Investing & Retirement Vocabulary

Vocabulary flashcards related to investing and retirement.

Risk Tolerance

Amount of uncertainty a person is willing to handle.

Dividend

Portion of a company’s earnings paid to stockholders.

Return

Amount earned on investment for a given period.

Volatility

Quick and unexpected changes in value or price.

Diversification

Spreading out your stocks, bonds, and other investments to distribute risk.

Investment Portfolio

Collection of investments you have made.

Brokerage Firm

Financial institution that facilitates the purchase and sale of financial securities by buyers/sellers.

Inflation

The rising level of prices and the decline of the value of the currency.

Appreciation

Increase in value (of an investment)

Depreciation

Decrease in value (of an investment)

Insider Trading

When an employee uses private company information to purchase stock or other securities for personal gain.

IPOI nitial Public Offering

– when stocks first debut on the market

Secondary Markets

Markets where you can buy and resell stocks and bonds.

Maturity Date

Date the bond is fully repaid to the bondholder.

Face Value

Amount for which a bond is issued.

Yield

The percentage return on the investment.

Treasury Bonds

Long term investments of 30 years by the government (treasury).

EE Bonds

Earn fixed interest rates for up to 30 years.

I Bonds

Earn interest based on inflation rates.

Mutual Funds

Investment created by pooling the money of many people and investing it in a collection of securities.

Index Funds

Investment created by following a collective stock market index, like the S&P 500, RUSSELL 2000, OR DJI.

Bull Market

Nickname slang for when the market is expected to go up… 20% rise from the lowest point. A period of rising stock prices.

Bear Market

Nickname slang for when the market is expected to go down… 20% decline from the highest point. A period of falling stock prices.

Penny Stocks

Shares/stocks that trade for less than $1 or around that.

OTC Market Over –The– Counter – a market

where individuals conduct trades without a central exchange or broker. Ironically, no physical locations, only electronically.

Capital Gain (Loss)

Income (or loss) that results from selling an asset for more than the purchase price (or for less than the purchase price).

Blue-Chip Stocks

Large companies’ stocks/shares with strong brands and financially sound businesses. Super reputable.

Dollar-Cost Averaging

Making regular investments in the market over time… like $250 a month forever. Goal is to put in a little over time into good companies regardless of price.

Day Trading

The buying and selling of stocks within a day, sometimes within seconds, to exploit the up- and-down price movements of a security.

Buy and Hold

Passive, long-term investment strategy that creates a stable portfolio. The goal is to hold your stock until you’ve hit you targeted return (like 2x the investment) or until retirement.

DRIP

Dividend ReInvestment Plan. Automatically uses your dividend cash to repurchase more of the stock. Then investors hold the stock to get more dividends over time. Repeat the process.

Socially Responsible Investing

SRI – goal is to generate both social and financial returns. Focuses on companies that make social impacts or positive sustainability.

PE Ratio Investing

Looks at companies PE ratios to determine if overvalued or undervalued and make investment decisions on that. Advanced process looks at future PE potential as well.

Growth investing

Looking for the “next big thing.” Focuses on companies who will likely expand or be big in the future. Almost never invests in dividend companies.

Technical Trading

Trading using charts, signals, and trends. Used commonly for active traders.

Value Investing

Investing using financial statements, company information, and long-term growth potential of the company.

Securities Exchange

Secondary market where securities are bought and sold through stockbrokers… like the NYSE.

SEC

Securities & Exchange Commission – protects investors and the market by ensuring fair access, company integrity, honesty, and passing federal laws.

NYSE

New York Stock Exchange – the largest exchange in the world.

FINRA

Financial Industry Regulatory Authority – not for profit organization that oversees US broker-dealers and ensures fair and honest operation.

Vesting

The amount of time before you are required to wait before earning the right to matching investment from an employer.

Pension Plan

Employee benefit plan set up by employer or union to provide retirement income after employment is completed.

401(k) plan

An employer sponsored plan that matches your investment contributions up to a certain percent.

403(b) plan

A tax free plan offered by public schools… similar to a 401k but just for educational purposes.

IRA

Individual Retirement Account with specific tax benefits.

Annuity

Long-term investment like insurance where you pay a portion now and receive a fixed income later (after 60 years old).

Estate

All assets and liabilities a person leaves after death.

Beneficiary

Person or group who receives a deceased person’s assets or benefits.

Inheritance

Receiving “something” as an heir to the death of someone else.

Power of Attorney

Legal document that allows you to appoint someone to manage your assets, estate, or medical or financial choices.

Living Will

Legal document that details how you prefer to receive medical benefits when you are unable.

Trust

Arrangement that allows a third party to hold specific assets on behalf of a beneficiary.