Finance, Econ, and Investing

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Trade-offs

The balance between two desirable but incompatible features; giving up one thing to gain another.

Supply and Demand

A model that describes how the quantity of a good or service is determined by the relationship between its availability and consumers' willingness to purchase it.

Incentives

Factors that motivate individuals to make certain decisions or take actions.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity more efficiently than another activity.

Gross Domestic Product (GDP)

The total value of all goods and services produced within a country's borders in a specific time period.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Unemployment

The situation when individuals who are able and willing to work cannot find a job.

Monetary Policy

The process by which a central bank manages money supply and interest rates to influence the economy.

Fiscal Policy

Government policy regarding taxation and spending to influence the economy.

Capital

Financial assets or resources used to fund a business or project.

Capital Allocation

The process of deciding how and where to invest financial resources.

Assets

Resources owned by an individual or entity that have economic value.

Liabilities

Financial obligations or debts that an individual or entity owes to others.

Equity

The value of an owner's share in an asset or business, calculated as assets minus liabilities.

Debt

Money borrowed that is expected to be paid back with interest.

Risk

The possibility of financial loss or gain associated with an investment.

Return

The gain or loss made on an investment relative to the amount invested.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio.

Stocks

Securities that represent ownership in a company and constitute a claim on part of the company’s assets and earnings.

Bonds

Debt securities issued by corporations or governments that pay fixed or variable interest over a specified term.

Interest Rates

The proportion of a loan that is charged as interest to the borrower, usually expressed as an annual percentage.

Time Value of Money

The concept that money available today is worth more than the same amount in the future due to its potential earning capacity.

Financial Markets

Platforms where individuals and institutions can trade financial securities and other assets.

Valuation

The process of determining the current worth of an asset or a company.

Market Equilibrium

A state where supply equals demand, and prices stabilize.

Consumer Price Index (CPI)

A measure that examines the average change over time in the prices paid by urban consumers for a basket of goods and services.

Fiscal Deficit

The difference between a government's total revenue and total expenditure when the expenditure exceeds the revenue.

Central Bank

A national bank that provides financial and banking services for its country's government and commercial banking system.

Fundamental Analysis

A method of evaluating a security by attempting to measure its intrinsic value, including economic factors and business fundamentals.

Technical Analysis

An evaluation method that analyzes statistical trends from trading activity, such as price movement and volume.

Market Capitalization

The total market value of a company's outstanding shares of stock.

Liquidity

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

Bond Yield

The return an investor can expect to earn if the bond is held until maturity.

Equity Financing

The method of raising capital by selling company stock to investors.

Debt Financing

The process of raising capital through borrowing, typically through loans or bond issuance.

Net Present Value (NPV)

The difference between the present value of cash inflows and outflows over a period of time.

Internal Rate of Return (IRR)

The discount rate that makes the net present value of all cash flows from an investment equal to zero.

Portfolio

A collection of financial investments like stocks, bonds, commodities, currencies, and cash equivalents.

Asset Allocation

The strategy of dividing an investment portfolio among different asset categories.

Exchange Traded Funds (ETFs)

Investment funds traded on stock exchanges, similar to individual stocks.

Mutual Funds

Pool of money from many investors to purchase securities, managed by a professional manager.

Derivatives

Financial contracts whose value is linked to the value of an underlying asset.

Value Investing

Investment strategy that involves picking stocks that appear to be trading for less than their intrinsic value.

Growth Investing

Investment strategy that focuses on companies expected to grow at an above-average rate compared to their industry.

Asset Bubble

A market phenomenon characterized by the rapid escalation of asset prices beyond their intrinsic value.

Bear Market

A market condition where prices are falling or are expected to fall.

Bull Market

A market condition characterized by rising prices for securities.

Short Selling

The sale of a security that the seller does not own with the intention of buying it back at a lower price.

Credit Score

A numerical expression based on a level analysis of a person's credit files, representing their creditworthiness.

Return on Investment (ROI)

A measure used to evaluate the efficiency of an investment, calculated as the ratio of net profit to investment cost.

Cost of Capital

The return rate that capital could be expected to earn in an alternative investment.

Mergers and Acquisitions (M&A)

Consolidation of companies or assets through various types of financial transactions.

Marketplace Competition

The rivalry among businesses to attract customers and achieve greater market share.

Corporate Governance

The system of rules, practices, and processes by which a company is directed and controlled.

Consumer Confidence Index (CCI)

An economic indicator that measures the degree of optimism consumers have regarding their expected financial situation.

Trade Balance

The difference between a country's exports and imports of goods and services.

Exchange Rate

The value of one currency for the purpose of conversion to another.

Public Debt

The total amount of money that a government owes to creditors.

Liquidity Risk

The risk that an entity will not be able to meet short-term financial obligations due to the inability to convert assets into cash.

Inverse Relationship Between Price and Demand

The principle that as the price of a good increases, the demand for that good decreases, and vice versa.

Ceteris Paribus

A Latin phrase meaning 'all other things being equal,' used in economic reasoning.

Externalities

Economic side effects or consequences that affect uninvolved third parties.

Frictional Unemployment

Short-term unemployment that occurs while workers move between jobs.

Seasonal Unemployment

Unemployment resulting from seasonal patterns in demand or supply.

Structural Unemployment

Long-term unemployment caused by fundamental changes in the economy that eliminate jobs.

Long-term Growth

Sustained upward movement in the economy's output over a period of time.

Income Inequality

The unequal distribution of income within a population.

Economic Cycle

The natural fluctuation of economic activity over time, typically measured in terms of GDP.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good changes in response to a change in price.

Government Subsidy

Financial assistance provided by the government to promote or support a specific economic policy.

Asset Allocation Strategy

The strategy of distributing investments across various asset classes to minimize risk and optimize returns.

Market Order

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

Limit Order

An order to buy or sell a stock at a specified price or better.

Stop Loss Order

An order placed to sell a security when it reaches a certain price to limit potential losses.

Swing Trading

A trading strategy aimed at capturing short to medium-term gains in a stock over a few days or weeks.

Day Trading

The practice of buying and selling financial instruments within the same trading day, often multiple times.

Position Trading

A long-term trading strategy where positions are held for weeks, months, or even years.

Robo-Advisors

Automated platforms that provide algorithm-driven financial planning services with little human intervention.

Market Capitalization Categories

Classifications of companies based on their market capitalization: small-cap, mid-cap, and large-cap.

Blue Chip Stocks

Shares in well-established companies with a history of stable earnings and reliable growth.

Penny Stocks

Low-priced stocks that typically trade for less than $5 per share, often with high volatility.

Dividends

Payments made by a corporation to its shareholders, usually from profits.

Dividend Yield

A financial ratio that shows how much a company pays in dividends each year relative to its stock price.

Price-to-Earnings Ratio (P/E)

A valuation ratio calculated by dividing the market price per share by the earnings per share (EPS).

Earnings Per Share (EPS)

The portion of a company's profit allocated to each outstanding share of common stock.

Return on Equity (ROE)

A measure of a corporation's profitability, calculated by dividing net income by shareholder equity.

Market Sentiment

The overall attitude of investors toward a particular security or market, often reflected in current price movement.

Technical Indicators

Statistical measures used by traders to predict future price movements based on historical data.

Moving Average

A technical analysis indicator that smooths price data by creating a constantly updated average price.

Relative Strength Index (RSI)

A momentum oscillator that measures the speed and change of price movements, used to identify overbought or oversold conditions.

Bollinger Bands

A volatility indicator that consists of three lines, the middle line is a moving average, with upper and lower bands representing price volatility.

Candlestick Chart

A type of financial chart that uses candlesticks to represent price movements over time, displaying open, high, low, and close prices.

Fibonacci Retracement

A technical analysis tool that uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels.

Volume

The number of shares or contracts traded in a security or market during a given period.

Liquidity Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets.

Alpha

A measure of an investment's performance on a risk-adjusted basis, indicating how much more or less return an investment has earned compared to its benchmark.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher volatility.

Sharpe Ratio

A measure of risk-adjusted return, calculated by subtracting the risk-free rate from the investment's return and dividing by its standard deviation.