| 401 (k) |
A retirement savings plan in which an employee can save some of their salary with special tax benefits. Some employers will even match the employees’ contributions. |
| Asset |
Anything you own that has value, such as shares of stock, a car, or a house. |
| Balance Sheet |
Summary of a company’s liabilities and assets (what it owes, and what it owns). |
| Bankruptcy |
The status of being unable to repay one’s debts. Bond – An investment in which the investor loans money to an entity (a company or a government) for a set period of time at a specified interest rate and/or repayment of principal. |
| Buy and Hold |
An investment strategy in which an investor buys stocks and holds them for a long period of time, regardless of fluctuations in the stock market. |
| Certificate of Deposit |
Also known as a CD. Banks issue CDs to customers for a fixed term and with a fixed interest rate; the customer must wait until the term is complete for the CD to “mature,” at which time the money is withdrawn with accrued interest. |
| Compound Interest |
Compound interest is interest that is paid on both the principal and also on any interest earned from the past. When principal, as well as past interest earn interest, a snowball effect of earnings occurs. |
| Corporation |
A legal entity that is separate and distinct from its owners. Credit – An agreement in which a borrower receives something of value and agrees to repay the lender at some future date. |
| Debit |
A debit is a decrease in your account, such as when you pay a bill. Another term frequently used with debit is “debit card.” Debit cards look very similar to credit cards, but when used it is similar to writing a check – the money is debited from a checking account. |
| Debt |
An amount that you owe. |
| Default |
The failure to pay a debt or make a payment when it is due. |
| Default Risk |
The risk that you will be unable to repay your debts, and therefore be “in default.” |
| Depreciation |
The decrease in the value of an asset over time, sometimes due to normal wear and tear. |
| Diversification |
A technique in which an investor tries to reduce risk by mixing a wide variety of investments within a portfolio. |
| Dividend |
The distribution of a portion of a company’s earnings to its shareholders. |
| Dow Jones Industrial Average |
An average made up of 30 large stocks that trade daily on the New York Stock Exchange. |
| Equity |
Another name for stock, representing ownership in a company. |
| Financial Planner |
An investment professional who helps clients meet their short- and long-term financial goals. |
| Fixed Asset |
Something that a company owns and uses in the running of its business, and which doesn’t get used up in the process, such as equipment or fixtures. |
| Gross Domestic Product |
The monetary value of all the goods and services produced within a country each year. |
| Income |
Money received either as compensation, such as a salary, or profit from an investment, such as interest earned on savings, or dividends from owning stock. |
| Individual Retirement Account |
Also known as an IRA. An account in which funds are set aside for retirement. There are several types of IRAs, some of which provide special tax benefits. |
| Inflation Rate |
The rate at which the general level of prices for goods and services is rising, and therefore also the rate at which purchasing power is falling. |
| Junk Bond |
A bond with an especially high risk of default. |
| Lease |
An agreement in which one party gains the use of a fixed asset, such as a building or equipment, and the other party receives rent and possibly a form of secured debt. |
| Liability |
Legal debts or obligations, in other words, where owing money, goods, or services. |
| Limited Liability Company |
Also known as an LLC. A business structure which allows owners to have limited personal liability for the debts and actions of the company. |
| Liquidity |
The extent to which an asset can be easily converted to cash. |
| Long-term Debt |
Loans and other financial obligations that have a term over one year. |
| Market Timing |
Trying to predict the future behavior of the stock market, by analyzing historical statistics and economic indicators. |
| Money Market Fund |
A mutual fund that invests only in securities that can easily be converted to cash and tries to avoid credit, market and liquidity risk. |
| Mortgage |
Specifically used with real estate purchases, this is a type of loan in which a house or property is used to secure the loan and which is repaid in installments over a set period of time. |
| Mutual Fund |
A type of investment that pools money of many investors to buy various securities such as stocks, bonds and/or cash-equivalents. They can provide diversification for investors. |
| NASDAQ |
The largest electronic screen-based equity securities trading market in the United States. Net Income – After all taxes and deductions have been subtracted from your gross income, net income is what you’re left with. |
| Net Worth |
In short, it’s the dollar value of how much wealth you have. It’s calculated by subtracting any liabilities from all of your assets. |
| New York Stock Exchange |
Also known as NYSE. A stock exchange that lists securities for a wide range of companies. Several thousand companies are traded on the exchange. |
| Portfolio |
The collection of assets – such as stocks, bonds and other investments – held by an investor. |
| Principal |
1. In a savings account, the amount you initially invest. 2. In a loan, the amount you originally borrowed, distinct from any accrued interest. |
| Profit Margin |
Measures, usually as a percentage, how much out of every dollar earned, that a company gets to keep as profit, after expenses have been deducted from revenue. |
| Return |
Income realized from an investment, usually expressed as a percentage. |
| Risk |
The chance that a person can lose money on an investment. |
| Shareholder |
Anyone who owns at least one single share in a company. Also known as a stockholder. |
| Stock |
A type of security that represents ownership in a corporation. Owning stock in a company and having equity in a company mean the same thing. |
| Stock Split |
The splitting of a company’s existing stock into multiple shares, where the total value of all the share remains the same. In a stock split, an individual could end up with more shares at a lower price per share, but with the same total share value as before the split. |
| Stockbroker |
An agent who places orders for an investor to buy or sell stocks or other securities. |
| Yield |
The annual rate of return from income (dividends, interest, etc.) on any type of investment, usually expressed as a percentage. |
