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| Investment Terms Glossary |
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Below are the terms we use in our web site therefore it is not an exhaustive list. Neither do we use rigorous academic definitions. (If you want a more complete list of definitions we suggest visiting the NYT site or Forbes. We WARN you that they are overwhelming!) To get started click this button
- 4
- 401k - a tax deferred investment account set up by your employer for you
- A
- Appreciate - to increase in value
- Asset - anything of value that you own
- Asset Allocation - how one distributes their investment dollars across the various types of assets (stocks, bonds, cash, gold, etc.)
- Asset Classes - categories of assets, such as stocks, bonds, real estate and foreign securities
- B
- Balanced - anything that is not leaning towards an extreme
- Bond - a formal contract to repay borrowed money with interest at fixed intervals.
- Broad Market Index - an index that attempts to express any of the major economic markets. For example the S&P 500 expresses 500 widely held stocks that measure the general performance of the stock market in the US.
- Broker, Brokerage - a party (broker = individual, brokerage = company) that arranges transactions between a buyer and a seller, and gets a commission when the deal is executed.
- Brokerage Account - an account with a financial company that allows you to invest in most all types of investments, especially stocks and exchange traded funds
- Buy - to trade cash for an asset
- Buy & Hold - to trade cash for an asset and then do NOTHING until you sell it
- C
- Cash - usually it means money issued by a government
- Cash position - to liquidate your investments and hold the money until you reinvest
- D
- Depreciate - to decrease in value
- Diversification - the dividing investment funds among a variety of securities with different risk so as to minimize overall risk
- Dollar Cost Averaging - a strategy of regularly investing equal dollar amounts for a period of time (such as $50 a month for 10 years) in the same investment or portfolio. This strategy results in more shares being bought when prices are low and fewer shares are bought when prices are high.
- E
- Economic Cycle - The long-term up and down movement of any economy and the indexes designed to track an economy or market.
- Employer Sponsored Retirement - any of several tax deferred investment accounts set up by your employer for you. Most common are 401k, 403b, SIMPLE, SEP and others.
- Equity - Ownership interest in a corporation in the form of common stock or preferred stock. See also security and stock.
- Equity Position - is usually the same as a "share of stock"
- Exchange Traded Fund (ETF) - an investment fund traded on stock exchanges, much like stocks. An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value.
- Expenses - a flow of cash away from you (often towards the professional money managers) which reduces your return
- F
- Financial Industry - A general designation for ALL companies and individuals who attempt to profit from the flow and management of money.
- Financial Instruments - A financial security having monetary value or recording a monetary transaction.
- Funding - the act of moving money into an investment account so that can be used to purchase various investment instruments, usually stocks, bonds, or funds.
- G
- Growth - an increase in the amount of an investment; usually used to express a more aggressive (risky) type of investment strategy
- H
- I
- Index - a formula that is claimed to express an underlying notion or concept. For example, the S&P 500 Composite Index is an index of 500 widely held stocks that measure the general performance of the stock market in the US
- Index Fund - is a way of investing money with a portfolio constructed to match or track the components of a market index with others to participate in a wider range of investments than feasible for most individual investors, and to share the costs and benefits of doing so.
- Investing - The action of buying and selling something that you expect to increase in value while you own it
- Investment - what you have when you buy something that you expect to increase in value while you own it
- Investment strategy - a particular approach or method designed to achieve your specific investment goal
- Investment vehicle - loosely, it's the thing you buy for an investment; a stock, bond, shares of funds, or whatever
- IRA, Individual Retirement Account - an IRS qualified retirement investment account, usually with taxes being deferred until retirement.
- J
- K
- L
- Liquid, Liquidate - the ability to turn your investment asset into cash
- Long - referring to an investment position of being fully invested
- Long Only- referring to an investment strategy of only being fully invested or fully in Cash
- Long & Short - referring to an investment strategy of only being fully invested or fully in invested in a Short position
- Long-term - referring to a period of time usually measured in years or even decades.
- M
- Management Costs - the fees you pay a company or individual to manage your money that you place under their control. The idea is that they know what they are doing and will increase your initial investment.
- Margin Account - an account that allows you to borrow money. Some investors borrow the money they invest (very risky) and to do so they must have a margin account. Think of it as a line of credit for investment purposes.
- Market Timing - the practice of deciding that the general trend of a particular market is heading up or down
- Money managers, professional - people who get paid to manage your money regardless of how well they perform
- Mutual Fund - a popular investment instrument where a large number of small investors pool their investments together and depend upon a profession money manager to then manage their investments as a whole
- Mutual Fund Account - an account with a financial company that allows you to invest in mutual funds
- N
- Net asset value - the total value of all the investments you have in a investment vehicle or under management with a professional. It is usually used to calculate their fees.
- O
- On-line - to be completely accessible via the Internet using a common browser which allows you to manage your accounts from anywhere via your computing device.
- On-line broker - because of the way the selling of investment vehicles is regulated the most common way to buy and sell is through a company known as a brokerage or broker. They are the middle men. Some brokers provide a web site for your convenience which usually comes with discounted prices. These are "online brokers"
- P
- Portfolio - a collection of specific investment vehicles, often in different asset classes
- Q
- R
- Resources - something you own, usually referring to cash or investments
- Retirement - the time when you live off of your investments and not a paycheck.
- Retirement Account - any place you can save your money AND defer paying income tax on the amount you save in that account. The idea is that when you retire and take the money out of your account you will be in a lower tax bracket. Note that you will eventually pay income tax on the money you put into a retirement account.
- Retirement Strategy - the specific financial plan that you are executing to ensure that you can eat and live comfortably when you no longer work.
- Returns - the money left AFTER you liquidate your investment. It can be positive or negative
- Risk - the probability that your investment will decrease in value while you own it
- Risk:Return Ratio - conventional wisdom holds that with greater risk comes greater return. (actually the concept of a ratio comes from a guy named Sharpe who proposed a formula that is used to characterize how well the return of an asset compensates the investor for the risk taken)
- Risk Tolerance - a measure of how strong your stomach is to losing money on paper and in reality.
- Rollover, roll over - the process of moving your qualified retirement monies from one investment account to another. It usually is moving from an employer sponsored 401k to a self directed IRA.
- S
- Security - proof of ownership for stock, bonds and other investments.
- Self directed investment - an investment strategy and portfolio controlled by you and not a fund manager, financial adviser, insurance agent, or the like
- Sell - to trade an asset for cash
- Share - a unit of ownership or an equity position; as in shares of stock.
- Shares of stock- units of ownership in a company or financial instrument (like a mutual fund)
- Short - sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value
- Stock - ownership in a company or a financial instrument
- Strategy - a particular approach or method designed to achieve a specific goal
- T
- Timing - the practice of deciding the specific trend that a particular market is currently exhibiting
- U
- V
- W
- XYZ
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