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| Term | Definition |
| 401(k) plan | A type of employer sponsored plan in which money is contributed on a pre tax basis and all earnings are tax deferred |
| Annual Report | A comprehensive report on a company's activities throughout the preceding year that are intended to give shareholders and other interested people information about the company's activities and financial performance. |
| Annuity | An investment contract made with the issuer types immediate, deferred, fixed, variable |
| Bear market | A time with generally falling stock prices |
| Blue chip stock | Stocks issued by solid and reliable companies with long records of growth and stability; usually pay small but reliable dividends and maintain a steady stock price |
| Bond | Investment issued by federal., state, or local government to help cover the costs of projects; considered less risky than stocks. Interest is lower than the return on riskier investments such as stocks. |
| Bond rating | A grade given to bonds that indicates their credit quality. |
| Bonds | Money loaned to the government, corporations or municipalities that pays the investor interest |
| Brokerage Firm | Financial institution that facilitates the buying and selling of financial securities between a buyer and a seller. |
| Bull market | A time with generally rising stock prices |
| Capital Gains | The income kept after selling stock at higher price than what was originally paid for it; income that must be reported on taxes |
| Capitalization | A company's outstanding shares multiplied by its share price |
| Common Stock | A security that represents ownership in a corporation. Holders of this stock having voting rights, but are on the bottom of the priority ladder for ownership structure.
In the event of liquidation. holders of this type of stock have rights to a company's assets only after other investors have been paid in full. |
| Corporation | A legal entity that is separate and distinct from its owners; offers shares of ownership to the public in the form of stock and offers investors limited liability |
| Depreciation | 1) A decrease in an asset's value
2) An accounting method of allocating the cost of an asset over its useful life; beneficial for both tax and accounting purposes. |
| Diversification | Investing in multiple industries/companies/investment types to help reduce financial risk |
| Dividends | Money paid to stockholders from corporation's earnings |
| Dodd-Frank Act | The most comprehensive financial regulatory reform measures taken since the great depression. Passed as a result of the 2008 financial crisis. |
| Double taxation | Disadvantage of investing in a corporation. Before issuing dividends to stockholders, the corporation must first pay income taxes. After the stockholder receives the dividend payment they must also pay income tax on their earnings |
| Dow Jones Average | A simple stock market index that calculates the stock prices of 30 large companies. |
| Dow Jones Industrial Average | An index of 30 "blue chip" stocks of U.S. industrial companies; includes a wide range of companies—from financial services companies, to computer companies, to retail companies—but excludes transportation and utility companies |
| EPS | Earnings Per Share; Company's net income divided by the number of shares |
| FDIC Insured | Consumer benefit offers by banks, savings, and loan companies; account holders are guaranteed that a portion of their money is protected against loss. |
| Federal Funds Reserve Requirements | The minimum amount of money that banks are required to maintain in a reserve account with the Federal Reserve. The balance depends on the total deposits of the bank's customers. |
| Financial Statements | The heart of the annual report, includes the balance sheet, income statement, gives details how the numbers were obtained |
| Front-end loan | Fees paid to the mutual fund company as an entry requirement into certain funds |
| Growth stock | Stocks of companies that generally do not pay dividends or pay only very small dividends; instead these companies reinvest their profits back into growing the business |
| Income stock | An equity security that pays regular, often steadily increasing dividends, and offers a high yield that may generate the majority of overall returns. |
| Index fund | An investment fund (usually a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions. |
| Individual Retirement Account (IRA) | A type of retirement savings plan that is not usually done through an employer |
| Inflation | Rise on prices that effectively makes cash have less buying power |
| Insider Information | Private information held by officers, directors, or major stockholders that has yet been divulged to the public |
| Investing | The act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit. |
| Investing Risk | The probability or likelihood of occurrence of losses relative to the expected return on any particular investment. |
| Investment Portfolio | Collection of investments you personally hold, including stocks, bonds, money market accounts, savings accounts, etc… |
| IPO | Initial Public Offering; a corporation's first public offering of a stock for sale. |
| Limited liability | Shareholders have the right to participate in the profits, through dividends and/or the appreciation of stock, but are not held personally liable for the company's debts. |
| Liquidity | The ability to convert an asset to cash quickly |
| Margin | Buying on credit |
| Market Indexes | Tracks the performance of a specific "basket" of stocks considered to represent a particular market or sector of the U.S. stock market or the economy. |
| Maturity Date | The final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid. |
| Mutual Fund | Investors own a small piece of a large number of stocks. |
| Mutual Fund | A pool of stocks, bonds, and other securities managed by an investment company. Individuals can buy shares of the fund and profit from its investment gains |
| NASDAQ | The computerized National Association of Securities Dealers Automated Quotation system that provides for the exchange of securities sold over the counter. |
| Nasdaq-100 Index | Stock market index designed to track the performance of the 100 largest and most actively traded non-financial domestic and international securities listed on The Nasdaq Stock Market. |
| No-load fund | Investors can buy and redeem the mutual fund units/shares at any time without a commission or sales charge. |
| NYSE Composite Index | The NYSE Composite Index tracks the price movements of all common stocks listed on the New York Stock Exchange. The Index is "capitalization-weighted" (that is, each stock's weight in the Index is proportionate to the stock's market capitalization). |
| P/E Ratio | Price/earning ratio, shows the relationship between the price of stock and company earnings |
| Par value | The face value of a bond. The market price of a bond may be above or below par, depending on factors such as the level of interest rates and the bond’s credit status. |
| Partnership | A business owned by two or more people. |
| Penny Stocks | Term for low-priced stocks (typically from $10, $5, and as low as $1, but not a penny) with short, erratic, or no track record of earnings, or once-good firms that have fallen on hard times and are ripe for sale. Have potential for high percentage returns, but the speculative (uncertain) nature causes wild swings in their prices. |
| Pension | A fixed sum paid regularly by an employer to an employee after retirement |
| Ponzi Scheme | Investment fraud; an individual invests money with investment firm and the firm pays returns from your initial investment or from the investment of subsequent investors, not from profits earned from investments |
| Preferred Stock | A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. These shareholders generally receive a dividend that must be paid out before dividends to common stockholders |
| Primary Market | Market where new issues of securities are offered to the public |
| Private Corporation | An incorporated business that does not trade shares of stock on an open market. Typically it is owned by a small number of people |
| Prospectus | A formal legal document that provides details about an investment offering for sale to the public; should contain the facts that an investor needs to make an informed investment decision. Required by and filed with the Securities and Exchange Commission, |
| Public Corporation | An incorporated business owned jointly by all stockholders. Stockholders vote on who will oversee the company as a board of directors. Usually the company profits are paid out in the form of dividents |
| Pyramid Scheme | A form of investment (illegal in the US and elsewhere) in which each paying participant recruits two further participants, with returns being given to early participants using money contributed by later ones. |
| Rate of Return | The annual amount of money an investment makes, given as a percentage. for example, a $100 investment that is worth $112 the next year had a 12% return |
| Return | Monetary increase that an investment makes. If an investment looses value it is called a negative return |
| Risk | The chance that an investment may loose value. Less risky investments have a lower rate of return |
| Risk Management | The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Inadequate risk management can result in severe consequences for companies as well as individuals. |
| Risk Tolerance | The degree of variability (change) in investment returns that an individual is willing to withstand. An individual should have a realistic understanding of his or her ability and willingness to stomach large swings in the value of his or her investments. Investors who take on too much risk may panic and sell at the wrong time. |
| Roth IRA | This type of individual retirement account is not tax deductible, but may not be subject to income tax upon withdrawl |
| Rule of 72 | Method used to estimate how long it will take for an investment to double in value; Divide 72 by the interest rate. |
| Secondary Market | Market where previously issued securities are traded between investors |
| Securities and Exchange Comission
(SEC) | Regulates companies that sell stock; ensures information given to investors is accurate and strives to maintain fair and orderly financial markets |
| Short Sale | Allows investors to profit from a decline in a security's price. An investor borrows a share of stock from a broker and sells it; Later the short seller must purchase a share of the same stock in order to replace the share that was borrowed. |
| Sole-proprietorship | Business owned and operated by one person; most common form of business organization in the U.S. |
| Stock | Shares of ownership in a corporation |
| Stockholder | An individual, group, or organization that holds one or more shares in a company, and in whose name the share certificate is issued. Also called shareholder. |
| Tax-Deferred | Income that will be taxed later |
| The S & P 500 Composite Stock Price Index | Index of 500 stocks intended to be a representative sample of leading companies in leading industries within the U.S. economy. Stocks in the Index are chosen for market size, liquidity, and industry representation. |
| Yield | For a savings account, the percentage of interest earned annually. For a stock, the annual dividend divided by the share price |
