Glossary

Finance & Investing Glossary

Bull Market

Trading

A financial market in which prices are rising or expected to rise.More in Detail

Bear Market

Trading

A market condition in which prices are falling or expected to fall. More in Detail

Dividend

Stocks

A distribution of profits by a corporation to its shareholders. More in Detail

Yield

Investment

The income return on an investment, such as interest or dividends.

Market Capitalization

Stocks

The total value of a company's shares of stock.

Liquidity

Investment

The degree to which an asset can be quickly bought or sold without affecting its price.

GDP

Economics

Gross Domestic Product - the total monetary value of all finished goods and services produced within a country.

Bond Yield

Bonds

The return an investor realizes on a bond.

APR

Banking

Annual Percentage Rate - the yearly interest rate charged for borrowing.

Diversification

Investment

Spreading investments across different assets to reduce risk.

P/E Ratio

Stocks

Price-to-Earnings Ratio - a metric used to value a company by measuring its current share price relative to its earnings per share.

Blue Chip Stocks

Stocks

Shares of large, well-established, and financially sound companies that have a history of reliable performance.

Common Stock

Stocks

A type of security that represents ownership in a corporation and gives shareholders voting rights.

Preferred Stock

Stocks

A class of stock that typically pays fixed dividends and has priority over common stock in dividend payments and asset claims.

Stock Split

Stocks

A corporate action that increases the number of shares by dividing existing shares, reducing the price per share proportionally.

Volatility

Stocks

A measure of how much a stock's price fluctuates over time, indicating its level of risk.

IPO

Stocks

Initial Public Offering - the process of offering shares of a private company to the public for the first time.

Dividend Yield

Stocks

The ratio of a company's annual dividend payments relative to its stock price, expressed as a percentage.

Corporate Bond

Bonds

A debt security issued by a corporation to raise capital, typically paying periodic interest and returning the principal at maturity.

Treasury Bond

Bonds

A government debt security with a maturity of more than 10 years, backed by the full faith and credit of the U.S. government.

Municipal Bond

Bonds

A debt security issued by a state, city, or local government to finance public projects, often offering tax-free interest income.

Coupon Rate

Bonds

The annual interest rate paid by a bond issuer relative to the bond's face value.

Duration

Bonds

A measure of a bond's price sensitivity to changes in interest rates.

Junk Bond

Bonds

A high-yield, high-risk bond with a credit rating below investment grade.

Zero-Coupon Bond

Bonds

A bond that doesn't pay periodic interest but is sold at a discount and redeemed at face value at maturity.

Bond Maturity

Bonds

The date when a bond's principal must be repaid to the bondholder.

Asset Allocation

Investment

The strategic distribution of investments across different asset classes to balance risk and return.

Portfolio Rebalancing

Investment

The process of realigning the weightings of assets in an investment portfolio to maintain the desired level of asset allocation.

Dollar-Cost Averaging

Investment

An investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions.

Risk Tolerance

Investment

The degree of variability in investment returns that an investor is willing to withstand.

Compound Interest

Investment

Interest earned on both the initial principal and previously accumulated interest, leading to exponential growth over time.

ETF

Investment

Exchange-Traded Fund - a type of investment fund traded on stock exchanges, typically tracking an index or basket of assets.

Mutual Fund

Investment

A professionally managed investment fund that pools money from multiple investors to purchase securities.

Index Fund

Investment

A type of mutual fund or ETF designed to track the performance of a specific market index.

Capital Gains

Investment

The profit realized from the sale of an investment that has increased in value.

ROI

Investment

Return on Investment - a performance measure used to evaluate the efficiency or profitability of an investment.

FDIC Insurance

Banking

Federal Deposit Insurance Corporation protection that covers depositor accounts at member banks up to $250,000 per depositor, per bank.

Overdraft

Banking

When withdrawals from a bank account exceed the available balance, often resulting in fees and penalties.

Direct Deposit

Banking

Electronic transfer of payments directly into a bank account, commonly used for payroll and government benefits.

ACH Transfer

Banking

Automated Clearing House network used for electronic funds transfer between banks, including bill payments and direct deposits.

Wire Transfer

Banking

Electronic transfer of funds from one bank account to another, typically processed the same day and often used for large transactions.

Certificate of Deposit

Banking

A time deposit that offers a higher interest rate in exchange for leaving money untouched for a specific period.

Money Market Account

Banking

A high-yield savings account that typically requires a higher minimum balance and may offer check-writing privileges.

Credit Score

Banking

A numerical rating of creditworthiness based on credit history, used by lenders to evaluate loan applications.

Mortgage

Banking

A loan used to purchase real estate, typically requiring regular payments over an extended period.

HELOC

Banking

Home Equity Line of Credit - a revolving credit line secured by the equity in your home.

Inflation

Economics

A general increase in prices and fall in the purchasing value of money over time.

Deflation

Economics

A general decrease in prices and increase in the purchasing value of money, often associated with reduced spending and economic slowdown.

Fiscal Policy

Economics

Government spending and taxation decisions used to influence the economy.

Monetary Policy

Economics

Central bank actions to control money supply and interest rates to achieve economic goals.

Supply and Demand

Economics

The economic model describing how prices are determined by the interaction between buyers and sellers in a market.

Recession

Economics

A period of temporary economic decline, generally identified by a fall in GDP in two successive quarters.

Depression

Economics

A severe and prolonged downturn in economic activity, more severe than a recession.

Trade Deficit

Economics

The amount by which the cost of a country's imports exceeds the value of its exports.

Exchange Rate

Economics

The rate at which one currency can be exchanged for another.

Consumer Price Index (CPI)

Economics

A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Unemployment Rate

Economics

The percentage of the labor force that is actively seeking employment but unable to find work.

Economic Growth

Economics

An increase in the production of goods and services in an economy over time, typically measured by the rate of change in GDP.