Secutires and Investments

Security

A tradable financial asset such as a stock, bond, or derivative that holds monetary value and can be bought or sold.

Investment

The purchase of an asset with the expectation of generating income or capital appreciation over time.

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its price.

Risk-Return Tradeoff

The principle that potential return rises with an increase in risk; higher-risk investments typically offer higher potential rewards.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to reduce exposure to any single asset.

Asset Allocation

The process of dividing investments among different asset categories (stocks, bonds, cash) based on goals, risk tolerance, and time horizon.

Capital Gain

The profit realized when an asset is sold for more than its original purchase price.

Capital Loss

The loss incurred when an asset is sold for less than its original purchase price.

Dividend

A portion of a company's profits paid out to shareholders, typically on a quarterly basis.

Portfolio

A collection of financial investments such as stocks, bonds, cash, and other assets held by an individual or institution.

Yield

The earnings generated on an investment over a particular period, expressed as a percentage of the investment's cost or current market value.

Inflation Risk

The risk that the purchasing power of investment returns will be eroded by inflation over time.

Market Risk

The risk of losses due to factors affecting the overall performance of financial markets.

Time Horizon

The expected length of time an investor plans to hold an investment before taking the money out.

Broker

An agent who buys and sells securities on behalf of clients in exchange for a commission or fee.

Registered Representative

A broker or financial advisor who has passed FINRA licensing exams and is authorized to sell securities.

Annual Report

A comprehensive report on a company's activities and financial performance published yearly for shareholders.

Prospectus

A formal legal document that provides details about an investment offering to help investors make informed decisions.

Traditional IRA

An individual retirement account where contributions may be tax-deductible and earnings grow tax-deferred until withdrawal.

Roth IRA

An individual retirement account funded with after-tax dollars where qualified withdrawals are tax-free.

401(k)

An employer-sponsored retirement savings plan where employees contribute pre-tax earnings and taxes are deferred until withdrawal.

403(b)

A retirement plan similar to a 401(k) but designed for public school employees and non-profit organizations.

SEP-IRA

A Simplified Employee Pension IRA that allows self-employed individuals and small business owners to contribute to retirement accounts.

Defined Benefit Plan

A pension plan where the employer promises a specified monthly benefit at retirement based on salary history and years of service.

Defined Contribution Plan

A retirement plan where the employee and/or employer contribute a set amount, and the benefit depends on investment performance.

Capital Gains Tax

A tax levied on the profit from the sale of an asset. Short-term (held <1 yr) taxed as ordinary income; long-term taxed at lower rates.

Tax-Deferred

An investment where taxes on earnings are postponed until a later date, typically at withdrawal.

Tax-Exempt

An investment whose earnings are not subject to federal (and sometimes state) income taxes, such as municipal bonds.

Revocable Trust

A trust that can be changed or terminated by the grantor during their lifetime; assets avoid probate but are still in the estate.

Irrevocable Trust

A trust that cannot be modified or dissolved after creation; assets are removed from the grantor's taxable estate.

Living Trust

A legal document created during a person's lifetime that places their assets in a trust, managed by a trustee for the benefit of a beneficiary.

Estate Tax

A tax on the transfer of property from a deceased person to their heirs, levied on estates above a certain value.

Gift Tax

A federal tax on the transfer of money or property from one person to another when the giver receives nothing (or less than full value) in return.

529 Plan

A tax-advantaged savings plan designed to encourage saving for future education costs; earnings grow tax-free.

HSA (Health Savings Account)

A tax-advantaged account used to pay for qualified medical expenses; contributions are pre-tax and can be invested.

Secured Loan

A loan backed by collateral that the lender can seize if the borrower defaults, reducing lender risk.

Unsecured Loan

A loan not backed by collateral; typically carries higher interest rates due to greater lender risk.

Mortgage

A loan used to purchase real estate, with the property itself serving as collateral; repaid over a set period with interest.

Fixed-Rate Mortgage

A mortgage where the interest rate remains constant throughout the life of the loan.

Adjustable-Rate Mortgage (ARM)

A mortgage where the interest rate can change periodically based on an index, typically after an initial fixed-rate period.

Term Life Insurance

Life insurance that provides coverage for a specific period; pays a death benefit if the insured dies during the term.

Whole Life Insurance

Permanent life insurance with a savings component (cash value) that accumulates over time alongside a death benefit.

Unit Trust

A type of collective investment vehicle where investors' money is pooled and divided into equal portions called units.

Open-Ended Investment Company (OEIC)

An investment fund with a variable number of shares based on investor demand; priced once per day at NAV.

Net Asset Value (NAV)

The per-share value of a fund calculated by dividing total assets minus liabilities by the number of outstanding shares.

Investment Trust

A publicly listed company that pools investors' money to invest in a diversified portfolio; shares trade on a stock exchange.

Hedge Fund

A private, actively managed investment fund that uses aggressive strategies including leverage, short-selling, and derivatives to generate returns.

Leverage

Using borrowed capital to increase potential return on investment; also amplifies losses.

Settlement

The process by which a securities transaction is completed; the buyer receives the security and the seller receives payment.

T+2 Settlement

Standard settlement convention where a trade must be finalized two business days after the transaction date.

Stock Exchange

An organized marketplace where stocks and other securities are bought and sold, such as the NYSE or NASDAQ.

NYSE (New York Stock Exchange)

The world's largest stock exchange by market capitalization, located on Wall Street in New York City.

NASDAQ

An electronic stock exchange known for listing many technology and growth companies; operates without a physical trading floor.

Primary Market

The market where new securities are issued and sold for the first time, such as through an IPO.

Secondary Market

The market where previously issued securities are traded among investors without the involvement of the issuing company.

Initial Public Offering (IPO)

The first time a company offers its shares to the public on a stock exchange.

Bull Market

A market condition characterized by rising prices and investor optimism, typically defined as a 20%+ rise from a recent low.

Bear Market

A market condition characterized by falling prices and investor pessimism, typically a 20%+ decline from a recent high.

Market Capitalization

The total market value of a company's outstanding shares; calculated as share price × number of shares outstanding.

Price-to-Earnings Ratio (P/E)

A valuation metric comparing a company's share price to its earnings per share; indicates how much investors pay per dollar of earnings.

Earnings Per Share (EPS)

A company's net profit divided by the number of outstanding shares; a key indicator of profitability.

Stock Split

When a company increases its number of shares by issuing more shares to current shareholders, reducing price per share proportionally.

52-Week High/Low

The highest and lowest price at which a stock has traded over the past year; used to assess a stock's current position.

Ticker Symbol

A unique abbreviation used to identify a publicly traded company on a stock exchange (e.g., AAPL for Apple).

Trading Volume

The number of shares traded during a given period; high volume often indicates strong investor interest or significant news.

Market Order

An order to buy or sell a security immediately at the current market price.

Limit Order

An order to buy or sell a security at a specific price or better; execution is not guaranteed.

Stop-Loss Order

An order to sell a security when it falls to a certain price, limiting the investor's loss.

Compound Interest

Interest calculated on both the initial principal and the accumulated interest from previous periods; 'interest on interest.'

Simple Interest

Interest calculated only on the principal amount of a loan or deposit.

Rule of 72

A quick estimate of how long it takes to double an investment: divide 72 by the annual interest rate.

Common Stock

Ownership shares in a company that typically give holders voting rights and a residual claim on earnings and assets.

Preferred Stock

A class of stock with a fixed dividend paid before common stock dividends; holders have priority in liquidation but usually no voting rights.

Blue-Chip Stock

Shares of large, well-established, financially stable companies with a long track record of reliable performance.

Growth Stock

Stock in a company expected to grow at an above-average rate; typically pays little or no dividend.

Value Stock

A stock trading below what analysts believe it is worth; often has a low P/E ratio and pays dividends.

Penny Stock

A low-priced stock, typically trading below $5 per share, usually in small companies with limited liquidity.

Real Estate Investment Trust (REIT)

A company that owns income-producing real estate; allows investors to invest in real estate without directly buying property.

Commodity

A raw material or agricultural product that can be bought and sold, such as gold, oil, or wheat.

Index Fund

A type of mutual fund or ETF designed to replicate the performance of a specific market index like the S&P 500.

Exchange-Traded Fund (ETF)

An investment fund traded on a stock exchange, similar to a stock; typically tracks an index and has lower fees than mutual funds.

Beta

A measure of a stock's volatility relative to the overall market; a beta > 1 means more volatile than the market.

Alpha

The excess return of an investment relative to a benchmark index; a positive alpha means the investment outperformed.

Mutual Fund

An investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

Load Fund

A mutual fund that charges a sales commission (load) when shares are purchased (front-end load) or sold (back-end load).

No-Load Fund

A mutual fund that does not charge a sales commission; investors buy shares directly at NAV.

Expense Ratio

The annual fee a mutual fund charges investors to cover operating expenses, expressed as a percentage of assets.

Fund Manager

A professional responsible for implementing a fund's investment strategy and managing its portfolio.

Total Return

The actual rate of return on an investment including capital gains, dividends, and interest over a given period.

Redemption

The act of selling mutual fund shares back to the fund company at the current NAV.

Capital Gains Distribution

Payment made by a mutual fund to shareholders from profits realized on the sale of securities within the fund.

Money Market Fund

A type of mutual fund that invests in short-term, low-risk debt instruments; designed to maintain a stable NAV of $1 per share.

Balanced Fund

A mutual fund that invests in a mix of stocks and bonds to provide both growth and income while managing risk.

Sector Fund

A mutual fund that focuses on a specific industry or sector of the economy, such as technology or healthcare.

12b-1 Fee

An annual marketing or distribution fee charged by a mutual fund, included in the expense ratio.

Bond

A fixed-income debt security issued by a corporation or government to raise capital; the issuer pays periodic interest and repays principal at maturity.

Par Value (Face Value)

The nominal or face value of a bond; the amount repaid to the bondholder at maturity, typically $1,000.

Coupon Rate

The annual interest rate stated on a bond; calculated as a percentage of the bond's face value.

Maturity Date

The date on which a bond's principal must be repaid to the bondholder.

Yield to Maturity (YTM)

The total return anticipated on a bond if held until it matures, accounting for price, coupon, and time to maturity.