Finance terminology

Common definitions and terminology used in finance

30-Year Treasury

The 30-Year Treasury is a U.S. Treasury debt obligation that has a maturity of 30 years. The 30-year Treasury used to be the bellwether U.S. bond but now most consider the 10-year Treasury to be the benchmark.

https://www.investopedia.com/terms/1/30-yeartreasury.asp

Accumulating Shares

Accumulating shares is a classification of common stock that is given to shareholders of a company in lieu of, or in addition to, a dividend.

https://www.investopedia.com/terms/a/accumulating-shares.asp

Activity-Based Costing

Activity-based costing (ABC) is a costing method that assigns overhead and indirect costs to related products and services.

https://www.investopedia.com/terms/a/abc.asp

Annuities

Reference: https://www.investopedia.com/terms/a/annuity.asp

The term “annuity” refers to an insurance contract issued and distributed by financial institutions with the intention of paying out invested funds in a fixed income stream in the future. Investors invest in or purchase annuities with monthly premiums or lump-sum payments. The holding institution issues a stream of payments in the future for a specified period of time or for the remainder of the annuitant’s life. Annuities are mainly used for retirement purposes and help individuals address the risk of outliving their savings.

Amortization

Appropriation

Appropriation is when money is set aside for a specific purpose. A company or a government appropriates funds in order to delegate cash for the necessities of its operations. Appropriations for the U.S. federal government are decided by Congress through various committees. A company might appropriate money for short-term or long-term needs that include employee salaries, research and development, and dividends.

https://www.investopedia.com/terms/a/appropriation.asp

Arbitrage Pricing Theory

Arbitrage pricing theory is a model that says an asset’s returns can be forecasted using the linear relationship of the expected returns of an asset and macroeconomic factors affecting the risk of the asset.

https://www.investopedia.com/terms/a/apt.asp

At par or At face value

Reference: https://www.investopedia.com/terms/a/at-par.asp#:~:text=Financial%20Review%20Board-,What%20Is%20at%20Par%3F,maturity%2C%20and%20interest%20rate%20fluctuations.

What Is at Par? The term “at par” means at face value. A bond, preferred stock, or other debt instrument may trade at par, below par, or above par.

Par value is static, unlike market value, which fluctuates with credit ratings, time to maturity, and interest rate fluctuations. The par value is assigned at the time the security is issued. When securities were issued in paper form, the par value was printed on the face of the security, hence the term “face value.”

B Corp

B corp certification is given to companies that meet certain standards for social and environmental performance

https://www.investopedia.com/b-corp-7488828

Bail-In

A bail-in provides relief to a financial institution on the brink of failure by requiring the cancellation of debts owed to creditors and depositors.

https://www.investopedia.com/terms/b/bailin.asp

Balance of Trade (BOT)

See Trade Deficit

Balance Sheet

A balance sheet is a financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific time.

https://www.investopedia.com/terms/b/balancesheet.asp

Basket of Goods

A basket of goods is a set of consumer goods and services whose prices are used to measure inflation.

https://www.investopedia.com/terms/b/basket_of_goods.asp

Bayes’ Theorem

Bayes’ Theorem is a formula used to calculate conditional probability, which is the probability that an event will occur when another event does.

https://www.investopedia.com/terms/b/bayes-theorem.asp

Bilateral Trade

Bilateral trade is the exchange of goods and services between two countries, often facilitated by agreements that reduce or eliminate trade barriers like tariffs and quotas.

https://www.investopedia.com/terms/b/bilateral-trade.asp

Benchmark index

A benchmark index is an index that mutual funds use to compare their investment performance against. The best-known benchmark index is the Standard and Poor’s 500, the index of 500 of the largest American companies by market capitalization. Mutual funds that invest in U.S. large-capitalization stocks typically use the S&P 500 index as their benchmark.

Borrowing costs

TODO

Bond yield

A bond yield is the return an investor realizes on a bond. Put simply, a bond yield is the return on the capital invested by an investor.

1. https://www.investopedia.com/terms/b/bond-yield.asp
2. What Do Low Bond Yields Mean for the Stock Market? https://www.investopedia.com/ask/answers/061715/how-can-bond-yield-influence-stock-market.asp

Breadth Thrust Indicator

The Breadth Thrust Indicator is a technical indicator used to ascertain market momentum. It signals the start of a potential new bull market when it moves from a level of below 40% (indicating an oversold market) to a level above 61.5% within any 10-day period.

https://www.investopedia.com/terms/b/breadth-thrust-indicator.asp

Breakdown

A breakdown is a downward move in a security’s price, usually through an identified level of support, that portends further declines.

https://www.investopedia.com/terms/b/breakdown.asp

Budget Deficit

https://www.investopedia.com/terms/a/appropriation.asp

Bullish Engulfing Pattern

The bullish engulfing pattern is a two-candle reversal pattern that occurs when the second candle completely overrides the first.

1. https://www.investopedia.com/terms/b/bullishengulfingpattern.asp

Capital Adequacy Ratio

The capital adequacy ratio (CAR) is an indicator of how well a bank can meet its obligations. It’s also known as the capital-to-risk weighted assets ratio.

1. https://www.investopedia.com/terms/c/capitaladequacyratio.asp
2. https://www.investopedia.com/ask/answers/052915/what-measures-can-be-used-evaluate-capital-adequacy-bank.asp

Capital Asset Pricing Model (CAPM)

The capital asset pricing model (CAPM) describes the relationship between systematic risk, or the general perils of investing, and expected return for assets, particularly stocks.

https://www.investopedia.com/terms/c/capm.asp

Capital Employed

Capital employed measures the total amount of money that a company spent to achieve profitability.

1. https://www.investopedia.com/terms/c/capitalemployed.asp

Capital Expenditure (CapEx)

Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.

https://www.investopedia.com/terms/c/capitalexpenditure.asp

Carried Interest

Carried interest is a share of profits earned by general partners of private equity, venture capital, and hedge funds. Carried interest is due to general partners based on their role rather than an initial investment in the fund.

https://www.investopedia.com/terms/c/carriedinterest.asp

Central Bank

Cost vs. Price: What’s the Difference?

https://www.investopedia.com/ask/answers/101314/what-difference-between-cost-and-price.asp

Congestion Pricing

The term congestion pricing refers to a dynamic pricing strategy designed to regulate demand by increasing prices without increasing supply.

https://www.investopedia.com/terms/c/congestion-pricing.asp

Conscious Capitalism

The term “conscious capitalism” refers to a socially responsible economic and political philosophy. The premise behind conscious capitalism is that businesses should operate ethically while they pursue profits.

https://www.investopedia.com/terms/c/conscious-capitalism.asp

Consumer Price Index

Inflation

To calculate the rate of inflation, the government looks at a consumer basket of commonly purchased items, known as the Consumer Price Index (CPI), tracking the cost of buying the items in the basket over time.

It is an overall measure of our day-to-day living expenses.

1. https://www.investopedia.com/terms/c/consumerpriceindex.asp
2. https://www.bls.gov/cpi/
3. https://fred.stlouisfed.org/series/CPIAUCSL#0?pos=1&module=ssw&format=essay&topic=econ&topic2=retire

Consumer Price Index for All Urban Consumers

The Consumer Price Index For All Urban Consumers (CPI-U) measures changes in U.S. consumer prices based on a representative basket of goods and services.

1. https://www.investopedia.com/terms/c/cpiu.asp

Consumer Spending or Personal Consumption Expenditures (PCE)

A measure of how much U.S. households spend on goods and services.

https://www.investopedia.com/terms/p/pce.asp

Commercial General Liability (CGL) Insurance

Commercial general liability insurance provides businesses with coverage for bodily or personal injury, and property damage.

https://www.investopedia.com/terms/c/commercial-general-liability-cgl.asp

Convertibles

Convertibles are securities, usually bonds or preferred shares, that can be converted into common stock.

https://www.investopedia.com/terms/c/convertibles.asp

Core Inflation

Core inflation is the rate at which prices are rising in the economy, excluding sharply fluctuating items like food and energy.

https://www.investopedia.com/terms/c/coreinflation.asp

Core Retail Sales

Core retail sales represents retail sales excluding spending on automobiles, gasoline, building materials, and food services. This metric is a strong indicator of economic health and is used to gauge whether the economy is contracting or expanding.

https://www.investopedia.com/terms/core-retail-sales.asp

Corporate Citizenship

A company’s responsibilities towards society

https://www.investopedia.com/terms/c/corporatecitizenship.asp

Corporate Social Responsibility

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public.

https://www.investopedia.com/terms/c/corp-social-responsibility.asp

Cost of Goods Sold

The direct costs of producing the goods sold by a company.

https://www.investopedia.com/terms/c/cogs.asp

Crossover

https://www.investopedia.com/terms/c/crossover.asp

Crude Oil

Crude oil is a naturally occurring liquid petroleum product composed of hydrocarbon deposits and other organic materials formed from the remains of animals and plants that lived millions of years ago.

https://www.investopedia.com/terms/c/crude-oil.asp

Digital Currencies

Cum Laude

Cum laude, a Latin term that means “with honor,” is an academic distinction awarded by U.S. colleges and universities to graduates who excel.

https://www.investopedia.com/terms/c/cum-laude.asp

Death Cross

A market chart pattern in which a short-term moving average crosses below a longer-term moving average, indicating price weakness.

https://www.investopedia.com/terms/d/deathcross.asp

Debt Collector

A debt collector is a person or organization that recovers money owed on delinquent accounts.

https://www.investopedia.com/terms/d/debt-collector.asp

Debt-Service Coverage Ratio (DSCR)

Decile

A decile is a quantitative method of splitting up a set of ranked data into 10 equally-sized subsections.

https://www.investopedia.com/terms/d/decile.asp

Deficit Spending

Deficit spending is when a government’s expenditures exceed its revenues during a specific period, leading to a budget deficit, often used as a strategy to stimulate economic growth.

https://www.investopedia.com/terms/d/deficit-spending.asp

Deflation

Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time.

https://www.investopedia.com/terms/d/deflation.asp

Discretionary Expense

A cost that a household (or a business) can survive without, if necessary.

https://www.investopedia.com/terms/d/discretionary-expense.asp

Divergence

https://www.investopedia.com/terms/d/divergence.asp

Downtrend

https://www.investopedia.com/terms/d/downtrend.asp

Duopoly

A duopoly is an oligopoly in which two companies own all or most of the market for a given service or good.

https://www.investopedia.com/terms/d/duopoly.asp

Earnings Announcement

An official public statement of a company’s profitability for a specific period, typically a quarter or a year.

1. https://www.investopedia.com/terms/e/earnings-announcement.asp

Earnings Call

An earnings call is a conference call between a public company, analysts, investors, and the media to discuss the company’s financial results.

1. https://www.investopedia.com/terms/e/earnings-call.asp
2. As an Investor, Do You Really Have to Listen to Quarterly Earnings Calls? https://www.investopedia.com/listening-to-quarterly-earnings-calls-8772324
3. How AI Could Transform the Way You Listen to Earnings Calls https://www.investopedia.com/ai-could-transform-listening-to-earnings-calls-8782450
4. Should You Buy Stock Before an Earnings Call? https://www.investopedia.com/should-you-buy-stock-before-earnings-call-8774762

Earnings Forecasts

1. https://www.investopedia.com/articles/stocks/06/earningsforecasts.asp

Earnings per share

Earnings per share (EPS) is a commonly used measure of a company’s profitability. It indicates how much profit each outstanding share of common stock has earned.

1. https://www.investopedia.com/terms/e/eps.asp
2. The 5 Types of Earnings per Share https://www.investopedia.com/investing/5-types-of-earnings-per-share/
3. What Is the Formula for Calculating Earnings per Share (EPS)? https://www.investopedia.com/ask/answers/070114/what-formula-calculating-earnings-share-eps.asp
4. How to Evaluate the Quality of EPS https://www.investopedia.com/articles/analyst/03/091703.asp
5. Earnings Per Share (EPS) vs. Diluted EPS https://www.investopedia.com/ask/answers/051115/what-difference-between-earnings-share-eps-and-diluted-eps.asp
6. Profits vs. Earnings https://www.investopedia.com/ask/answers/070615/what-difference-between-earnings-and-profit.asp
7. P/E Ratio vs. EPS vs. Earnings Yield https://www.investopedia.com/articles/investing/120513/comparing-pe-eps-and-earnings-yield.asp
8. Can a Company Declare a Dividend that Exceeds EPS? https://www.investopedia.com/ask/answers/08/dividend-exceed-eps.asp
9. The Impact of Share Repurchases on Financial Accounting https://www.investopedia.com/articles/investing/112013/impact-share-repurchases.asp
10. 6 Basic Financial Ratios and What They Reveal https://www.investopedia.com/financial-edge/0910/6-basic-financial-ratios-and-what-they-tell-you.aspx

Earnings Report

1. How Do I Access a Company’s Earnings Report? https://www.investopedia.com/ask/answers/070915/how-can-i-access-companys-earnings-report.asp
2. Guide to Company Earnings https://www.investopedia.com/terms/e/earningsreport.asp

Earnings Season

Earnings season marks the time when a large number of publicly traded companies release their quarterly earnings reports. Each earnings season begins one or two weeks after the last month of each quarter. Investors see most public companies release their earnings in early to mid-January, April, July, and October. The exact date of an earnings release depends on when the company’s quarter ends.

1. Earnings season is when publicly traded companies release their quarterly earnings reports.
2. Most earnings reports are released in January, April, July, and October.
3. Investors rely on earnings reports to see the financial health of publicly traded companies.
4. https://www.investopedia.com/ask/answers/08/earnings-season.asp
5. 5 Tricks Companies Use During Earnings Season https://www.investopedia.com/articles/stocks/08/earnings-tricks.asp

Economic Growth Rate

An economic growth rate is the percentage change in the value of all of the goods and services produced in a nation during a specific period of time, as compared to an earlier period.

https://www.investopedia.com/terms/e/economicgrowthrate.asp

Elasticity

Elasticity is a term used in economics to describe responsiveness in one variable to changes in another. Typically, elasticity is used to describe how much demand for a product changes as its price increases or decreases. This is also known as demand elasticity.

https://www.investopedia.com/terms/e/elastic.asp

Enterprise Value

1. Enterprise Value (EV) Formula and What It Means https://www.investopedia.com/terms/e/enterprisevalue.asp

Estate Planning

A strategy that details in writing who will get your assets and money after your death or in the event that you become incapacitated. It may include a will, name guardians for your dependents, and include health care proxies.

https://www.investopedia.com/terms/e/estateplanning.asp

Exponential Moving Average

https://www.investopedia.com/terms/e/ema.asp

Fabless Company

A fabless company designs and markets hardware while outsourcing its manufacture to a third-party partner.

https://www.investopedia.com/terms/f/fablesscompany.asp

Falling Knife

Falling knife is a colloquial term for a rapid drop in the price or value of a security. The term is commonly used in phrases like, “Don’t try to catch a falling knife.” It can be translated to mean, “Wait for the price to bottom out before buying it.”

https://www.investopedia.com/terms/f/fallingknife.asp

Falling Three Methods

The falling three methods is a bearish candlestick pattern of five candles, signaling a continuation of a downtrend. It features two long bearish candles at the start and end, separated by three shorter counter-trend candles.

https://www.investopedia.com/terms/f/falling-three-methods.asp

Fear Index or CBOE Volatility Index

A real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index (SPX).

https://www.investopedia.com/terms/v/vix.asp

Federal Budget

The federal budget is an annual financial plan that outlines the government’s expected revenues and expenditures for the fiscal year.

https://www.investopedia.com/terms/f/federal-budget.asp

Federal Open Market Committee (FOMC)

The Federal Open Market Committee is the branch of the Federal Reserve that oversees monetary policy.

https://www.investopedia.com/terms/f/fomc.asp

Fiduciary

Fiduciaries are persons or organizations who act on behalf of others and are required to put clients’ interests ahead of their own.

https://www.investopedia.com/terms/f/fiduciary.asp

Financial Securities

The term “security” refers to a multitude of different investments, such as stocks, bonds, investment contracts, notes, and derivatives. For example, a security can represent ownership in a corporation in the form of stock, a creditor relationship with a governmental body or corporation in the form of a bond, or rights to ownership in the form of an option.

https://www.investopedia.com/terms/s/security.asp

Flight to Quality

Flight to quality occurs when investors in aggregate begin to shift their asset allocation away from riskier investments and into safer ones, for instance out of stocks and into bonds. Uncertainty in the financial or international markets usually causes this herd-like behavior.

https://www.investopedia.com/terms/f/flighttoquality.asp

Free Trade Agreement (FTA)

A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

The concept of free trade is the opposite of trade protectionism or economic isolationism.

https://www.investopedia.com/terms/f/free-trade.asp

Full Retirement Age (FRA) for Social Security

The retirement age at which you can receive full retirement benefits from Social Security is called the full retirement age (FRA). It’s also known as normal retirement age.

Fungibility

Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type.

https://www.investopedia.com/terms/f/fungibility.asp

Grantor

A grantor is an individual or other entity that creates a trust. Their assets are placed into the trust.

https://www.investopedia.com/terms/g/grantor.asp

Growth Rates

Growth rates refer to the percentage change of a specific variable within a specific time period.

1. https://www.investopedia.com/terms/g/growthrates.asp

Growth stocks and Value stocks

Many investors divide the world of stocks into growth stocks and value stocks. While growth stocks are stocks of rapidly growing companies, value stocks are stocks in companies who’s perceived value as assigned by the market is below the value assigned by the particular analyst. The notion of value is truly in the eye of the beholder. Some successful investors, such as Warren Buffet, have made a career of being “value investors”; finding “undervalued” investments and taking large stakes in them.

Every stock in the market is either value, growth or some combination of value and growth. Growth stocks are typically thought of as stocks in companies that have rapidly growing sales, revenue and profits, and which plow most of those returns back into growing the company rather than paying a dividend to shareholders.

The market is defined as being equally divided between growth and value. Therefore, when you hold the stock market index funds I recommend, you are holding half of your stock portfolio in growth and half in value.

Hawthorne Effect

The Hawthorne Effect is the supposed inclination of people who are the subjects of an experiment or study to change or improve the behavior being evaluated only because it is being studied and not because of changes in the experiment parameters or stimulus.

https://www.investopedia.com/terms/h/hawthorne-effect.asp

Heteroscedasticity

In finance, conditional heteroskedasticity is often seen in the prices of stocks and bonds. The level of volatility of these equities cannot be predicted over any period. Unconditional heteroskedasticity can be used when discussing variables that have identifiable seasonal variability, such as electricity usage.

https://www.investopedia.com/terms/h/heteroskedasticity.asp

Hindenburg Omen

The Hindenburg Omen is a technical indicator designed to signal the increased probability of a stock market crash.

https://www.investopedia.com/terms/h/hindenburgomen.asp

Home Equity

The difference between how much a home is worth and what you still owe on the mortgage. Think of it as how much of your home you own. You can borrow against the equity in your home.

Horizontal Line

A horizontal line is often drawn on a price chart to highlight areas of support or resistance.

https://www.investopedia.com/terms/h/horizontal-line.asp

Hypothecation

Hypothecation occurs when an asset is pledged as collateral to secure a loan.

https://www.investopedia.com/terms/h/hypothecation.asp

Income Statement

The income statement is one of three important financial statements used by a company to report its financial performance over a specific accounting period.

https://www.investopedia.com/terms/i/incomestatement.asp

Incoterms

To facilitate commerce around the world, the International Chamber of Commerce (ICC) publishes a set of Incoterms, officially known as international commercial terms.

https://www.investopedia.com/terms/i/incoterms.asp

Index funds

Index funds are mutual funds (pools of money from many small investors) that invest in all or substantially all of the stocks or bonds that comprise a particular index, in their appropriate weighting. Index funds are often referred to as “passive investments” because their managers do not buy and sell securities in an effort to earn more than the return on the index.

They are funds that hold all of the stocks in a specific segment of the market.

e.g. An S&P 500 index fund holds the stocks of the 500 widely held companies that make up that index.

Inelastic

“Inelastic” is an economic term referring to the static quantity of a good or service when its price changes. Inelastic demand means that when the price goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.

https://www.investopedia.com/terms/e/inelastic.asp

Initial Public Offering (IPO)

An IPO, or initial public offering, is the term for the first time that a private company sells shares of its stock to the public on a stock exchange.

1. https://www.investopedia.com/terms/i/ipo.asp
2. What Are the 3 Stages of the IPO Life Cycle? https://www.investopedia.com/ask/answers/06/ipoprocess.asp
3. How an Initial Public Offering (IPO) Is Priced https://www.investopedia.com/articles/financial-theory/11/how-an-ipo-is-valued.asp
4. What Are the Advantages and Disadvantages of a Company Going Public? https://www.investopedia.com/ask/answers/advantages-disadvantages-company-going-public/
5. 5 Tips for Investing in IPOs https://www.investopedia.com/investing/tips-for-investing-in-ipos/
6. Why Is There an IPO Lockup Period and How Long Does It Last? https://www.investopedia.com/ask/answer/12/ipo-lockup-period.asp
7. What a Roadshow Is and How It Creates a Successful IPO https://www.investopedia.com/terms/r/roadshow.asp
8. Greenshoe Options: An IPO’s Best Friend https://www.investopedia.com/articles/optioninvestor/08/greenshoe-option-ipo.asp

Inventory Turnover Ratio

Inventory turnover ratio is a financial ratio showing how many times a company turned over its inventory in a given period.

https://www.investopedia.com/terms/i/inventoryturnover.asp

Illiquidity and Insolvency

Illiquidity is when a firm (or an individual) cannot sell sufficient assets to meet its (or one’s own) liabilities. It has the right amount of assets, but they are not marketable because there are too few potential buyers.

An asset’s illiquidity does not speak to its return potential; it only means that it may take more time to find a buyer to convert the asset to cash.

Insolvency is when the value of the liabilities clearly exceeds the value of the assets.

The distinction is harder to draw than is sometimes assumed. A firm in a liquidity crisis might be able to sell its assets, but only at prices so low as to imply insolvency.

Jobs Growth

Jobs growth is measured in the U.S. by the number of employees added to nonfarm payrolls monthly, as reported by the Bureau of Labor Statistics (BLS).

https://www.investopedia.com/terms/j/jobsgrowth.asp

Kontradieff Waves

Kondratieff Wave, named after Russian economist Nikolai Kondratieff, refers to cycles, lasting about 40 to 60 years, experienced by capitalist economies.

https://www.investopedia.com/terms/k/kondratieff-wave.asp

Lock in Profits

Locking in profits refers to realizing unrealized gains by selling all or part of a security, reducing exposure to market fluctuations.

https://www.investopedia.com/terms/l/lock_in_profits.asp

Leveraged buyouts

takeovers of firms financed by borrowing

Market

A market is a mechanism by which potential buyers and potential sellers of items can be matched. In the world of stock and bond investments, some markets are physical while others exist only as computer-to-computer interchanges.

Market Capitalization

Market capitalization is the current value of a publicly traded company, based on the total dollar amount that all of its outstanding shares are worth .

1. https://www.investopedia.com/terms/m/marketcapitalization.asp
2. Market Capitalization vs. Revenue https://www.investopedia.com/ask/answers/122414/what-difference-between-market-capitalization-and-revenue.asp
3. Mid-Cap: Definition, Other Sizes, Valuation Limits, and Example https://www.investopedia.com/terms/m/midcapstock.asp
4. What Are Small-Cap Stocks, and Are They a Good Investment? https://www.investopedia.com/terms/s/small-cap.asp
5. Micro-Cap: Definition in Stock Investing, Risks Vs. Larger Caps https://www.investopedia.com/terms/m/microcapstock.asp

Marketing Mix

A marketing mix is a strategic framework that encompasses the four Ps—product, price, placement, and promotion—used to market a product or service and generate revenue.

https://www.investopedia.com/terms/m/marketing-mix.asp

Market Index

A hypothetical portfolio representing a segment of the financial market.

1. Market Index: Definition, How Indexing Works, Types, and Examples: https://www.investopedia.com/terms/m/marketindex.asp
2. Top 3 US Stock Market Indexes: https://www.investopedia.com/insights/introduction-to-stock-market-indices/
3. S&P 500 Index: What It’s for and Why It’s Important in Investing: https://www.investopedia.com/terms/s/sp500.asp
4. What Does the Nasdaq Composite Index Measure? https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp

Measuring Principle

The measuring principle is a theoretical method for targeting the minimum price of securities for traders in order to determine entry and exit points.

https://www.investopedia.com/terms/m/measuring-principle.asp

Meme Stocks

Meme stocks are shares of companies around which online communities have formed to promote and build narratives.

1. https://www.investopedia.com/meme-stock-5206762
2. Is Investing in Meme Stocks a Good Idea? https://www.investopedia.com/investing-in-meme-stocks-8663954

Mercantilism

Mercantilism was an economic system of trade that spanned the 16th century to the 18th century.

Based on the idea that a nation’s wealth and power were best served by increasing exports and trade.

https://www.investopedia.com/terms/m/mercantilism.asp

Minimum Wage

A minimum wage is the lowest wage that a worker may be paid per hour. It’s a price floor on hourly wages mandated by federal law. Nonexempt workers can’t be offered a job or agree to work for less than this amount.

1. https://www.investopedia.com/terms/m/minimum_wage.asp
2. Can a Family Survive on the U.S. Minimum Wage? https://www.investopedia.com/articles/personal-finance/022615/can-family-survive-us-minimum-wage.asp
3. Minimum Wage Hikes Don’t Just Raise Pay—They Can Make Jobs Better, New Research Says https://www.investopedia.com/minimum-wage-hikes-dont-just-raise-pay-they-can-make-jobs-better-new-research-says-11802152
4. How Minimum Wages May Raise Unemployment https://www.investopedia.com/articles/investing/080515/minimum-wages-can-raise-unemployment.asp
5. Does Raising the Minimum Wage Increase Inflation? https://www.investopedia.com/ask/answers/052815/does-raising-minimum-wage-increase-inflation.asp
6. What Are the Pros and Cons of Raising the Minimum Wage? https://www.investopedia.com/articles/markets-economy/090516/what-are-pros-and-cons-raising-minimum-wage.asp
7. Do Minimum Wage Laws Make Labor a Fixed or Variable Cost? https://www.investopedia.com/ask/answers/012915/do-minimum-wage-laws-make-labor-fixed-or-variable-cost.asp

Monetary Reserve

A monetary reserve is the holdings of currencies, precious metals, and other highly liquid assets used to redeem national currencies and bank deposits and to meet current and near-term financial obligations by a country’s central bank, government treasury, or other monetary authority.

1. https://www.investopedia.com/terms/m/monetary-reserve.asp
2. https://www.investopedia.com/ask/answers/122214/how-does-monetary-policy-influence-inflation.asp

Money managers

Money managers are professionals who invest money on behalf of others. They take funds from individuals, pension funds, foundations and other endowments and invest it in markets according to particular criteria. Money managers are usually paid based on a percentage of the total money they invest. Therefore, if their investments make money and the pool of money they invest grows, so does their income.

Most-Favored-Nation (MFN) Clause

A most-favored-nation (MFN) clause requires a country providing a trade concession to one trading partner to extend the same treatment to all.

https://www.investopedia.com/terms/m/mostfavorednation.asp

Moving Average

1. https://www.investopedia.com/terms/m/movingaverage.asp
2. Why the 50-Day Simple Moving Average Is Popular Among Traders: https://www.investopedia.com/ask/answers/012815/why-50-simple-moving-average-sma-so-common-traders-and-analysts.asp

Moving Average Convergence/Divergence Indicator

https://www.investopedia.com/terms/m/macd.asp

Multiplier Effect

The multiplier effect measures the impact that a change in economic activity—like investment or spending—will have on total economic output.

https://www.investopedia.com/terms/m/multipliereffect.asp

Net exports

The value of a nation’s total export goods and services minus the value of all the goods and services it imports equals its net exports.

https://www.investopedia.com/terms/n/netexports.asp

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

1. Net Present Value (NPV): What It Means and Steps to Calculate It: https://www.investopedia.com/terms/n/npv.asp
2. Capital Budgeting: Definition, Methods, and Examples: https://www.investopedia.com/terms/c/capitalbudgeting.asp
3. Disadvantages of Net Present Value (NPV) for Investments: https://www.investopedia.com/ask/answers/06/npvdisadvantages.asp
4. Hurdle Rate: What It Is and How Businesses and Investors Use It: https://www.investopedia.com/terms/h/hurdlerate.asp

Options Contract

An options contract is an agreement between two parties for a potential transaction on an underlying security at a preset price, called the strike price, before or on the expiration date.

https://www.investopedia.com/terms/o/optionscontract.asp

Peak Pricing

Peak pricing is a form of congestion pricing where customers pay an additional fee during periods of high demand.

https://www.investopedia.com/terms/p/peak-pricing.asp

Per Capita GDP

Per capita gross domestic product (GDP) is a financial metric that breaks down a country’s economic output per person and is calculated by dividing the GDP of a nation by its population.

Per capita GDP is a global measure for gauging the prosperity of nations and is used by economists, along with GDP, to analyze the prosperity of a country based on its economic growth.

Small, rich countries and more developed industrial countries tend to have the highest per capita GDP.

Per Diem and Per Diem Rates

What is Per Diem on a loan?

https://www.investopedia.com/terms/p/per-diem-payments.asp

1. Daily allowances paid to employees to cover costs they incur while on a business trip.
2. Per diems are daily allowances for the costs of business travel.
3. Per diems cover business expenses for accommodations, meals, and incidentals.
4. For 2025 the standard lodging per diem is $110, and the meals and incidental expenses (M&IE) per diem rose is $68.
5. Companies may provide a company credit card, full or partial expense coverage, or fixed daily rates.
6. Most firms use the standard rates set by the federal government as a guideline for their per diems.
7. Per diem payment also refers to compensation for workers who are paid by the day.

Percentage point

Price Elasticity

Price elasticity of demand is a measurement of the change in the demand for a product as a result of a change in its price. If a price change creates a large change in demand, that is known as elastic demand. If a price change creates a small change in demand, that is an inelastic demand.

https://www.investopedia.com/terms/p/priceelasticity.asp

Private Placements

A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on a public exchange. It is an alternative to an initial public offering (IPO) for a young company seeking to raise money to expand.

https://www.investopedia.com/terms/p/privateplacement.asp

Probate

Probate is the process completed when a decedent leaves assets to distribute, such as bank accounts, real estate, and financial investments. Probate is the general administration of a deceased person’s will or the estate of a deceased person without a will.

https://www.investopedia.com/terms/p/probate.asp

Producer Price Index

The Producer Price Index is a measure of wholesale inflation. The index is published monthly by the Bureau of Labor Statistics.

The Producer Price Index (PPI) measures the average change over time in the prices domestic producers receive for their output. It is a measure of inflation at the wholesale level that is compiled from thousands of indexes measuring producer prices by industry and product category.

https://www.investopedia.com/terms/p/ppi.asp

Profit and Loss Statement

The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period.

https://www.investopedia.com/terms/p/plstatement.asp

Prospect Theory

Prospect theory holds that investors prefer certainty over risk and are loss averse.

https://www.investopedia.com/terms/p/prospecttheory.asp

Prospectus

A prospectus is a document that should be given to a potential investor before he or she makes an investment. Every mutual fund has a prospectus, as does an initial public offering of stock. The prospectus defines the risks of the potential investment, as well as the investment philosophy and the capitalization of the stock or mutual fund the investor is being solicited to invest in.

Qualifying Relative

A qualifying relative, designated by the Internal Revenue Service (IRS), can be claimed as a dependent by a taxpayer, assuming the taxpayer provided considerable financial support for the relative during the tax year.

https://www.investopedia.com/terms/q/qualifying-relative.asp

Quantitive easing

On November 25, 2008, the Federal Reserve introduced a program to buy certain housing and mortgage-related securities to bring relief to tight credit markets in the wake of the 2008 housing crisis. This is known as quantitative easing.

Racketeering

The term racketeering broadly refers to criminal acts, typically those involving extortion, that involve a “racket”. A racket, being some sort of scheme organized to extract illegal profits.

1. https://www.investopedia.com/terms/r/racketeering.asp

Red Chip

A red-chip company is one that does most of its business in China, and which the Chinese government has a considerable stake in the firm.

https://www.investopedia.com/terms/r/redchip.asp

Regression

Regression is a statistical method that attempts to determine the strength and character of the relationship between a dependent variable and one or more independent variables.

https://www.investopedia.com/terms/r/regression.asp

Relative Value Fund

A relative value fund is an actively managed investment fund that seeks to exploit temporary differences in the prices of related securities. This approach to investing is often used by hedge funds.

https://www.investopedia.com/terms/r/relativevalue-funds.asp

Rent Seeking

Rent seeking is defined as any practice in which an entity aims to increase its wealth without making any contribution to the wealth or benefit of society.

https://www.investopedia.com/terms/r/rentseeking.asp

Repurchase Agreement (Repo)

A repurchase agreement is a contract to sell securities, usually government bonds, and repurchase them back shortly after at a slightly higher price.

https://www.investopedia.com/terms/r/repurchaseagreement.asp

Restricted Stock Unit (RSU)

A restricted stock unit (RSU) is an award of stock shares, usually given as a form of employee compensation. The recipient must meet certain conditions before the restricted stock units are transferred to the owner.

1. https://www.investopedia.com/terms/r/restricted-stock-unit.asp
2. Vesting: What It Is and How It Works: https://www.investopedia.com/terms/v/vesting.asp
3. Employee Stock Options (ESOs): https://www.investopedia.com/terms/e/eso.asp
4. Financial Accounting Standards Board (FASB) https://www.investopedia.com/terms/f/fasb.asp
5. Fair Market Value (FMV) https://www.investopedia.com/terms/f/fairmarketvalue.asp

Reversal

A reversal is a change in the price direction of an asset. A reversal can occur to the upside or downside. Following an uptrend, a reversal would be to the downside. Following a downtrend, a reversal would be to the upside. Reversals are based on overall price direction and are not typically based on one or two periods/bars on a chart.

https://www.investopedia.com/terms/r/reversal.asp

Risk management

Risk management refers to the techniques that can be used to reduce the risk in an investment portfolio. Risk is the measure of the probability of potential outcomes and the change in portfolio value that would occur if those outcomes came to pass.

S&P 500 Index Fund

Securities and Exchange Commission (SEC)

Securities industry

The securities industry is made up of the brokerage firms, investment banks, insurance companies, and other entities that develop, package and market stocks and bonds in order for corporations and government entities to raise capital from outside investors and for investors to seek investment returns.

Sharpe Ratio

A measure of an investment’s risk-adjusted performance, calculated by comparing its return to that of a risk-free asset.

1. https://www.investopedia.com/terms/s/sharperatio.asp
2. https://www.investopedia.com/terms/w/william-f-sharpe.asp
3. https://www.investopedia.com/terms/c/capm.asp
4. https://www.investopedia.com/terms/r/risk-freerate.asp
5. https://www.investopedia.com/terms/r/riskpremium.asp

Short Squeeze

A short squeeze happens in financial markets when the price of an asset rises sharply, causing traders who had sold short to close their positions. It occurs when a security has a significant amount of short sellers, meaning lots of investors are betting on its price falling.

A short squeeze begins when the price of an asset unexpectedly jumps higher. It gains momentum as a significant number of the short sellers decide to cut losses and exit their positions.

1. https://www.investopedia.com/terms/s/shortsqueeze.asp

Short term investments

Short-term investments are liquid assets designed to provide a safe harbor for cash while it awaits future deployment into higher-returning opportunities.

Short-term investments are financial assets that can easily be converted to cash and used for near-term goals.

https://www.investopedia.com/terms/s/shorterminvestments.asp

Sinking Fund

Small cap stock

A small-cap stock is stock of a company with a total market capitalization (shares of stock outstanding times price per share) of less than $500 million.

Smart Contracts

A smart contract is a self-executing program that automates the actions required in a blockchain transaction. Once completed, the transactions are trackable and irreversible.

https://www.investopedia.com/terms/s/smart-contracts.asp

State and Local Tax (SALT)

The state and local tax (SALT) deduction allows most taxpayers to subtract up to $10,000 in paid property, income, or sales taxes from their taxable incomes.

https://www.investopedia.com/salt-5180146

Stock Gap

A stock gap is an area discontinuity in a security’s chart where its price either rises or falls from the previous day’s close with no trading occurring in between. Gaps are common when news causes market fundamentals to change during hours when markets are typically closed, for instance, an earnings call after-hours.

https://www.investopedia.com/terms/g/gap.asp

Stock picking

Stock picking refers to the supposed ability to select stocks that are undervalued and will outperform the market over some future period of time.

Stocks

Stocks are ownership interests (equity) in companies. After a company has paid all of its expenses for the year (including taxes and interest on debt), the remainder belongs to the owners. The total money left divided by the number of shares of stock outstanding is known as the earnings per share (EPS). This EPS can be reused by the company for growth or can be returned to stockholders either as dividends or through a repurchase of the stock by the company. The price of a share of stock increases or decreases in relation to the value potential investors put on it when they analyze the company’s prospects for continuing to earn more than the company’s costs in the future.

1. Stocks: What They Are, Main Types, How They Differ From Bonds: https://www.investopedia.com/terms/s/stock.asp

Stagflation

Stagflation is a combination of high inflation, steep unemployment, and stagnant economic growth. It’s an unusual mix because inflation is expected to occur when unemployment is low and the economy is growing. With stagflation, it’s the worst of all worlds.

Standard Deviation

Standard Deviation measures the volatility of a security or of a portion of securities. Specifically, it measures the fluctuation of stock prices without regard to direction. Standard Deviation is measured using a statistical calculation. It is important for every investor to know, and understand the significance of, the standard deviation of his or her investment portfolio.

One of the major differences between Smart investors and hyperactive investors is - the relationship between risk and portfolio return.

Standard deviation is the way to mathematically measure how risky an investment or a portfolio really is. It has been accepted as the most appropriate way to measure the risk in investment portfolios since the work on Harry Markowitz in the late 1950s. Markowitz won the Nobel Prize in Economics for his research.

Look at Standard deviation in investing they way you look at the lab results of your blood tests. You really don’t need to understand how the lab arrived at the numbers, but you do need to know what is within normal range.

In investing, the higher the standard deviation, the more risky the portfolio. Here are some general guidelines, using the fall 2005 standard deviation of the S&P 500 as a guide:

• Conservative investors should have a standard deviation no higher than 8%
• Moderately aggressive investors should have a standard deviation no higher than 15%
• Very aggressive investors should have a standard deviation no higher than 20%
• No one should have a standard deviation higher than 30%, if that.

Step-Up in Basis

The event in which the value of an asset is adjusted from its initial cost basis to its current market value upon the owner’s death.

Substitution Effect

Consumers switching to cheaper products as price increases.

https://www.investopedia.com/terms/s/substitution-effect.asp

Supply Chain Management

Supply chain management (SCM) is the monitoring and optimization of the production and distribution of a company’s products and services.

https://www.investopedia.com/terms/s/scm.asp

Swap Spread

A swap spread is the difference between the fixed component of a given swap and the yield on a sovereign debt security with a similar maturity.

https://www.investopedia.com/terms/s/swapspread.asp

Symmetrical Triangle Pattern

A symmetrical triangle is formed by trend lines connecting a series of sequentially lower peaks and higher troughs. This pattern is considered a continuation pattern, indicating a period of consolidation before the price breaks out.

https://www.investopedia.com/terms/s/symmetricaltriangle.asp

Tarrifs

Tax Cuts and Jobs Act (TCJA)

The Tax Cuts and Jobs Act (TCJA) was a major overhaul of the tax code, signed into law by President Donald Trump in his first term on Jan. 1, 2018.

https://www.investopedia.com/taxes/trumps-tax-reform-plan-explained/

Terms and Conditions

Terms and conditions for a credit card are the formal statement of rules and guidelines that govern the relationship between a credit card issuer and a credit cardholder. All the details about a card’s interest rates, fees, and reward structure are listed in the document.

https://www.investopedia.com/terms/t/terms-and-conditions-credit-card.asp

The Glass Ceiling

An invisible systemic barrier that prevents certain people from rising to senior-level positions within an organization.

https://www.investopedia.com/terms/g/glass-ceiling.asp

Time value of money

Time-Varying Volatility

Time-varying volatility refers to the fluctuations in volatility over different time periods. Investors may choose to study or consider the volatility of an underlying security during various time periods.

https://www.investopedia.com/terms/t/time-varying-volatility.asp

Target Rate

1. A target rate is a key interest rate that a central bank uses to guide monetary policy toward the desired economic outcomes.
2. A central bank can choose its target based on official discretion or specific policy rules with the intent of influencing economic variables, such as employment or inflation.
3. The Federal Open Market Committee generally uses the overnight fed funds rate as its target rate.

https://www.investopedia.com/terms/t/target-rate.asp

Technical Indicator

https://www.investopedia.com/terms/t/technicalindicator.asp

Theory of Price

The theory of price states that the price for a specific good or service is determined by the relationship between its supply and demand at any given time.

https://www.investopedia.com/terms/t/theory-of-price.asp

Trade Deficit

https://www.investopedia.com/terms/t/trade_deficit.asp

1. A trade deficit occurs when a country’s imports exceed its exports during a given period.

2. Also referred to as a negative balance of trade (BOT).

3. Balances are calculated for several categories of international transactions

   1. goods (a.k.a., “merchandise”), services, goods and services.

4. Trade deficits can be shorter or longer term.

5. Implications of a trade deficit depend on impacts on production, jobs, national security and how the deficits are financed.

6. Balance of Trade (BOT): https://www.investopedia.com/terms/b/bot.asp

7. https://www.investopedia.com/terms/t/trade_deficit.asp

8. https://www.investopedia.com/articles/investing/051515/pros-cons-trade-deficit.asp

9. https://www.investopedia.com/ask/answers/061515/what-happens-us-dollar-during-trade-deficit.asp

10. https://www.investopedia.com/ask/answers/trade-deficit-effects-on-stock-market/

11. https://www.investopedia.com/ask/answers/041615/which-factors-can-influence-countrys-balance-trade.asp

Trade Signal

https://www.investopedia.com/terms/t/trade-signal.asp

Trade Wars

A trade war is an economic dispute between two countries. It can occur when one country retaliates against another’s perceived unfair trading practices with restrictions, such as tariffs, on imports.

https://www.investopedia.com/terms/t/trade-war.asp

True Cost Economics

True cost economics is an economic model that seeks to include the cost of negative externalities in the pricing of goods and services.

https://www.investopedia.com/terms/t/truecosteconomics.asp

Trustee

A trustee is a person or firm that holds and administers property or assets for the benefit of a third party.

https://www.investopedia.com/terms/t/trustee.asp

Trusts or Trust Funds

https://www.investopedia.com/terms/t/trust-fund.asp

U.S. Debt Ceiling

The debt ceiling—also known as the debt limit—is the maximum amount of money that the United States can borrow cumulatively to meet its existing legal obligations.

https://www.investopedia.com/terms/d/debt-ceiling.asp

U.S. Dollar index

It measures the dollar against the euro, yen and other major currencies.

See How the strong U.S. dollar can affect everyone

Undervalued

1. What Does Undervalued Mean? Definition in Value Investing https://www.investopedia.com/terms/u/undervalued.asp

Unicorn

The term unicorn refers to a privately held startup company with a value of over $1 billion.

1. https://www.investopedia.com/terms/u/unicorn.asp

Universal Default

The term “universal default” refers to a provision found in some credit cards’ cardholder agreements. According to this provision, the credit card company is permitted to increase the interest rate on the credit card if the cardholder fails to make their minimum monthly payment.

https://www.investopedia.com/terms/u/universal-default.asp

Uptrend

https://www.investopedia.com/terms/u/uptrend.asp

Valuation

Valuation is the analytical process of determining the current (or projected) worth of an asset or a company.

https://www.investopedia.com/terms/v/valuation.asp

Volatility

A statistical measure of the dispersion of returns for a given security or market index.

https://www.investopedia.com/terms/v/volatility.asp

Wage Garnishment

Wage garnishment is one way someone can collect on a debt. It’s a legal process that allows part of your paycheck to be garnished, or taken, by the government or person you owe money to.

Weather Derivative

A weather derivative is a financial instrument that allows companies or individuals to hedge against the risk of financial losses due to adverse weather conditions.

https://www.investopedia.com/terms/w/weatherderivative.asp

Weighted Average Cost of Capital

A firm’s average cost of capital, weighted to reflect that different sources of capital, like common stocks and bonds, carry different return expectations.

1. Cost of Capital: What It Is, Why It Matters, Formula, and Example: https://www.investopedia.com/terms/c/costofcapital.asp
2. Required Rate of Return (RRR): Definition and Examples: https://www.investopedia.com/terms/r/requiredrateofreturn.asp
3. Capital: Definition, How It’s Used, Structure, and Types in Business: https://www.investopedia.com/terms/c/capital.asp

West Texas Intermediate

West Texas Intermediate (WTI) is a grade of crude oil and one of the main three benchmarks in oil pricing, along with Brent and Dubai Crude.

What do these mean?

U.S. Trade Deficit

What is the difference between a ‘put’ and a ‘call’ option?

What is the difference between a CDO and a CDS?

What are “derivatives” and “options” (in relation to stocks)?

Wholesale Price Index

A wholesale price index (WPI) measures change in the overall price of goods before they are sold at retail. This includes the prices charged by manufacturers and, often outside the U.S., wholesalers. Usually expressed in terms of the percentage change from the prior month or a year earlier, the WPI is an inflation indicator.

https://www.investopedia.com/terms/w/wpi.asp

Withholding Tax

Tags

1. Explanation of Trade Types