Vocabulary

• 401(k) – A retirement savings plan sponsored by an employer which allows employees to save and invest a piece of their paycheck before taxes are taken out.
• 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 – The implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio.
• Bond – A fixed income instrument that represents a loan made by an investor to a borrower.
• Capital Gain – The increase in the value of an investment or real estate that gives it a higher worth than the purchase price.
• Compound Interest – Interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.
• Diversification – A risk management strategy that involves mixing a variety of investments within a portfolio.
• Dividend – A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
• ETF (Exchange-Traded Fund) – A type of security that involves a collection of securities—such as stocks—that often tracks an underlying index.
• Equity – Ownership interest in a corporation in the form of stock or securities.
• Fiduciary – A person who holds a legal or ethical relationship of trust with one or more other parties.
• Fixed Income – A type of investing or budgeting style for which real return rates or periodic income is received at regular intervals and at reasonably predictable levels.
• Inflation – The rate at which the general level of prices for goods and services is rising and subsequently, purchasing power is falling.
• IRA (Individual Retirement Account) – A tax-advantaged investing tool that individuals use to earmark funds for retirement savings.
• 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 Fund – An investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities.
• Net Worth – The amount by which assets exceed liabilities.
• Pension Plan – A retirement plan that requires an employer to make contributions into a pool of funds set aside for a worker's future benefit.
• Portfolio – A grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts.
• Real Estate Investment Trust (REIT) – A company that owns, operates or finances income-producing real estate.
• 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.
• Securities – A fungible, negotiable financial instrument that holds some type of monetary value.
• Social Security – Any government system that provides monetary assistance to people with an inadequate or no income.
• Stock – A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.
• Tax Bracket – A range of incomes subject to a certain income tax rate.
• Tax Deduction – A reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income.
• Tax Exempt – The monetary exemption of taxes.
• Traditional IRA – An individual retirement account in which money is deposited pre-tax, with the taxes paid upon withdrawal.
• Yield – The income return on an investment.
• Capital Loss – The decrease in the value of an investment or real estate that gives it a lower worth than the purchase price.
• Certificate of Deposit (CD) – A savings certificate with a fixed maturity date and specified fixed interest rate.
• Dollar Cost Averaging – A strategy in which an investor places a fixed dollar amount into a given investment on a regular basis.
• Estate Planning – The preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or death.
• Financial Planner – A qualified investment professional who helps individuals and corporations meet their long-term financial objectives.
• Hedge Fund – An aggressively managed portfolio of investments that uses leveraged, long, short and derivative positions.
• Index Fund – A type of mutual fund with a portfolio constructed to match or track the components of a market index.
• Margin – Borrowed money that is used to purchase securities.
• Money Market Fund – A type of mutual fund that invests in high-quality, short-term debt instruments and cash equivalents.
• Options – Contracts that give the bearer the right, but not the obligation, to either buy or sell an amount of some underlying asset at a pre-determined price.
• Preferred Stock – A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.
• Trust Fund – A fund comprised of a variety of assets intended to provide benefits to an individual or organization.
• Volatility – A statistical measure of the dispersion of returns for a given security or market index.
• Commodities – Basic goods used in commerce that are interchangeable with other commodities of the same type.
• Futures Contract – A legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.
• Interest Rate – The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.
• Private Equity – Capital that is not listed on a public exchange.
• Buyout – The purchase of a company's shares in which the acquiring party gains controlling interest of the targeted firm.
• Venture Capital – Financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.
• Blue Chip Stocks – Shares in large, well-established and financially sound companies with a history of reliable performance.