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Use this Glossary to help inderstand the language of the financial industry.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
Annual percentage rate (APR)
A way to compare the costs of a loan. APR allows you to evaluate the cost of the loan in terms of a percentage. If your loan has a 10% APR, you’ll pay $10 per $100 you borrow annually. You want to avoid high APR’s, you simply want the loan with the lowest APR.
Annual percentage yield (APY)
A tool for evaluating how much a deposit earns you. It refers to your earnings on a deposit over a year - how much money you’re making. Everyone wants their money to grow so it’s important to choose a bank with a good APY.
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B
Balanced Fund
A mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds, to provide both income and capital appreciation while avoiding excessive risk. The purpose of balanced funds (also sometimes called hybrid funds) is to provide investors with a single mutual fund that combines both growth and income objectives, by investing in both stocks (for growth) and bonds (for income). Such diversified holdings ensure that these funds will manage downturns in the stock market without too much of a loss; the flip side, of course, is that balanced funds will usually increase less than an all-stock fund during a bull market. -
investorwords.comBeta
A measure of the
volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
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C
Capital gain
Profit that results from the sale or exchange of a capital asset over its purchase price.
Capital gains can be either realized or unrealized. Realized capital gains occur when the actual sale or exchange of the asset returned more money than the purchase price (as adjusted for depreciation and other factors). Unrealized capital gains occur when it is known that the asset has appreciated in value, but the asset has not been sold yet; the gain is only potential.
Certificate of deposit (CD)
A time deposit with a maturity date that generally pays higher interest rates than other types of deposit accounts. A penalty may be assessed if funds are withdrawn before the maturity date. Maturity dates are set by the bank and based on your agreement.
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D
Dow Jones Industrial Average (DJIA)
Dow 30, or informally the Dow Jones or The Dow, is one of several stock market indices created by nineteenth century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index as a way to gauge the performance of the industrial component of America’s stock markets. It is the oldest continuing U.S. market index, aside from the Dow Jones Transportation Average, which Dow also created. Dow was inspired by Charlie Lowrys previous work.
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E
ETF
A baskets of securities that are traded, like individual stocks, on an exchange (all available offerings currently trade on the American Stock Exchange). Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day. They can also be sold short and bought on margin–in brief, anything you might do with a stock, you can do with an ETF.
Read our more detailed post:
What are ETF’s and how do they work?Equity
The portion of a property’s value over and above any liens against it. Also the ownership interest of common and preferred stock shareholders in a corporation.
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F
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G
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H
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I
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J
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K
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L
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M
Money Market Account (MMA)
An account that may be interest-bearing and typically limited to 6 withdrawals per month, including 3 written checks depending on the bank. Most often MMA’s pay higher interest rates compared to local Banks.
Mutual fund
A fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, futures, currencies, or money market securities. These funds offer investors the advantages of diversification and professional management. A management fee is charged for these services. Funds also levy other fees such as 12b-1 fees, exchange fees and other administrative charges. Mutual fund shares are redeemable on demand at net asset value by shareholders, who all share equally in the gains and losses generated by the fund.
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N
NASDAQ
The National Association of Securities Dealers Automated Quotations is an American stock exchange. It is the largest electronic screen-based equity securities trading market in the United States. With approximately 3,200 companies, it lists more companies and on average trades more shares per day than any other U.S. market.
Non Sufficient Funds (NSF)
In the US banking industry, the term “non-sufficient funds” (NSF) is used to indicate that a demand for payment (a check) cannot be honored because insufficient funds are available in the account on which the instrument was drawn. In simplified terms, a check has been presented for clearance, but the amount written on the check exceeds the available balance in the account. It is often colloquially referred to as a bad check, a “bounced” check, or a rubber check. Businesses frequently use the term dishonored check.
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O
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P
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Q
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R
ROTH IRA
IRA contributions are made with after-tax assets, all transactions within the IRA have no tax impact, and withdrawals are usually tax-free. Named for Senator William Roth.
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S
S&P 500
The S&P 500 is an index containing the stocks of 500 Large-Cap corporations, most of which are American. The index is the most notable of the many indices owned and maintained by Standard & Poor’s, a division of McGraw-Hill. S&P 500 is used in reference not only to the index but also to the 500 actual companies whose stocks are included in the index.
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T
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U
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V
Volatility
The rise and fall in price of a security, commodity, or market within a short-term period.
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W
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X
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Y
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Z
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