Vocabulary

• 401(k) Plan – An employer-sponsored retirement savings plan that allows employees to contribute a portion of their pre-tax earnings to their retirement savings.
• Annuity – A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.
• Asset Allocation – An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon.
• Bonds – An investment that involves lending money to an entity (typically corporate or governmental) which borrows the funds for a defined period at a variable or fixed interest rate.
• Capital Gain – The rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.
• Compound Interest – The addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest.
• Dividend – A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
• Dollar-Cost Averaging – An investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility.
• ETFs (Exchange-Traded Funds) – Investment funds and exchange-traded products, with shares that are tradable on a stock exchange.
• Equity – Ownership interest in a corporation in the form of common or preferred stock.
• Fixed Income – A type of investment in which real return rates or periodic income is received at regular intervals and at reasonably predictable levels.
• Index Funds – A type of mutual fund with a portfolio constructed to match or track the components of a financial market index.
• Individual Retirement Account (IRA) – An investing tool used by individuals to earn and earmark funds for retirement savings.
• Inflation – The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
• Interest Rate – The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
• Investment – An asset or item acquired with the goal of generating income or appreciation.
• Liquidity – The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.
• Mutual Funds – An 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.
• Portfolio – A range of investments held by a person or organization.
• Rate of Return – The gain or loss made on an investment relative to the amount of money invested.
• Rebalancing – The process of realigning the weightings of a portfolio of assets to maintain a desired asset allocation.
• Risk Tolerance – The degree of variability in investment returns that an investor is willing to withstand.
• Rollover – The transfer of the holdings of one retirement plan to another without suffering tax consequences.
• Roth IRA – An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year.
• Securities – A fungible, negotiable financial instrument that holds some type of monetary value.
• Stocks – A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
• Tax Deferred – Investment earnings such as interest, dividends or capital gains that accumulate tax-free until the investor takes constructive receipt of the gains.
• Tax Exempt – A financial or other transaction that is free from tax.
• Traditional IRA – An individual retirement arrangement (IRA) allowing a person to set aside pre-tax income up to a specified amount each year.
• Treasury Bonds – A government debt security with a maturity of more than 10 years.
• Volatility – A statistical measure of the dispersion of returns for a given security or market index.
• Yield – The income return on an investment, such as the interest or dividends received from holding a particular security.
• Financial Advisor – A professional who provides financial services to clients based on their financial situation.
• Pension Plan – A type of retirement plan where an employer/sponsor promises a specified retirement benefit that is predetermined by a formula based on the employee's earnings history, tenure of service and age.
• Social Security – A federal insurance program that provides benefits to retired people and those who are unemployed or disabled.
• Diversification – A risk management technique that mixes a wide variety of investments within a portfolio.
• Capital Loss – The decrease in the value of an investment or real estate.
• Bear Market – A condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining.
• Bull Market – A financial market of a group of securities in which prices are rising or are expected to rise.
• Market Correction – A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index to adjust for an overvaluation.
• Recession – A significant decline in activity across the economy, lasting longer than a few months.
• Depression – A severe and prolonged downturn in economic activity.
• Stockbroker – A professional who buys and sells securities on a stock exchange on behalf of clients.
• Real Estate Investment Trust (REIT) – A company that owns, operates or finances income-generating real estate.
• Hedge Fund – A limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.
• Private Equity – A type of equity and one of the asset classes consisting of equity securities in operating companies that are not publicly traded on a stock exchange.
• Venture Capital – A type of private equity, a form of financing that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential.
• Cryptocurrency – A digital or virtual form of currency that uses cryptography for security.
• Financial Planner – A qualified investment professional who helps individuals and corporations meet their long-term financial objectives.
• Retirement Planner – A professional who identifies sources of income, estimating expenses, implementing a savings program and managing assets and risk for individuals planning for their retirement.