The Useful Money Dictionary (Updated Regularly)

Last updated on August 22, 2023

Welcome to the (confusing) world of finance.

Where understanding the lingo is just as important as managing your money. I know that financial terms can sometimes sound like a foreign language (at least to me).

But don’t worry, I’m here to break it down for you. Think of this as your personal money dictionary, where every complex term is explained in a simple and straightforward manner.

I’ll keep this updated as time goes by.

If you just learn a few new terms every day, then you’ll be speaking financial fluently. And be on your way to improving your money game.

I’m gonna explain everything simply so you won’t get lost in translation.

So let’s get started, shall we?


A

Asset: Something you own that has value, such as a house, stock, or car.

Annuity: A type of investment that provides a steady stream of income, often used for retirement.

APR (Annual Percentage Rate): The cost of borrowing money, expressed as a yearly rate.

Appreciation: An increase in the value of an asset over time.

Assets Under Management (AUM): The total value of assets managed by a financial company.

Adequate Insurance Coverage: Having enough insurance to protect you and your assets in case of an accident or loss.

Adjustable Rate Mortgage (ARM): A type of mortgage where the interest rate can change over time.

Allowance: A set amount of money given to someone for a specific purpose, such as spending money or savings.

Arbitrage: Buying and selling assets in different markets to take advantage of price differences.

Asset Allocation: The process of dividing investments among different asset classes, such as stocks, bonds, and real estate.

Amortization: The process of paying off a loan in equal installments over a period of time.

Automatic Investment Plan: An arrangement to regularly invest a set amount of money into a financial product.

Average Cost Basis: The average price paid per unit of an investment, used to calculate capital gains or losses.

Average Daily Balance: The average amount of money in a bank account over a period of time, used to calculate interest.

Awareness: Knowledge about personal finance and how it affects one’s financial well-being.

Accrued Interest: Interest that has accumulated on an investment or loan but has not yet been paid or received.

Accumulation Phase: The stage in a retirement savings plan where money is being saved and invested.

Active Management: The process of actively buying and selling investments to try and beat the market.

Aggregate Demand: The total demand for goods and services in an economy at a given time.

Alternative Investment: An investment that is not a traditional stock, bond, or cash investment, such as real estate or commodities.

Appraisal: A professional assessment of the value of a property or asset.

Arrears: A debt that is overdue and has not been paid.

Ask Price: The price a seller is willing to accept for a security or asset.

Asset Class: A group of similar investments, such as stocks, bonds, or real estate.

Average: A statistic that summarizes a set of numerical values by finding their arithmetic mean.

Account: A collection of investments held by an individual or institutional investor.

Alpha: A measure of the excess return of an investment relative to the benchmark it is compared to.

Annual Report: A report issued by a publicly traded company every year that provides information about its financial performance.

Average True Range (ATR): A measure of volatility in the stock market.

Asset Price: The price of a stock, bond, or any other financial instrument.

Average Volume: The average number of shares traded in a stock over a specific period of time.

All-Time High: The highest price a stock has ever reached.

Ask Size: The number of shares a seller is willing to sell at the ask price.

Active Trading: The practice of buying and selling stocks frequently to take advantage of short-term price movements.


B

Balance Sheet: A financial statement that reports a company’s assets, liabilities, and equity at a specific point in time.

Bankruptcy: A legal process where a company or individual is unable to repay its debts.

Bond: A type of investment that represents a loan made to a company or government, with the bondholder receiving periodic interest payments.

Bear Market: A market characterized by declining stock prices and a negative outlook for the future.

Beta: A measure of the volatility of a stock relative to the overall market.

Bid Price: The highest price a buyer is willing to pay for a stock.

Blue Chip Stock: A stock of a well-established and financially sound company with a long history of steady growth.

Bond Fund: A type of mutual fund that invests in bonds.

Bond Rating: A rating assigned by a credit rating agency that measures the creditworthiness of a bond issuer.

Breakout: A price movement of a stock that moves above a key resistance level.

Bull Market: A market characterized by rising stock prices and a positive outlook for the future.

Business Cycle: The natural fluctuations in the economy over time, including periods of growth and contraction.


C

Capital: Money used to purchase assets or start a business.

Capital Gain: The profit made from the sale of an investment, such as a stock.

Capital Structure: The mix of a company’s long-term debt and equity used to finance its operations.

Cash Flow: The amount of cash generated by a company’s operations.

Certificate of Deposit (CD): A type of deposit account with a bank that pays a fixed interest rate over a specified term.

Closed-End Fund: A type of investment company that issues a fixed number of shares that trade on an exchange.

Collateral: Assets pledged as security for a loan.

Commission: A fee charged by a broker for executing a trade.

Commodity: A physical good that is traded, such as gold or oil.

Compound Interest: Interest earned on both the principal and the interest already earned.

Consumer Price Index (CPI): A measure of the change in the price level of consumer goods and services over time.

Corporate Bond: A type of bond issued by a corporation.

Correction: A temporary downward movement in the price of a stock or market.

Credit: The ability of a person or company to borrow money.

Credit Risk: The risk that a borrower will default on a loan.

Currency: A medium of exchange, such as the U.S. dollar, used to buy goods and services.

Current Ratio: A measure of a company’s ability to pay its short-term obligations using its current assets.


D

Debt: Money owed by a company or individual.

Debt-to-Equity Ratio: A measure of a company’s financial leverage, calculated by dividing its total debt by its equity.

Default: The failure to repay a loan.

Deflation: A decrease in the general price level of goods and services.

Depreciation: A decrease in the value of an asset over time due to wear and tear, obsolescence, or other factors.

Diversification: The process of spreading investments across different assets (or asset classes) to reduce risk.

Dividend: A payment made by a company to its shareholders, usually as a portion of its profits.

Derivative: A financial contract whose value is based on, or “derived” from, the price of an underlying asset, such as a stock, commodity, or currency.

Day Trading: The practice of buying and selling financial instruments within the same day, with the goal of making profits from short-term price movements.

Default: The failure to repay a loan or fulfill a financial obligation, such as not paying a bond coupon or missing a mortgage payment.

Defined Benefit Plan: A type of retirement plan in which an employer promises a specified monthly benefit to an employee after retirement, usually based on a formula that takes into account the employee’s salary and years of service.

Debt Service Coverage Ratio (DSCR): A measure of a company’s ability to repay its debt, calculated by dividing its net operating income by its total debt service.

Discount Broker: A type of broker that charges lower fees than full-service brokers, but provides fewer services and resources to its clients.

Diversified Portfolio: A portfolio that contains a variety of investments, such as stocks, bonds, and real estate, to reduce risk and provide a balance of growth and income.

Dow Jones Industrial Average (DJIA): A stock market index that measures the performance of 30 large, publicly traded companies in the United States.

Due Diligence: The process of thoroughly investigating a potential investment or business opportunity before making a decision.

Dow Jones Industrial Average (DJIA): The DJIA is an index that tracks the stock performance of 30 large-cap companies in the United States, representing various sectors of the economy. The companies included in the DJIA are chosen based on their reputation, market share, and other criteria. The DJIA is often used as a barometer for the performance of the U.S. stock market.


E

Earnings Per Share (EPS): A measure of a company’s profitability, calculated by dividing its net income by the number of its outstanding shares of stock.

Economic Cycle: The natural cycle of expansion and contraction that an economy experiences over time, driven by factors such as consumer spending and investment.

Efficient Market Hypothesis (EMH): A theory that states that financial markets are “informationally efficient,” meaning that all relevant information is reflected in the prices of securities, making it impossible for investors to consistently achieve above-average returns.

Equity: The value of a company’s assets minus its liabilities, also referred to as shareholder equity or owners’ equity.

Exchange-Traded Fund (ETF): A type of investment fund that tracks a specific index, sector, or asset class, and can be bought and sold on an exchange like a stock.

Ex-Dividend Date: The date on which a stock trades without its next dividend payment, which is usually the day before the stock goes “ex-dividend.”

Ex-Rights Date: The date on which a stock trades without its rights to purchase additional shares, which is usually the day after the stock goes “ex-rights.”

Earnings: The amount of money a company makes, usually expressed on a per-share basis.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): A measure of a company’s financial performance that excludes the effects of financing, taxes, depreciation, and amortization.

Economic Indicator: A statistic that provides information about the current state of the economy, such as employment, inflation, or consumer spending.

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Equity: The value of a company’s assets minus its liabilities, also referred to as shareholder equity or owners’ equity.

Equity Capital: The capital that a company raises by selling shares of stock to investors.

Equity Fund: An investment fund that invests primarily in stocks, with the goal of generating capital growth over the long term.

Exchange-Traded Fund (ETF): A type of investment fund that tracks a specific index, sector, or asset class, and can be bought and sold on an exchange like a stock.

Exchange Rate: The price of one currency in terms of another currency.

Executive Stock Option: A type of stock option that is granted to executives and other key employees as a form of compensation.

Expected Return: The average return that an investor expects to receive from an investment over time.

External Auditor: An independent professional who examines and verifies a company’s financial statements to ensure their accuracy and compliance with accounting standards.

External Debt: The amount of money owed by a country to creditors outside its borders.

Extreme Market Volatility: Large and rapid fluctuations in the prices of securities, often caused by unexpected events or shifts in market sentiment.

Exchange: A marketplace where securities and other financial instruments are bought and sold.

Economic Recession: A period of economic contraction characterized by declining gross domestic product (GDP), employment, and trade.


F

Fair Market Value: The price that a willing buyer and seller would agree upon for a particular asset, in an arm’s length transaction.

Financial Advisor: A professional who provides advice and guidance to clients on financial matters, such as investment, retirement, and estate planning.

Financial Institution: An organization that provides financial services, such as banking, lending, and investment management.

Financial Leverage: The use of borrowed funds to increase the return on an investment.

Financial Model: A mathematical representation of a company or financial system, used to make projections and estimate future financial performance.

Financial Planning: The process of setting and achieving financial goals, such as saving for retirement, buying a home, or paying for college.

Financial Ratio: A comparison between two or more financial variables, used to evaluate a company’s financial health or performance.

Financial Statement: A document that provides information about a company’s financial position, such as its income statement, balance sheet, or cash flow statement.

Financial Risk: The potential for loss or damage to an investment, due to fluctuations in market conditions or other factors.

Fixed Asset: A long-term asset, such as property, plant, and equipment, that is not expected to be sold in the normal course of business.

Fixed Deposit: A type of savings account with a fixed interest rate and a set maturity date, also known as a term deposit.

Fixed Income: A type of investment that pays a fixed rate of return, such as bonds, certificates of deposit, or annuities.

Fixed Interest Rate: An interest rate that remains constant over the term of a loan or bond, regardless of changes in market conditions.

Floating Interest Rate: An interest rate that fluctuates with changes in market conditions, typically tied to a benchmark such as the prime rate or the London Interbank Offered Rate (LIBOR).

Foreign Exchange (Forex) Market: A market where currencies are traded, allowing investors to buy and sell currencies from different countries.

Foreclosure: The legal process by which a lender seizes and sells property to recover the amount owed on a mortgage loan.

Forward Contract: A type of derivative contract that allows two parties to agree on the future sale or purchase of a specific asset, at a specified price and date.

Forward Rate Agreement (FRA): A type of financial contract that sets the interest rate on a loan that will be made at a later date.

Fund Manager: An individual or organization responsible for managing a pool of investments, such as a mutual fund, pension fund, or hedge fund.

Futures Contract: A type of derivative contract that obligates the buyer to purchase a specific asset at a specified price and date in the future.

Future Value: The value of an asset or investment at a future date, taking into account any expected growth or interest.

Futures Market: A marketplace where futures contracts are traded and the prices of commodities, such as oil and gold, are determined.


G

Gross Domestic Product (GDP): The total value of all goods and services produced in a country over a certain period of time.

Gross Profit Margin: A measure of a company’s profitability, calculated as the difference between its revenue and the cost of goods sold, divided by the revenue.

Growth Stock: A stock in a company that is expected to grow at a rate higher than the average growth of the overall stock market.

Goodwill: An intangible asset that represents the value of a company’s reputation and brand name.

Guaranteed Investment Certificate (GIC): A type of low-risk investment that guarantees a set rate of return over a specified period of time.

General Partner (GP): In a limited partnership, the general partner is responsible for managing the day-to-day operations of the partnership and assumes unlimited liability for the partnership’s debts.

Gold Standard: A monetary system in which the value of a currency is tied to a fixed amount of gold.

Government Bond: A bond issued by a government, typically used to finance its spending and operations.

Green Bond: A bond that is used to finance environmentally-friendly projects and initiatives.

Gross Income: The total amount of money a person or company earns before any deductions or taxes are taken out.

Global Depository Receipt (GDR): A type of financial instrument that represents ownership of shares in a foreign company and is traded on a stock exchange.

Growth Fund: A type of mutual fund that invests in companies with high growth potential.

Guaranteed Annuity: An annuity that guarantees a set rate of return for the duration of the investment.

Gross Receipts Tax: A tax on the total amount of money a business earns, regardless of its profits or losses.

Guaranteed Minimum Pension (GMP): A minimum amount of pension that must be provided to an employee after retirement, regardless of their other pension benefits.


H

Hedge Fund: An investment fund that uses advanced strategies, such as short selling and derivatives, to generate high returns for its investors.

High-Yield Bond: A type of bond that pays a higher rate of interest compared to other bonds in the market, typically issued by companies with lower credit ratings.

Hot Money: A term used to describe funds that move quickly in and out of countries and assets, often in response to changes in interest rates or economic conditions.

Hybrid Fund: An investment fund that invests in a combination of stocks, bonds, and other assets, in order to balance risk and reward.

Hold (or hodl): A term used to describe the decision to keep an investment in your portfolio, rather than selling it.

House View: A term used to describe the collective opinion of a financial institution’s investment management team regarding the market and specific investments.

Historical Volatility: A measurement of the volatility of a security’s price over a given historical period, used as a tool to help assess risk.


I

Inflation: A measure of the overall increase in prices of goods and services in an economy over a certain period of time.

Initial Public Offering (IPO): The first time a company’s stock becomes available for public purchase, usually on a stock exchange.

Interest: The amount of money charged by a lender to a borrower for the use of money.

Interest Rate: The percentage of a loan or deposit amount that is charged as interest by the lender.

Interest Rate Risk: The risk that changes in interest rates will affect the value of a security or investment portfolio.

Intermediate-Term Bond: A type of bond with a maturity of 2-10 years.

Internal Rate of Return (IRR): A calculation used to evaluate the profitability of an investment, based on the net present value of its cash flows.

International Fund: An investment fund that invests in companies and markets outside of the investor’s home country.

Investment: The act of allocating money or capital to an asset with the expectation of generating income or capital appreciation.

Investment Grade: A rating assigned to a security indicating that it is considered to be a low-risk investment, typically given to bonds with a credit rating of BBB or higher.

Investment Horizon: The length of time an investor intends to hold an investment.

Investment Portfolio: A collection of investments held by an individual or institution, including stocks, bonds, real estate, and other assets.

Irregular Income: Income that is not received on a regular or consistent basis, such as bonuses or commission payments.

Irreversible Investment: An investment that cannot be easily sold or liquidated, such as a real estate property or a business.

Issuer: The entity or organization that issues a security, such as a stock or bond.


J

Junk Bond: A bond with a credit rating below BBB-. Junk bonds are considered high-risk and often offer higher yields to compensate for the increased risk.

Joint Venture: A business relationship where two or more companies combine resources to achieve a common goal.

Judgment: A legal ruling, typically in a civil lawsuit, ordering one party to pay a specific amount to the other.

Jobs Report: A monthly report released by the Bureau of Labor Statistics that provides data on employment, wages, and unemployment.

John Maynard Keynes: A British economist who is known for his theories on macroeconomics, including the idea that government intervention is necessary to stabilize the economy during recessions.

J-REIT: A type of real estate investment trust that operates in Japan and is listed on the Tokyo Stock Exchange.

J-Corp: A type of corporation in Japan with a legal structure similar to that of a US-style corporation.

Judgment Day: The date on which a borrower must repay a debt or face consequences such as legal action or asset seizure.


K

K-1 Form: A tax form used to report a share of partnership income, deductions, credits, and other information to the IRS.

Key Employee: A person who is considered critical to the success of a company and is often offered incentives such as stock options.

Keynesian Economics: An economic theory based on the ideas of John Maynard Keynes that emphasizes the role of government intervention in stabilizing the economy.

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Kicker: An added feature or bonus that makes a financial product, such as a bond or preferred stock, more attractive to investors.

Knowledge Capital: The accumulated knowledge and expertise of a company’s employees, which can contribute to its overall value.

KOSDAQ: The Korean Securities Dealers Automated Quotation, a stock market index in South Korea.

K-REIT: A type of real estate investment trust that operates in South Korea and is listed on the Korean Stock Exchange.

KPI (Key Performance Indicator): A metric used to evaluate the performance of a company or investment, such as sales growth or return on investment.


L

LBO (Leveraged Buyout): A type of acquisition in which a company is purchased using a significant amount of debt.

LIFO (Last In, First Out): An inventory valuation method in which the last items to be added to inventory are the first to be sold.

Limited Liability: A legal concept that limits an individual’s financial liability in the event of a business failure.

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

Long Position: A stock or financial instrument that is bought in the expectation of its price rising, allowing the holder to sell it for a profit.

Look-Through Earnings: A method of calculating the earnings of a company that takes into account the income generated by subsidiaries and investments.

Loss Leader: A product that is sold at a low price to attract customers, with the expectation that they will purchase additional, higher-priced items.

LTV (Loan-to-Value Ratio): A ratio used by lenders to determine the risk of lending money, calculated as the loan amount divided by the value of the collateral.

Leverage: The use of borrowed funds to increase the potential return of an investment.

LIBOR (London Interbank Offered Rate): A benchmark interest rate at which banks can borrow funds from one another in the London interbank market.

Lien: A legal claim against a property, used as collateral to secure a loan.

Limited Partnership: A type of partnership in which one or more partners have limited liability and one or more partners have unlimited liability.

Line of Credit: An arrangement between a lender and borrower in which the borrower can borrow up to a specified limit at any time.

Liquid Asset: An asset that can be easily converted into cash, such as cash itself or highly-liquid securities.

Liquidation: The process of selling assets to pay off debts, often as a result of a company going out of business.


M

Market Capitalization: The total value of a company’s outstanding shares of stock.

Maturity: The date when a bond or other financial product reaches its end and is due to be repaid.

Money Market: A market for short-term debt securities such as Treasury bills and commercial paper.

Mutual Fund: An investment vehicle that pools money from multiple investors to buy a diverse portfolio of stocks, bonds, or other securities.

Mergers and Acquisitions (M&A): The process of combining two or more companies into one through acquisition or merger.

Municipal Bond: A bond issued by a local government or municipality, such as a city or county, to finance public projects.

Macroeconomics: The study of the overall economy and its performance, including economic growth, inflation, and unemployment.

Margin: The amount of money an investor borrows from a broker to buy securities.

Market Order: An order to buy or sell a security at the current market price.

Moving Average: A statistical calculation that averages a set of data points over a specified number of time periods.

Market Maker: A firm or individual that acts as both a buyer and a seller of securities, making a market for a particular security.

Market Risk: The risk that the value of an investment will decline due to changes in market conditions, such as a recession or market crash.

Median: A statistical calculation that determines the middle value in a set of data.

Microeconomics: The study of individual economic behavior, such as consumer behavior and decision-making, and its impact on the economy.

Monetary Policy: The actions taken by a central bank, such as the Federal Reserve, to influence the money supply and interest rates in an economy.


N

Naked Call: A type of options trade where the trader sells a call option without owning the underlying asset.

NAV (Net Asset Value): The value of a mutual fund or exchange-traded fund (ETF) per share, calculated by dividing the total value of all the securities held by the fund by the number of shares outstanding.

Net Interest Margin: The difference between a financial institution’s interest income and interest expenses, expressed as a percentage of the interest-earning assets.

Net Worth: The value of a person or company’s assets minus their liabilities.

Net Present Value (NPV): A financial metric used to evaluate the profitability of an investment, equal to the present value of future cash flows minus the initial investment.

New Issue: A new stock or bond offering that is being sold to the public for the first time.

No-Load Fund: A mutual fund that does not charge a fee for buying or selling shares, meaning the investor does not have to pay any sales charges.

Non-Performing Loan (NPL): A loan where the borrower has failed to make interest or principal payments for a period of time.

Note: A debt security with a fixed interest rate and a specific maturity date, issued by corporations, municipalities, or the federal government.

Notional Value: The nominal or face value of an asset, liability, or derivative.

Nasdaq Composite: The Nasdaq Composite is an index that tracks the stock performance of more than 3,000 companies listed on the Nasdaq stock exchange. The companies included in the Nasdaq Composite are typically technology and growth-oriented companies, although they represent a wide range of industries. The Nasdaq Composite is often used as a benchmark for the performance of the technology sector and growth-oriented companies.


O

Option: A contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset (such as a stock, commodity, or currency) at a specified price on or before a specified date.

Outperform: To perform better than a benchmark index or a peer group of investments. An investment is said to outperform if its return is higher than the benchmark or the average return of its peer group.


P

Portfolio: A collection of investments, such as stocks, bonds, real estate, and commodities, held by an individual or institution.

Premium: The amount by which the price of an option, insurance policy, or other financial product exceeds its intrinsic value.

Profit: The amount by which revenue exceeds expenses, calculated as revenue minus expenses.

Profit Margin: A financial metric used to measure the profitability of a company, calculated as the company’s net income divided by its revenue.

Profit Maximization: The goal of maximizing the amount of profit a company can earn. This is often achieved by optimizing production, pricing, and marketing strategies.

Public Offering: The sale of securities to the public, usually in the form of stocks or bonds, through a securities exchange or over-the-counter market.

Put Option: A contract that gives the buyer the right, but not the obligation, to sell an underlying asset (such as a stock, commodity, or currency) at a specified price on or before a specified date.

P/E Ratio: A financial ratio used to evaluate a company’s stock price relative to its earnings, calculated as the company’s stock price divided by its earnings per share (EPS).


Q

Quarterly Earnings Report: A report that publicly traded companies are required to release every three months, providing an update on their financial performance for the previous quarter.

Quantitative Easing: A monetary policy used by central banks to stimulate the economy by increasing the money supply. This is often done by purchasing government bonds or other securities to inject money into the financial system.

Quant Fund: A type of investment fund that uses mathematical models and algorithms to make investment decisions, often in the context of high-frequency trading or other highly quantitative strategies.

Quantitative Analyst: A financial professional who specializes in using mathematical models and statistical analysis to make investment decisions or to assess risk.

Quantitative Trading: A type of trading that relies on mathematical models and algorithms to make investment decisions, rather than relying on traditional fundamental analysis or human intuition.


R

Rate of return: The amount of money an investment has earned or is expected to earn, expressed as a percentage of the initial investment.

Real estate: Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.

Retirement plan: A savings plan designed to provide income during retirement, often with tax benefits.

Risk: The possibility that an investment’s actual return will be different from the expected return.

Risk tolerance: The degree of uncertainty a person is willing to accept in the pursuit of potential rewards.

Roth IRA: A type of individual retirement account (IRA) where contributions are made with after-tax dollars and qualified withdrawals are tax-free.

Rule of 72: A quick way to determine how long it will take for an investment to double in value based on its rate of return (72 divided by the rate of return).

Rule of 115: A quick way to determine how long it will take for an investment to triple in value based on its rate of return (115 divided by rate of return).


S

Stock: a type of security that represents ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.

Securities: financial instruments, such as stocks, bonds, and options, that are used to raise capital or generate investment income.

Stock market: a marketplace where stocks, bonds, and other securities are bought and sold.

Stop-loss order: an order placed with a broker to sell a security when it reaches a certain price, intended to limit an investor’s loss.

Systematic risk: the risk that affects a large number of assets and is inherent in the market as a whole, such as economic recession, war, or natural disasters.

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Stocks and bonds: two of the most common types of securities that investors can use to grow their wealth.

Secondary market: the market where securities are bought and sold after they are initially offered to the public.

Short selling: a trading strategy in which an investor sells a stock they do not own, hoping to buy it back at a lower price.

Stock split: an event in which a company’s existing shares are divided into a larger number of shares, which can lead to a lower stock price.

Stock dividend: a payment made by a company to its shareholders in the form of additional shares of stock rather than cash.

S&P 500: The S&P 500 is an index that tracks the stock performance of 500 large-cap companies in the United States, representing various sectors of the economy. The companies included in the S&P 500 are chosen based on their market capitalization, liquidity, and other criteria. The S&P 500 is often used as a benchmark for the overall performance of the U.S. stock market.


T

Tax: a fee imposed by a government on income, goods, or services.

Treasury bonds: bonds issued by the federal government that pay a fixed rate of interest and mature in 10 to 30 years.

Trading: the buying and selling of securities, such as stocks, bonds, and options, with the goal of generating a profit.

Technical analysis: a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume.

Trade: an exchange of goods or securities between two parties.

Trade deficit: a situation in which a country imports more goods and services than it exports, leading to a net outflow of currency.

Trade surplus: a situation in which a country exports more goods and services than it imports, leading to a net inflow of currency.

Treasury yields: the interest rates paid by U.S. Treasury bonds of a certain maturity.

Time horizon: the length of time over which an investment is expected to be held.

Turnover rate: the frequency with which a portfolio’s holdings are bought and sold, also referred to as trading activity.


U

Unit trust: a type of investment that pools money from multiple investors to purchase a portfolio of securities, with the aim of providing diversification and professional management.

Undervalued: a stock that is believed to be trading at a price below its intrinsic value, based on factors such as earnings and assets.

Unsystematic risk: risk that is specific to a particular company or industry, as opposed to systematic risk that affects the market as a whole.

US dollar (USD): the official currency of the United States and a widely traded currency globally.

Unemployment rate: the percentage of the labor force that is without work but seeking employment.

Unrealized gain/loss: the difference between the purchase price and the current market value of a security that has not yet been sold.

Upward trend: a sustained increase in the price of a security or the market as a whole over a period of time.

US Treasury bills (T-bills): short-term debt securities issued by the U.S. government with maturities of up to one year.

Utility stock: a stock in a company that provides essential services, such as electricity or water, and is often seen as a stable and predictable investment.

Uptick rule: a regulatory requirement that states that a short sale of a security can only be made on an uptick in its price, intended to reduce volatility and protect against market manipulation.


V

Value investing: a strategy that focuses on buying stocks of companies that are believed to be undervalued, based on metrics such as price-to-earnings ratios and dividend yields.

Variable rate: a rate that changes periodically, such as an adjustable-rate mortgage or a variable-rate credit card.

Volatility: a measure of the fluctuation in the price of a security or the market as a whole over time.

Volume: the number of shares or contracts of a security that are traded in a given period of time.

Virtual currency: a digital form of currency that exists only in the virtual world and is often decentralized, such as Bitcoin.

Venture capital: a type of private equity financing provided to early-stage companies with high growth potential.

Value-added tax (VAT): a tax levied on the value added to goods and services at each stage of production and distribution.

Variable annuity: a type of annuity contract in which the payments and returns can vary based on the performance of underlying investments.

Venture debt: a type of debt financing provided to early-stage companies, typically with higher interest rates than traditional debt.

Volatility index (VIX): an index that measures the implied volatility of the S&P 500 index, often referred to as the “fear index” as it reflects market expectations for stock market volatility.


W

Wealth: the value of all the assets a person owns, minus any liabilities.

Withholding tax: a tax that is deducted from wages or investment income before it is paid to the recipient.

Working capital: the difference between a company’s current assets and its current liabilities, used to measure its ability to meet its short-term obligations.

Wealth tax: a tax on the value of a person’s assets, including investments, property, and other forms of wealth.

Wages: the payment received by an employee for the work they perform.

Write-off: a reduction in the value of an asset or liability, such as when a loan is written off as a loss by a lender.

Weighted average cost of capital (WACC): a measure of a company’s cost of capital, taking into account the relative weights of debt and equity financing.

Working day: a day on which a financial market is open for trading.

World Trade Organization (WTO): an international organization that promotes and regulates international trade.

WTI crude oil: West Texas Intermediate crude oil, a benchmark for the price of oil used by many countries around the world.


X

X-efficiency: the efficiency of a firm in using its inputs to produce output, taking into account all costs, including those associated with regulation and information asymmetry.

Xenophobia: an unreasonable fear or hatred of people from other countries, which can impact international trade and investment.

X-risk: a term used in financial and risk management to refer to events that are extremely unlikely but have the potential to cause significant harm.

X-value: a term used in real estate to refer to the estimated value of a property, based on factors such as location, size, and condition.

XBRL: eXtensible Business Reporting Language, a standard for the electronic exchange of business and financial information.

XOR: Exclusive OR, a logical operation that returns true if only one of its inputs is true, often used in financial modeling and risk management.

XROE: the return on equity for a company, calculated as its net income divided by its total equity.

X-inefficiency: inefficiency resulting from factors such as lack of competition, regulation, or information asymmetry.

X-factor: a term used to refer to an important but unpredictable or immeasurable factor that can have a significant impact on a financial outcome.


Y

Yield: the income generated by an investment, usually expressed as a percentage of the investment’s cost.

Yield curve: a graph that plots the yields of bonds with different maturities, used to assess market expectations for future interest rates.

Yield to maturity (YTM): the total return expected on a bond if the investor holds it until maturity, taking into account both the coupon payments and the change in market price.

Yield spread: the difference between the yields of two securities with similar characteristics but different credit ratings, used to measure the risk premium of one security relative to another.

Yield hunting: the practice of seeking out investments with high yields, often by taking on more risk.

Yen: the currency of Japan, often used as a safe-haven currency in times of global economic uncertainty.

Y-combinator: a startup accelerator that provides seed funding, mentorship, and support to early-stage startups.

Y2K: Year 2000, a term used to describe the potential computer-related problems that could occur as a result of the transition from the year 1999 to the year 2000.

YTD: Year-to-date, a term used to describe the performance of an investment over the current calendar year.

Yield compression: a decrease in the yield of a security, often as a result of improved market conditions or increased demand for the security.


Z

Zero-coupon bond: a bond that does not make regular interest payments, but instead is sold at a discount to its face value and pays the full face value at maturity.

Z-score: a statistical measure used to evaluate the likelihood of an event occurring, often used in financial modeling and risk management.

Zero lower bound: the situation in which a central bank’s policy rate is at or close to zero, making it difficult for the bank to stimulate the economy through conventional monetary policy.

Zonal system: a system of pricing electricity, in which prices are determined by geographic zones, with higher prices in zones with higher electricity demand or higher transmission costs.

Zero-sum game: a situation in which one person’s gain is exactly balanced by another person’s loss, often used to describe financial markets or investment strategies.

ZIRP: Zero Interest Rate Policy, a monetary policy in which a central bank sets its policy rate at or close to zero in order to stimulate economic activity.

Z-tranche: a tranche of a collateralized debt obligation (CDO) that is the first to suffer losses in the event of default, often referred to as the “equity tranche”.

Z-bond: a bond that is issued in a zero-coupon format, paying no interest but sold at a discount to its face value.

Zonal pricing: the practice of setting prices for goods or services based on geographic zones, with prices varying based on factors such as distance, cost of transport, or local market conditions.

Z-share: a type of stock that has a low priority in the event of a company’s liquidation, but may offer a higher dividend yield than other types of stock.


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