Vocabulary

• Asset Allocation – This refers to the strategy of dividing investment portfolio across various asset classes like stocks, bonds, and cash.
• Balance Sheet – A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time.
• Bonds – These are debt securities that are similar to IOUs. When you purchase a bond, you are lending money to the issuer in exchange for periodic interest payments and the return of principal at maturity.
• Budget – A plan that outlines an individual's or company's financial and operational goals.
• Capital Gains – The increase in value of a capital asset (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.
• Credit Score – A numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual.
• Diversification – The strategy of investing in a variety of different assets to reduce risk.
• Dividends – Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
• ETFs (Exchange Traded Funds) – A type of investment fund and exchange-traded product, traded on stock exchanges.
• Equity – Ownership interest in a corporation in the form of stock shares.
• FICO Score – A type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk.
• Fiscal Policy – Government policy that attempts to influence the direction of the economy through changes in government spending or taxes.
• Forex Market – The market in which participants can buy, sell, exchange, and speculate on currencies.
• Hedge Fund – An offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital.
• Index Fund – A type of mutual fund with a portfolio constructed to match or track the components of a market index.
• 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 amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.
• Investment – Asset or item acquired with the goal of generating income or appreciation.
• Liability – An obligation resulting from past transactions or events.
• 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 funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
• Net Worth – The amount by which assets exceed liabilities.
• 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 at or before a specified date.
• Portfolio – A range of investments held by a person or organization.
• Real Estate – Property consisting of land or buildings.
• REIT (Real Estate Investment Trust) – A company that owns, operates or finances income-generating real estate.
• ROI (Return on Investment) – A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.
• Savings Account – A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
• Securities – A tradable financial asset.
• Stock Market – A public market for the trading of company stock and derivatives at an agreed price.
• Taxation – The means by which governments finance their expenditure by imposing charges on citizens and corporate entities.
• 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.
• Volatility – 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.
• 401(k) Plan – A qualified retirement plan that allows eligible employees of a company to save and invest for their own retirement on a tax deferred basis.
• 529 Plan – A tax-advantaged savings plan designed to encourage saving for future education costs.
• IRA (Individual Retirement Account) – An investing tool used by individuals to earn and earmark funds for retirement savings.
• Roth IRA – An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year.
• Annuity – A long-term investment that is issued by an insurance company and is designed to help protect you from the risk of outliving your income.
• Bull Market – A market in which share prices are rising, encouraging buying.
• Bear Market – A market in which prices are falling, encouraging selling.
• Market Order – An order to buy or sell a security immediately at the best available current price.
• Limit Order – An order to buy or sell a security at a certain price or better.
• Day Trading – The buying and selling of a security within a single trading day.
• Swing Trading – A style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks.
• Arbitrage – The simultaneous purchase and sale of the same assets in different markets in order to profit from tiny differences in the asset's listed price.
• Derivatives – Financial securities with values reliant upon, or derived from, an underlying asset or group of assets.
• 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.
• Short Selling – The sale of a security that is not owned by the seller, or that the seller has borrowed, in the hope that the price will go down.