reduce the risk of adverse price movements in an asset.