Economics and Personal Finance Unit 4 – Investing Vocabulary

A comprehensive vocabulary review of 21 foundational terms covering investment types, market conditions, financial metrics, and regulatory concepts for Economics and Personal Finance Unit 4.

Investing

The act of allocating money, capital, or resources with the expectation of generating future income, profit, or financial return.

Stocks

Units of equity ownership in a corporation. Examples of Common Stock include Apple, Nike, Coca-Cola, Google, etc.

Bonds

A debt security representing a loan from an investor to a borrower; note that U.S Government Bonds are considered EXTREMELY safe.

Stock Market

The collection of exchanges and markets where buying, selling, and issuance of shares of publicly held companies take place; performance is typically tracked by a Stock Market Index.

Mutual Funds

An investment vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, and other assets.

Investment Risk

The probability, degree of uncertainty, or potential for financial loss relative to the expected return on an investment.

Investment Diversification

A risk-reduction strategy that mixes a wide variety of different investments within a portfolio to limit exposure to any single asset.

Rate of Return

The net gain or loss on an investment over a specified time period, typically expressed as a percentage of the initial investment cost.

Dividend

A distribution of a portion of a company's profits or earnings paid out directly to its shareholders.

Capital Gains

The profit realized from the sale of an investment or asset. For example: buy a stock for $\$40$ and sell it two years later for $\$50$. Your capital gain is $\$10$. You will be taxed on that gain.

Capital Losses

The financial loss incurred when a capital asset decreases in value and is sold for a price lower than its original purchase price.

Bull Market

A financial market condition characterized by rising stock prices, investor confidence, and an optimistic economic outlook.

Bear Market

A financial market condition characterized by prolonged price declines, negative investor sentiment, and widespread pessimism.

Blue-Chip Stock

Shares of large, nationally recognized, well-established, and financially sound corporations with a long history of stable earnings.

Growth Stock

Shares in a company whose earnings and revenues are expected to grow at a significantly faster rate than the market average, usually reinvesting profits rather than paying dividends.

Income Stock

An equity security that offers a regular and steady dividend yield, prioritizing consistent income distribution over capital appreciation.

Market Capitalization

The total dollar market value of a company's outstanding shares of stock, calculated by multiplying a company's total shares by the current market share price.

P/E Ratio

Stands for Price to Earnings Ratio; a key valuation metric comparing a company's current share price to its per-share earnings.

Initial Public Offering (IPO)

The process where a private company first sells shares of stock to the public; noted in the lecture context as the largest IPO of all time when SpaceX raised $\$75\text{ BILLION}$ in June of $2026$.

Securities & Exchange Commission (SEC)

A federal government regulatory agency whose purpose is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Liquid vs. Non-Liquid

The distinction between assets that can be quickly and easily converted into cash without a substantial loss in value (liquid) and those that cannot be rapidly sold or converted to cash without significant effort or loss (non-liquid).