What you'll learn:
➤ A
| Term | Simplified Explanation |
|---|---|
| Burned Cryptocurrency | Any cryptocurrency that can’t be used or traded anymore. |
| 1 x 2 Call Spread | Buy 1 call at a lower price, sell 2 calls at higher prices. Good if stock rises but not too high. Risk: High. |
| 1099-DIV | A tax form showing money you earned from investments like dividends. |
| A Public and Private Key | Public key: Like an address to receive cryptocurrency.<br> Private key: Secret password to access your crypto wallet. |
| Absolute Returns | ETFs without fixed strategies. They adapt to market conditions for maximum returns within risk limits. |
| Account Closure | When an institution closes your account due to inactivity, debt, fraud, or you choose to close it. |
| Account Value | Total worth of your account, combining cash and investments. |
| Acquisition | One company buying enough shares of another to control it. |
| Active Management Return | Difference between a fund’s return and a benchmark’s due to active trading. |
| ADP National Employment Report | Tracks U.S. private sector employment trends using payroll data. Released monthly. |
| After-Hours Trading | Trading after normal stock exchange hours, riskier due to less activity. |
| Agencies Bond ETFs | ETFs investing in federal agency bonds or government-sponsored enterprise bonds. |
| Agency MBS ETFs | ETFs buying mortgage-backed securities sponsored by government agencies. |
| Alpha-Seeking ETFs | ETFs aiming to outperform the market using unique strategies. |
| Altcoin | Any cryptocurrency other than Bitcoin. |
| Alternative Investment | Investments like real estate and hedge funds, different from stocks and bonds. |
| American Call Option | A contract letting you buy shares at a set price within a certain time. |
| American Options | Options you can exercise or assign before they expire. |
| American Put Option | A contract letting you sell shares at a set price within a certain time. |
| Annualized | Converting short-term data to an annual rate for comparison. |
| Asia-Pacific ETF | ETFs investing in Asian-Pacific countries’ securities. |
| Asian ETF | ETFs investing in Asian countries’ stocks. |
| Asset Allocation | ETFs spreading investments across different assets for stability. |
| Asset Classes | Groups of investments with similar behaviors. |
| Asset-Backed ETFs | ETFs investing in securities backed by assets like loans or leases. |
| Assignment | Seller’s obligation to buy/sell stocks at a set price. |
| At the Market | Selling a stock at its current market price. |
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➤ B
| Term | Description |
|---|---|
| Bankruptcy | Legal process for individuals/businesses unable to pay debts. Offers fresh start, impacts credit. |
| Basic Materials ETFs | Invest in companies dealing with raw materials. |
| Benchmark | Reference point for comparing investments, often an index. |
| Benefit Security Ratio (Funded Ratio) | Measures pension fund’s assets vs. liabilities for retirement goals. |
| Bid-Ask Spread | Difference between buying/selling prices of a security. |
| Blockchain | Secure digital ledger for recording cryptocurrency transactions. |
| Bond ETFs | Invest in bonds, offer stability and income. |
| Bond Spread ETFs | Use bond yield spreads to measure risk and performance differences. |
| Broad Debt ETFs | Invest in various types of bonds for stability and income. |
| Broad Equity ETFs | Invest in stocks across sectors for diversification. |
| Budget Deficit | Govt. spending exceeds revenue, funded by selling bonds. |
| Build America Bond ETFs | Invest in taxable municipal bonds with tax credits, stimulating economy. |
| Business Annual Report | Shows company’s financial performance, required by most states. |
| Business Model | Outlines company’s profit strategy and operations. |
| Buy Write (Covered Call) | Strategy to earn income by selling call option while owning stock. |
| Buy-Write ETFs | ETFs that buy stocks, sell call options for income. |
➤ C
| Term | Description |
|---|---|
| Calendar Spread | Buy long-term Call/Puts, sell near-term Call/Puts; limited profit, risk. |
| Call Spread Collar | Buy call at lower strike, sell call at higher strike, sell put at lower strike. |
| Can I Buy Fractional Shares of Stocks? | Yes, some brokers allow buying fractional shares of expensive stocks. |
| Capital Gain | Profit from selling an asset for more than paid; taxed on realization. |
| Commission | Fees charged by brokers for trading or investment advice. |
| Commodity ETFs | Invest in commodities like agricultural products, resources, precious metals. |
| Communication Services ETFs | Invest in communication sector stocks. |
| Communication Services Stocks | Stocks in communication sector including media, telecoms. |
| Conflict of Interest | Clashing responsibilities affecting judgment due to personal/professional interests. |
| Consumer Discretionary ETFs | Invest in consumer-related companies. |
| Consumer Discretionary Stocks | Stocks related to consumer spending. |
| Consumer Staple Stocks | Stocks of essential goods/services providers. |
| Consumer Staples ETFs | Invest in essential goods/services companies. |
| Convertible Bond ETFs | Invest in bonds convertible to equity. |
| Copy Trading | Automatically copying others’ investments. |
| Core Inflation | Inflation minus volatile food and energy prices. |
| Corporate Engagement | Businesses’ interaction with stakeholders for value improvement. |
| Corporate Fixed Income ETFs | Invest in corporate bonds. |
| Correlation | Measure of how asset prices move together. |
| Cost of Capital | Hurdle rate calculated from equity and debt costs. |
| Cost of Equity | Hurdle rate calculated based on stock’s beta to benchmark index. |
| Country or Region Risk | Unique risks of investing in specific geographic areas. |
| Crypto Wallets | Devices/software to access cryptocurrencies. |
| Cryptocurrency Exchanges and Markets | Trading platforms for cryptocurrencies. |
| Cryptocurrency Wallet | Digital wallet for storing cryptocurrencies. |
| Cryptography | Encoding/decoding for cryptocurrency transactions. |
➤ D
| Term | Description |
|---|---|
| Debt | Money one owes another, often with fees or interest. Can be loans, credit, bonds. |
| DeFi (Decentralized Finance) | Internet-based financial system using blockchain to remove intermediaries. |
| Deficit | Spending more than income; fiscal deficit or trade deficit. |
| Deflation | Price decline of goods/services due to contraction in money/credit supply. |
| Delta | Option price change for a $1 change in underlying price. |
| Demand | Consumers’ willingness to buy at a price; affects market growth. |
| Deposit | Money placed into an account (bank, investment). |
| Developed Markets ETF | Invest in economically developed countries’ securities. |
| Difference Between Mutual Fund and ETF | Differences in transparency, pricing, fees. |
| Difference Between Cold and Hot Storage | Offline vs. online cryptocurrency storage. |
| Difference Between Gross Profit and Operating Income | Gross profit vs. operating income. |
| Difference Between Gross Revenues and Net Revenues | Gross vs. net revenues (sales). |
| Distribution Schedule | Frequency of distributing asset returns or payments. |
| Dividend Aristocrat | S&P 500 companies increasing dividends for 25+ years. |
| Dividend King | Companies paying and increasing dividends for 50+ years. |
| Dividend Reinvesting Plans (DRIPs) | Automatically reinvest cash dividends. |
| Dividend Yield | Income yield from owning a stock; calculated from dividends and price. |
| Do You Have to Purchase a Full Coin When Buying One? | Fractional cryptocurrency buying possible. |
| Due Diligence | Systematic analysis of facts before purchasing securities. |
➤ E
| Term | Description |
|---|---|
| Earnings per Share | Net income per share available to stockholders. |
| EBITA | Earnings Before Interest, Taxes, and Amortization; used to analyze operational efficiency. |
| EBITDA | Earnings Before Interest, Taxes, Depreciation & Amortization; proxy for “operating” cash flow. |
| Economic Profit | Profit generated above a pre-determined hurdle rate; positive value creates shareholder value. |
| Emergency Fund | Savings fund for unplanned expenses or emergencies. |
| Emerging Market ETF | Invests in less economically developed countries’ securities with high growth prospects. |
| Enterprise Value | Measures true market value of a company including creditors and shareholders, after cash. |
| Enterprise Value to EBITDA Ratio | Relates operating cash flow (EBITDA) to determine economic value based on ability to generate EBITDA. |
| Enterprise Value to Sales Ratio | Measures economic value applied to sales (revenues). |
| EPS (Earnings per Share) | Measures company’s profitability; net profit divided by outstanding shares. |
| Equity ETFs | Invest in stocks of companies independent of size, sector, valuations. |
| Europe ETF | Invests in European countries’ companies with various strategies. |
| European Options | Options that can only be exercised/assigned on expiration. |
| Ex-dividend date | Last day to buy and receive next dividend payment. |
| Exclusions | Financial, dividend, home sales, balance sheet exclusions in finance. |
| Exercise | Buyer’s right to exercise an option to buy/sell stocks. |
| Expected return | Anticipated profit/loss in a given timeframe; based on historical data. |
| Expense Ratio | Percentage of fund’s assets for management, legal, and auditing fees. |
| Expiration Date | Date on which the option expires. |
| Exposure | Portfolio’s ownership of different securities/types of securities. |
➤ F-G
| Term | Description |
|---|---|
| FDIC Insurance | Protects deposit accounts in the event of bank insolvency; covers up to $250,000 per depositor, per insured bank. |
| Fees and Expenses | Charges by ETF managers for buying, holding, or selling ETF shares. Typically low for passively managed ETFs. |
| Fiduciary Duty | Legal obligation to act in the best interest of another party; common in investment advisory relationships. |
| Fill or Kill Order | Order to execute a transaction immediately at the market or specified price; canceled if not filled quickly. |
| Financial Materiality | Fact/event impacting investor decisions; requires public disclosure of material events under GAAP. |
| Financials ETFs | Invest in stocks under financials sector: banking, investment management, insurance, etc. |
| Financials Stocks | Provide banking and related financial services; cyclical and perform well during upswings. |
| Fiscal Policy | Manipulation of government spending and taxes to influence economic conditions. |
| Forbearance | Temporary postponement of loan payments to give borrowers financial relief. |
| Form ADV | Disclosure form investment advisors file with regulatory authorities; outlines fees, services, conflicts. |
| Free Cash Flow Yield | Yield investors expect for economic value; indicates company’s ability to sustain operations. |
| Frontier Market ETF | Invests in least economically developed nations; high risk and high growth prospects. |
| Frontier Markets | Invest in securities from least developed nations; high risk and high growth prospects. |
| FUD (Fear, Uncertainty, and Doubt) | Spreading negative information about crypto or market; selling due to negative sentiment. |
| Fund Flows | Net investor cash inflows/outflows to/from an ETF; indicates interest in an ETF. |
| FX ETFs | Track single or basket of currencies, analyze macroeconomic factors for investment decisions. |
| Gains | Increase in value or profit from selling property or assets; can be net, gross, realized, unrealized gains. |
| Gamma | Change in delta for $1 change in underlying price in options trading. |
| Global ETF | Diversify holdings across global geographies; offers exposure to both developed and emerging/frontier markets. |
| Greeks | Options Greeks measure factors affecting option price: delta, gamma, theta, vega, rho. |
| Gross Domestic Product (GDP) | Measures total value of a country’s goods and services produced in a specified timeframe. |
| Growth | Growth stocks have above-average future growth; typically earlier-stage companies. |
| Guaranteed Funds | Investment products offering guaranteed minimum return upon maturity, often offered by insurance companies. |
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➤ H-J
| Term | Description |
|---|---|
| Hardship Withdrawals | Special early withdrawals allowed from deferred elective plans; IRS permits for immediate financial needs. |
| Hash | Cryptographic output of a hash algorithm; fixed alphanumeric string from data input. |
| Headline Inflation | Measures price change of goods/services in a fixed basket; raw inflation figure reported by BLS. |
| Healthcare ETFs | Invest in stocks under healthcare sector providing medical services, equipment, insurance, etc. |
| Healthcare Stocks | Provide medical services, equipment, insurance, etc.; non-cyclical sector. |
| Hedge Fund | Pool investor capital, use sophisticated strategies to beat average returns; riskier than mutual funds. |
| Hedging | Strategy to limit financial risk by investing in opposing securities; mitigates losses. |
| High Dividend Yield ETFs | Invest in stocks of companies with consistent dividend payments; generate returns from dividends. |
| High Yield Bond ETFs | Invest in high-paying, low-rated bonds; offer higher yields due to higher default risk. |
| Historical (Realized) Volatility | Measures stock price fluctuations during a given time period. |
| Hit the Bid | Sell at the current market price offered by a buyer. |
| HODL (Hold On for Dear Life) | Slang term in crypto communities for holding onto assets regardless of market fluctuations. |
| House Price Index | FHFA index tracking home prices using repeat-sales data; indicator of pricing trends. |
| Hyperinflation | Rapid, uncontrollable price spikes across an economy; usually associated with excessive money printing. |
| IAPD: Investment Adviser Public Disclosure | Database with registration, documents of investment professionals; helps verify advisors’ status. |
| In-the Money (ITM) Option | Call option with strike price below stock price; Put option with strike above stock price. |
| Industrial Stocks | Operations in aerospace, manufacturing, construction, etc.; reliant on supply-demand dynamics. |
| Inflation-Protected Bond ETFs | Invest in bonds that protect yield from inflation; guarantee real returns. |
| Information Technology Stocks | Operate in electronics, software, computers, tech services; historically trade at higher multiples. |
| Initial Coin Offering (ICO) | Crowdfunding method for cryptocurrency projects, similar to an IPO. |
| Inverse OPEC | Proposed coalition to reduce global energy prices by promoting green energy and reducing fossil fuel dependence. |
| Investment Committee | Group managing an entity’s investments; selects strategies, monitors performance, and reports. |
| Investment Consultant | Financial professionals providing investment-related services; help with strategies, monitoring, and planning. |
| Investment-Grade Bond ETFs | Invest in bonds with low risk of default; carry high credit ratings. |
| Investor Sentiment | Attitude of investors toward securities or market; revealed by price movements. |
| Iron Condor | Options strategy involving call and put spreads; profit from stock staying between strikes. |
| Jobless Claims | Measure individuals filing for unemployment benefits weekly; leading economic indicator. |
| Jobs Report | Employment data released by BLS monthly; includes unemployment, wage changes, etc. |
➤ L-M
| Term | Definition |
|---|---|
| Large-Cap ETFs | ETFs investing in stocks of large companies with a market cap greater than $10 billion, offering exposure to notable global companies. They’re considered safer and more liquid than mid-cap and small-cap ETFs. |
| Large-Cap Stocks | Companies with market caps exceeding $10 billion, known for stability, financial transparency, and higher dividend likelihood. Generally less volatile than smaller counterparts, but with potentially slower growth. |
| Latin America ETF | ETFs investing in securities from Latin American countries, offering exposure to emerging markets. High growth prospects but vulnerable to geopolitical and currency risks. |
| Limit Order | An order specifying buying below or selling above a certain price. Traders use this to control execution price. |
| Liquidation | The process of converting illiquid assets into liquid ones, often cash. Investors may liquidate for portfolio changes or to capture gains. Also refers to dissolving a business during bankruptcy or insolvency. |
| Liquidity Risk | The risk of being unable to convert assets to cash quickly without significant loss. Includes inability to meet debts, market inefficiency, and affecting asset prices. |
| Loan ETFs | ETFs investing in bank loans, providing retail investors access to floating-rate assets typically available to institutions. Can also act as inflation protection. |
| Long Call | An option strategy profiting from stock price increases above the call strike plus premium paid. Low risk. |
| Long Call Butterfly | A bullish strategy involving 2 short calls at a middle strike and 1 long call each at lower and upper strikes. Profitable if stock closes at middle strike on expiration. Implemented in high volatility with bullish view. Low risk. |
| Long Call Spread | Buying 1 call at lower strike and selling 1 call at higher strike with the same expiration. Profits if stock rises above lower strike plus premium paid. Low risk. |
| Long Put | An option strategy profiting from stock price declines below put strike plus premium paid. Low risk. |
| Long Put Butterfly | A bearish strategy involving 2 short puts at a middle strike and 1 long put each at lower and upper strikes. Profitable if stock closes at middle strike on expiration. Implemented in high volatility with bearish view. Low risk. |
| Long Put Spread | Buying 1 put at higher strike and selling 1 put at lower strike with the same expiration. Profits if stock falls below higher strike minus premium. Low risk. |
| Long Risk Reversal | Buying 1 call at higher strike and selling 1 put at lower strike with the same expiration. Profitable if stock rises above higher strike. High risk. |
| Long Straddle | Buying 1 call and 1 put at same strike with same expiration. Profits from volatility increase. Can be both bullish and bearish. Low risk. |
| Long Strangle | Buying 1 out-of-the-money call and 1 out-of-the-money put with same expiration. Profits from volatility increase. Can be both bullish and bearish. Low risk. |
| Long/Short ETFs | ETFs using long/short strategy to profit from stock price movements. Invest in appreciating and depreciating stocks. May maintain market neutrality. |
| Losses | Decrease in asset value or financial deficit from selling an asset below its purchase price. Can be realized, unrealized, or recognizable losses. |
| Low Volatility | Investment style focusing on low volatility stocks that historically outperform during market downturns. Associated with sectors like consumer staples, defense, and utilities. |
| Materials Stocks | Companies in the materials sector dealing with raw materials like chemicals, mining, and packaging. Demand is influenced by industrial and commercial customers, leading to volatile economic cycles. |
| Maturity | The end date of an investment or transaction, when principal and interest might be repaid. Applies to various financial instruments. |
| Merger | A voluntary agreement where two companies merge into one new entity. Different types like congeneric, conglomerate, and horizontal mergers. Affects competition and company culture. |
| Micro-Cap ETFs | ETFs investing in very small companies with market caps below $150 million. High risk, volatility, and low liquidity due to limited analyst coverage. |
| Mid-Cap ETFs | ETFs investing in mid-sized companies with market caps between $2 billion and $10 billion. Riskier than large-caps but less than micro-caps. Expected to increase profits and market share. |
| Middle East & Africa ETF | ETFs investing in securities from the Middle East and Africa regions, including countries like Egypt, Israel, and Turkey. Offers exposure to oil-rich countries and precious metals in Africa. |
| Mining | The process of adding and verifying transactions on a blockchain using substantial computer power and energy. Miners are rewarded with coins for their efforts. |
| Mixed Economy | Economic system combining elements of different models (e.g., free market and command economies). Balances private property with societal goals. Examples include the U.S., Canada, and U.K. |
| Momentum | Investment strategy focusing on stocks that have recently outperformed peers. Believes stocks trending upwards will continue to do so. Can be volatile. |
| Mortgage Rate | Interest rate on a mortgage, presented as a percentage of the home loan’s value. Influenced by market conditions and borrower’s situation. |
| Mortgage Refinance | Replacing an existing mortgage with a new one, often for lower rates, shorter terms, or accessing home equity. |
| Moving Average | Average price of a security over a defined time period. Commonly 50, 100, or 200 days. |
| Multi-Asset Buy-Write ETFs | ETFs using a buy-write strategy, simultaneously buying securities and selling call options. Aiming to generate income. Profitable if securities stay flat or decline. |
| Multi-Asset Global Macro ETFs | ETFs using macroeconomic and geopolitical analysis to make investment decisions. Adjusts asset allocations based on conditions. |
| Multi-Asset Long/Short ETFs | ETFs using long/short strategy, profiting from price changes in selected securities. Maintains market neutrality or uses pair trading. |
| Multi-Asset Volatility ETFs | ETFs holding mixed assets to achieve desired volatility levels. Outperform during market downturns. |
| Municipals Fixed Income ETFs | Fixed income ETFs investing primarily in tax-exempt municipal bonds issued by states and localities. Beneficial for after-tax income. Invests in general obligation and revenue bonds. |
➤ N-P
| Term | Definition |
|---|---|
| National Debt Ceiling | The national debt ceiling limits how much money the U.S. government can borrow to satisfy its legal and financial obligations. Raising the ceiling doesn’t authorize funding new projects; it permits financing existing obligations made by past elected officials. Failure to adjust or suspend the ceiling could lead to the U.S. government defaulting on its debt, lowering its credit rating, and increasing debt costs. |
| Natural Gas Futures | Natural gas futures are standardized contracts that oblige the buyer to purchase a specific amount of natural gas at a predetermined date and price. Producers and consumers use these contracts to manage price risks. Speculators often trade futures to profit from price swings, but this also exposes portfolios to substantial loss risks due to the market’s volatility. |
| Natural Resources ETFs | Natural resources ETFs invest in stocks related to mining, producing, or distributing natural resources, including mining, forestry, and oil exploration companies. There are majors and juniors types. These ETFs are non-cyclical and offer dividend yields. |
| Net Deposits | Net deposits represent the difference between total deposits and withdrawals in a financial account. Positive net deposits indicate more deposits than withdrawals, while negative net deposits indicate more withdrawals than deposits. |
| Net Income | Net income is another term for after-tax profit. |
| News Buzz Score | News buzz scores indicate changes in news volume’s standard deviations, serving as risk alert indicators. A higher buzz score indicates higher volatility due to news volume fluctuations. |
| News Sentiment Score | News sentiment scores measure bullishness and bearishness of equity prices based on the positivity and negativity of news corpus. They are defined on a scale of -5 to 5, with -5 and 5 being extremely bearish and bullish indicators, respectively. |
| News Volume Score | News volume is the count of news articles about a stock published and parsed on a given day. High news volume can indicate trend breakouts or reversals. |
| NFT | NFTs (non-fungible tokens) are unique crypto assets minted on blockchains like Ethereum. They represent ownership of items like art, music, tweets, or real estate. NFTs can increase market efficiency and reduce fraud risk by tokenizing assets. |
| Noncompete | A noncompete is a legal contract that prevents employees from competing with an employer during or after employment. It prohibits working for competitors, in certain industries, or regions for a specified timeframe. These contracts reduce competition and turnover but vary in legality and enforceability by state. |
| North America ETF | North America ETFs invest in securities from the U.S., Canada, and/or Mexico. They are suitable for investors who believe in the region’s future outlook. These ETFs limit exposure to geopolitical risks but lack geographic diversification, increasing exposure to U.S.-specific risks. |
| OPEC | OPEC is a cartel of 13 major oil-exporting nations, regulating global oil supply and prices. It aims to stabilize prices and offers member states technical and economic aid. However, OPEC’s influence has raised concerns about its impact on global stability versus profits. |
| Operating Margin | Operating margin measures a company’s operating income relative to net revenues. It gauges profitability, indicating how much profit a company generates for every unit of revenue received. |
| Option At-the Money | An option is ATM when its strike and stock price are the same. |
| Option Event Variance | Option event variance measures the expected event percentage move in an underlying asset based on implied volatility in a given option. It helps determine if implied volatility is cheap or expensive before an event. |
| Option Out-of-the-Money | An OTM Call option’s strike price is above the stock price, while an OTM Put option’s strike price is below. |
| Options | Options are contracts that give a buyer the right, but not obligation, to buy or sell a specified number of shares at a predetermined price within a designated time. Each contract represents 100 shares. |
| PEG ratio | The PEG ratio adjusts the P/E ratio for earnings growth over the measured time. It helps evaluate valuation by considering growth expectations. |
| Performance | ETF performance is assessed based on historical returns, influenced by underlying holdings. It can be measured excluding or including fees to assess investment viability. |
| Personal investment strategy | A personal investment strategy is a plan informed by goals, risk tolerance, and other factors. It guides investment decisions, adapting as needs and circumstances change. |
| Portfolio | A portfolio is a collection of financial assets, like cash, stocks, bonds, etc. It’s managed in various accounts to generate returns based on risk tolerance and financial goals. |
| Preferred Stock ETFs | Preferred stock ETFs hold preferred stocks that receive dividends before common shareholders, offering greater security during liquidation. These ETFs can hold preferred stocks from various sectors or strategies. |
| Premium | Premium is the price paid or received for buying or selling an option. |
| Price-to-Earnings Ratio | The P/E ratio reflects the price investors are willing to pay for each unit of earnings per share. |
| Principal risks (business) | Principal business risks encompass market, credit, operational, liquidity, and insurance risks. These major risks affect business operations and profits. |
| Principal risks (financial system) | In the financial system, principal risk refers to the potential for a failing institution to cause a domino effect, threatening overall financial stability. |
| Principal risks (investing) | In investing, principal risk involves losing capital due to investment declines or failed transactions. It varies by asset type, with bonds and CDs carrying less risk compared to stocks and commodities. |
| Put Spread Collar | A Put Spread Collar involves buying a higher strike put, selling a lower strike put, and selling a higher strike call. It’s profitable when the stock trades below the long put strike plus or minus the premium paid or collected. It’s suitable for bearish views but carries high risk. |
➤ Q-S
| Term | Definition |
|---|---|
| Quantum Computing | Quantum computing employs quantum mechanics to solve complex problems that classical computers cannot handle. It uses quantum bits (qubits) to process information, offering exponential processing power. Quantum computers require extreme conditions and have potential applications in various fields. |
| Real Estate ETFs | Real estate ETFs invest in stocks related to the real estate sector, including residential, commercial, or industrial real estate. They may also include real estate investment trusts (REITs) and are impacted by interest rate changes that affect real estate supply and demand. |
| Real Estate Stocks | Stocks in the real estate sector involve companies operating in residential, commercial, or industrial real estate. Real estate investment trusts (REITs) are a common investment option in this sector. Interest rate changes influence these stocks by affecting real estate demand. |
| Recession Proof | Recession-proof assets, companies, or industries are considered resistant to economic downturns. They may thrive during recessions while potentially showing slower growth during economic upturns. Examples include essential services like healthcare and stable industries like utilities. |
| Reinvestment Risk | Reinvestment risk refers to the possibility that reinvesting an asset’s cash flows may yield lower returns due to falling interest rates. It primarily affects fixed-income assets like bonds, especially callable bonds, and can be reduced through different investment strategies. |
| Relative Strength Index (RSI) | The Relative Strength Index (RSI) evaluates the speed and magnitude of stock price movements by comparing recent gains and losses over a specified time frame. It helps identify potential overbought or oversold conditions in a stock’s price. |
| Renewable Energy | Renewable energy comes from sustainable sources such as solar, wind, and hydropower. It offers environmental benefits and economic advantages, as it is cleaner and more scalable than fossil fuels. It has applications in various sectors and attracts investor interest. |
| Return on Equity | Return on equity measures how efficiently a company generates returns for its shareholders based on the amount of equity invested. It is calculated by dividing net income by shareholder equity. |
| Return on Invested Capital | Return on invested capital (ROIC) assesses a company’s value generation based on its total capital, including both credit and equity investments. It is calculated by dividing net profit after taxes by total capital. |
| Rho | Rho refers to the change in option price relative to changes in the risk-free interest rate. |
| Russell 2000 Index | The Russell 2000 Index tracks the performance of small-cap U.S. stocks and is used as a benchmark for small-cap investments. It includes smaller and potentially more volatile stocks than larger indexes like the S&P 500. |
| Satoshi | A Satoshi is the smallest unit of Bitcoin, representing 1/100,000,000th of a Bitcoin. It is named after Satoshi Nakamoto, the creator of Bitcoin. |
| SEC-Registered Investment Advisor | An SEC-registered investment advisor offers investment advice for a fee. Larger advisors must register with the SEC and adhere to specific standards, including disclosing services, fees, conflicts of interest, and acting in clients’ best interests. |
| Sectors | Sectors are groups of companies with similar business activities or services. In investing, sectors help analyze different segments of the economy, such as energy, technology, healthcare, and financial services, based on common characteristics. |
| Securities and Exchange Commission (SEC) | The SEC is a federal agency overseeing securities markets, protecting investors, regulating brokerages, and enforcing securities laws. It ensures transparency, fairness, and integrity in the financial markets. |
| Shallow Recession | A shallow recession involves a relatively mild contraction in economic growth, resulting in moderate declines in factors such as industrial production, retail sales, and consumer spending. It contrasts with deep recessions characterized by severe contractions. |
| Sharpe Ratio | The Sharpe Ratio assesses risk-adjusted returns by comparing an investment’s excess returns to its volatility. It indicates how effectively an investment compensates for the risk taken to achieve higher returns. |
| Short Call | A short call involves selling a call option, profiting if the stock price falls below the strike price. It is suitable for high-volatility environments when an investor anticipates a stock decline. |
| Short Call Spread | A short call spread involves selling a lower strike call and buying a higher strike call, aiming to profit if the stock price falls. It offers a defined risk profile and is suitable when expecting a stock decline. |
| Short Put | A short put involves selling a put option, profiting if the stock price stays above the strike price. It’s suited for high-volatility environments when an investor expects the stock to rise. |
| Short Put Spread | A short put spread involves selling a higher strike put and buying a lower strike put, aiming to profit if the stock price stays above a certain level. It offers a defined risk profile and is suitable when anticipating a stock rise. |
| Short Risk Reversal | A short risk reversal involves selling a higher strike call and buying a lower strike put, profiting if the stock falls below a certain level. It’s a bearish strategy and offers a risk/reward profile similar to shorting stock. |
| Short Straddle | A short straddle involves selling a call and a put at the same strike, profiting from low stock price movement. It’s suitable when anticipating reduced volatility and aims to benefit from stable stock prices. |
| Short Strangle | A short strangle involves selling an out-of-the-money call and put at the same strike, profiting from minimal stock price movement. It’s suited for low volatility environments and aims to capitalize on stable stock prices. |
| Sinking Fund (Corporate Finance) | In corporate finance, a sinking fund is set up to save money for future expenses or debt repayments. It may be used to buy back bonds early or cover obligations at maturity, enhancing a company’s credit risk and lowering the cost of debt. |
| Sinking Fund (Personal Finance) | In personal finance, a sinking fund holds savings for specific future expenses like gifts, vacations, or home remodels. It allows individuals to plan for large expenses without impacting their monthly budgets, distinguishing it from emergency funds. |
| SIPC Insurance | SIPC insurance protects investors from insolvent brokerages, covering up to $500,000 per account type. It safeguards against brokerage failure, securities theft, and unauthorized trading, but not against a security’s loss of value. |
| Size and Style ETFs | Size and style ETFs invest in stocks based on criteria such as market capitalization and valuation. They may focus on small, mid, or large-cap stocks and value, growth, or blended stocks, offering different risk-reward profiles. |
| Skew | Skew measures the implied volatility difference between out-of-the-money puts, calls, and at-the-money options, helping identify shifts in market sentiment based on supply and demand changes in these options. |
| Small-Cap ETFs | Small-cap ETFs invest in stocks with market capitalization typically between $300 million and $2 billion. They often include companies with strong growth potential but higher volatility and are influenced by market cycles. |
| Small-Cap Stocks | Small-cap stocks belong to companies with market capitalization between $300 million and $2 billion. They encompass both young growth companies and established firms, offering potential for high returns along with higher risks and volatility. |
| Sovereign Fixed Income ETFs | Sovereign fixed income ETFs primarily invest in government-issued debt securities. These securities can be in domestic or foreign currency and offer exposure to the sovereign debt market. |
| Spreads Fixed Income ETFs | Spreads fixed income ETFs allocate holdings based on bond yield spreads, measuring the risk differential between different debt instruments. They offer an approach to capture potential yield spreads in bond markets. |
| Stagflation | Stagflation refers to a rare economic condition of simultaneous high inflation, slow growth, and high unemployment. It poses challenges for policy makers as addressing one factor may worsen another, and it may result from various economic shocks. |
| Standard Deviation | Standard deviation measures the dispersion of data points from their mean, indicating an asset’s historical volatility. It helps assess an asset’s risk by quantifying its price fluctuations over time. |
| Standard Tax Deduction | The standard tax deduction is a portion of income that is not taxed by the government. Taxpayers can claim this deduction or itemize their deductions, with amounts varying based on factors such as filing status, dependents, and age. |
| Stimulus Check | A stimulus check is a government payment made to taxpayers to stimulate economic activity. It aims to boost consumer spending and confidence during economic downturns. Eligibility is determined by factors like income, filing status, and dependents. |
| Stock | A stock represents ownership in a company, with each share offering fractional ownership. Stockholders have the potential to earn dividends and benefit from the company’s growth. |
| Stock Halt | A stock halt occurs when trading of a security is temporarily paused by stock exchanges or regulatory bodies. It can be triggered to address volatility, imbalances, or other market-related concerns, impacting the affected stock’s trading. |
| Stock Split | A stock split divides existing shares into new ones to lower the per-share price while maintaining market capitalization. It aims to increase affordability, liquidity, and potential price growth, often used to attract investors and fit index criteria. |
| Strategy ETFs | Strategy ETFs follow specific investment strategies such as dividend-focused or alpha-seeking approaches. These ETFs may have higher expense ratios due to their specialized strategies that guide investment decisions. |
| Strike Price | The strike price is the predetermined price at which an option contract can be exercised to buy or sell the underlying asset. It plays a key role in determining the profitability of an options trade. |
| Structural Unemployment | Structural unemployment arises when a mismatch exists between the skills demanded by the economy and those possessed by workers. It may result from technological shifts, globalization, and other structural changes in the job market. |
| Student Debt Moratorium | A student debt moratorium involves temporary relief from student loan payments and interest accrual. It is often implemented during economic crises to alleviate financial burdens on borrowers. |
| Sub Transfer Agency Fee (Sub T/A fee) | Sub-transfer agency fees are charges on retirement plan statements when investment funds compensate third parties for services related to shareholder tracking and communication. These fees can impact overall plan costs for investors. |
➤T-Z
| Term | Definition |
|---|---|
| Take the Offer | To “take the offer” means to buy a security at the market price that someone is willing to sell it for. |
| Target Date ETFs | Target date ETFs are designed for long-term investors aiming to grow their portfolio over a specific investment horizon. These ETFs are often tailored for retirement savings, adjusting asset allocation as they approach a designated target date. |
| Target Date Funds | Target date funds simplify long-term investing goals like retirement planning. They set a time horizon and adjust asset allocation to grow and secure the portfolio value by the target date. They can be actively or passively managed. |
| Target Outcome ETFs | Target outcome ETFs, also known as Defined Outcome ETFs, limit potential gains and losses using a multi-asset allocation strategy. They suit investors focused on capital preservation and often track an index. |
| Target Risk ETFs | Target risk ETFs use a multi-asset strategy to achieve desired risk profiles, labeled as conservative, moderate, or aggressive. Some use a “glide path” to adjust risk exposure over time while maintaining a consistent level of risk. |
| Tax Bracket | Tax brackets categorize income into ranges, each taxed at a specific rate. Different filing statuses have varying dollar ranges for tax brackets. They determine the amount of income subject to different tax rates. |
| Tax Credit | Tax credits directly reduce tax bills by the credited amount. They are more favorable than deductions, offering dollar-for-dollar reductions. Refundable credits provide refunds even if no tax is owed. Nonrefundable credits don’t go below $0 in taxes. |
| Taxable account | A taxable account follows regular IRS tax rules and includes brokerage, savings, CD, and money market accounts. Unlike retirement accounts, they lack special tax incentives and penalties, but taxes are owed on any earnings. |
| Technical analysis | Technical analysis involves analyzing historical price and volume data to predict future prices and volatility. It’s used to evaluate investments and identify trading opportunities using charts and patterns. |
| Technology ETFs | Technology ETFs invest in tech-related stocks, including electronics, software, and IT services. They often trade at higher valuations due to growth potential associated with technology companies. |
| The Great Depression | The Great Depression was a severe economic depression from 1929 to 1941, marked by stock market crash, production decline, banking failures, and high unemployment. It prompted significant changes in economic theory, policy, and regulation. |
| The Great Resignation | The Great Resignation is the increased job resignations during the Covid-19 pandemic due to factors like work-life balance, appreciation, and health concerns. It led to a labor market shift, impacting retirement and childcare. |
| Theme ETFs | Theme ETFs focus on specific concepts like green energy or social responsibility. They have specialized strategies and higher fees compared to other ETFs. |
| Theta | Theta measures option price change due to time decay as expiration approaches. It quantifies how much an option’s value decreases over time. |
| Treasury ETFs | Treasury ETFs invest in US government debt securities, offering safety and stability. They include Treasury bills, notes, bonds, and TIPS, and are exempt from state and local income taxes. |
| Unemployment Rate | The unemployment rate indicates the percentage of the labor force without a job. It’s a lagging indicator and can rise during recessions. |
| US Broad Market ETF | US Broad Market ETFs invest across US companies regardless of size, sector, or valuation. They’re good for investors optimistic about the US economy while limiting global risks. |
| US Consumer ETFs | US Consumer ETFs invest in US companies related to consumer goods and services. They include consumer discretionary and staple sectors and respond to changes in consumer behavior and sentiment. |
| US Dividend ETFs | US Dividend ETFs invest in US companies with consistent dividend payments. They generate returns from dividend income and suit risk-averse investors seeking passive income. |
| US Growth ETFs | US Growth ETFs invest in US companies with high growth potential, usually with high P/E ratios and strong revenue growth. They target capital gains rather than dividends. |
| US Large-Cap ETF | US Large-Cap ETFs invest in large US companies with market capitalization over $10 billion. They offer exposure to well-established businesses but may lack geographical diversification. |
| US Low Volatility ETFs | US Low Volatility ETFs invest in stable stocks with low price fluctuations. They reduce risk exposure and diversify holdings across sectors. They suit risk-averse investors. |
| US Momentum ETFs | US Momentum ETFs invest in US stocks trending upwards. They may also short sell stocks trending downwards. They carry higher volatility and target investors expecting trends to continue. |
| US Multi-Factor SmartBeta ETF | US Multi-Factor SmartBeta ETFs invest in stocks using factor-based strategies to outperform traditional indexes. They employ active management to adjust position sizes based on changing factors. |
| US SMID-Cap ETFs | US SMID-Cap ETFs invest in mid-cap, small-cap, and micro-cap US companies. They offer higher growth potential than large-cap stocks, albeit with higher risk. |
| US Tech ETFs | US Tech ETFs invest in US technology sector stocks, including electronics, software, IT services, and more. They tend to have higher valuations and volatility due to growth prospects. |
| Utilities ETFs | Utilities ETFs invest in utility sector stocks providing services like electric, gas, and water. They are non-cyclical and often generate returns through dividend payments. |
| Valuation | Valuation compares a stock’s price to its earnings and helps investors assess if a stock is overpriced or underpriced. |
| Value | Value measures a stock’s valuation compared to a preset peer group, often related to price-to-earnings ratios. It’s used in value investing to capture excess returns from undervalued stocks. |
| Vega | Vega measures how option price changes due to volatility fluctuations. It indicates the impact of changes in implied volatility on an option’s price. |
| VWAP | VWAP stands for volume-weighted average price and calculates the average price based on traded volume during a period. |
| Z-Score | Z-Score measures how many standard deviations an element is from the mean. It’s used to identify and quantify risk levels and premiums. |
