Financial Terms

12b-1 Fees - A 12b-1 fee is a fee charged by a mutual fund that covers the marketing and distribution costs of the fund as well as some service fees.
52-Week High/Low - The 52-week high and low for a stock represents the highest closing price and the lowest closing price the stock has traded at over a 52-week period.
Analyst Ratings - Analyst ratings or stock ratings, such as “Buy”, “Sell”, and “Hold” are an evaluation of a stock's expected performance and/or it's risk level as determined by a rating agency or brokerage firm
Analyst Ratings Trading - The traditional ratings an analyst uses are “buy”, “sell”, and “hold” although they may use additional categories such as “underperform” and “outperform” to show a broader spectrum of potential outcomes to investors.
Asset Allocation - Asset allocation is an investment strategy that purposes to balance risk versus reward by adjusting the percentage of each asset, among different asset classes (i.e. stocks, bonds, cash, real estate, etc.) in an investment portfolio.
Average Daily Trade Volume - ADTV - Average daily trading volume (ADTV) is a calculation that identifies the number of individual securities traded over a specified amount of time, divided by the number of days in that time period.
Backdoor Roth IRA - A backdoor Roth IRA is not a financial product, but rather a strategy that high-income earners can use to put retirement savings into a Roth IRA
Back-End Load - A back-end load is a sales charge (or commission) that an investor pays when they sell shares in a mutual fund.
Balance Sheet - A company’s balance sheet gives an accounting of what a company owns (its assets), what it owes (its liabilities), and the amount of capital that the company receives from its shareholders.
Balanced Fund - A balanced fund is a kind of mutual fund that has a mix of both equities (such as stocks or commodities) and bonds.
Bear Market - A bear market is defined as a market that declines by 20% or more over at least a two-month timeframe.
Beta - Beta is the result of a calculation that measures the relative volatility of a stock in correlation to a particular standard.
Bid-Ask Spread - The bid-ask spread is a tool that market makers at financial institutions use to facilitate buying and selling in a way that facilitates orderly trading.
Blue-Chip Stocks - Blue-chip stocks are known for their quality and stability. Although there is no single definition, investors typically agree that a blue-chip stock has a market capitalization of over $5 billion dollars
Bollinger Bands - Bollinger bands are a technical analysis tool that clarifies the price action of a security by showing its volatility through the expansion or contraction of the bands over a period of time.
Bond - A bond is a type of fixed-income security that can be thought of like a credit instrument by the issuing party.
Book Value Per Share – BVPS - Book value per share (BVPS) is a ratio used to compare a firm's common shareholder's equity to the number of shares outstanding.
Bull Market - A bull market occurs when a particular asset class is rising in value. This encourages buying, which then causes the asset class to continue to rise.
Buyback - In a stock buyback, or share repurchase program, a company repurchases their shares in the marketplace
Call Option - The owner of the call option, an investor is buying the right, but not the obligation, to purchase a specific number of shares of a company’s stock at an agreed upon price.
Candlestick - A candlestick is a technical indicator that shows traders the opening and closing price of a stock for a specific period.
Capital Gains - A capital gain is an increase in value between the price an asset (such as real estate or stocks) is sold for and the price that an investor paid for the asset.
Cash Flow - Cash flow is a measurement of how much cash and cash equivalents a company is receiving and how much it is sending out.
Catch-Up Contributions - Catch-up contributions are deposits that are made above and beyond what is allowed in an employer-sponsored retirement plan.
Certificate of Deposit (CD) - A certificate of deposit (CD) is a financial product that allows a financial institution or brokerage firm (typically banks and credit unions) to hold a depositor’s funds until a fixed maturity date in exchange for a fixed rate of return.
Channel Trading - Channel trading is a trading strategy that relies on technical analysis based on defined trading channels created by price movement patterns.
Closed-End Mutual Funds - Closed-end mutual funds (CEFs) are a special type of mutual fund, an investment structure, with shares traded in the open market, like stocks or ETFs
Compound Annual Growth Rate (CAGR) - The compound annual growth rate is a value that represents the arithmetic mean of an investment’s annual growth rate over a specified period of time.
Compound Interest - Compound interest is the interest calculated on an additional principal balance that includes not only the interest on the principal but also the interest on all the interest that has accumulated in the previous period.
Conference Calls - A conference call is an event that allows companies to provide information to any interested party. This includes institutional investors (such as the large investment banks and stock analysts) but is also available to individual investors.
Consumer Price Index (CPI) - The consumer price index examines the average cost of a select group of consumer goods and services that range from food and beverages to smartphones and medical care.
Convertible Shares - Convertible shares are a class of a company’s preferred shares. Like common shares, convertible shares give shareholders an ownership stake in the company that is offering the shares.
Correction - In investing terms, a correction is defined as a statistical event where the price of a security or asset class experiences a decline of at least 10% (although it could be more) from its most recent peak.
Cost of Capital - The cost of capital is the amount of money needed to make a capital budgeting project worthwhile.
Cost of Debt - In its simplest form, cost of debt is the effective interest rate that a company will pay on all of its debt obligations. The cost of debt is expressed as a percentage.
Cost of Equity - For a business, the cost of equity is the expected return they will get from the equity financing they receive. For an investor, the cost of equity is the expected return that they will get in exchange for their investment in a business in the form of buying shares
Cost of Goods Sold (COGS) - Cost of goods sold (COGS) is essentially how much it costs a business to make a sale. This is why COGS is also referred to as the cost of sales.
Coverage Ratio - The coverage ratio is actually a series of ratios that are used by investors to determine a company’s ability to meet their financial obligations.
Current Ratio - The current ratio (also known as the working capital ratio) is a tool that allows investors to assess the liquidity of a company.
Day Trading - Day trading is the practice of buying and selling securities within a single day. Although day traders will frequently enter and exit trades within several hours, or even several minutes.
Debt-To-Equity Ratio - A company’s debt-to-equity ratio is a performance metric that measures a company’s level of debt in relation to the overall value of their stock
Depreciation - Depreciation is an accounting practice that allows a company to record, as an expense, only a portion of an asset’s cost over the period of that asset’s useful life.
Derivative - A derivative is a contractual agreement between two parties. The value of the derivative is determined by the value of an underlying asset such as stocks, bonds, commodities (oil, wheat, soybeans, etc.) or precious metals (gold, silver, etc.)
Discount Rate - The most common definition is when referring to the interest rate the Federal Reserve Banks charge to financial institutions who borrow money from their overnight discount window.
Diversification - Diversification in investing is the method of allocating capital that reduces the exposure to any one particular asset or risk. The strategy towards diversification is to reduce risk or volatility by investing in a variety of assets.
Dividend - Dividend investing focuses either on collecting high dividend yield stocks or stocks with fast-growing dividends. Dividend stocks are stocks issued by companies who redistribute a portion of their profits to their shareholders on a regular basis.
Dividend Aristocrat Index - The dividend aristocrat index is a group of blue-chip S&P 500 companies that have a documented history of delivering increased dividends for at least 25 consecutive years.
Dollar Cost Averaging - Dollar cost averaging is an investment strategy where an investor buys a fixed dollar amount of a security at regular intervals regardless of the price.
Dow Jones Industrial Average (DJIA) - Dow Jones Industrial Average (DJIA) is one of the most-watched indices in the world. An index of 30 blue chip stocks that use a variable to create a price-weighted average that fluctuates with price changes in the component stocks.
Earnings Per Share - Earnings per share (EPS) is an investment metric determines a company's profit divided by its number of common outstanding shares.
Earnings Reports - Earnings reports are part of the legal requirements that publicly held companies must meet to disclose their company’s performance.
Exchange-Traded Funds (ETFs) - An exchange-traded fund is a pooled investment vehicle that has some of the attributes of owning individual stocks and some attributes of owning a mutual fund or an index fund.
Ex-Dividend - The ex-dividend date is the first day a stock will be trading “ex-dividend”, established by the market once the company announces a date of record for their dividend.
Federal Reserve - The Federal Reserve is the central bank of the United States of America. The Federal Reserve (The Fed) plays an important role in formulating and guiding our nation’s monetary policy.
Fiduciary - A fiduciary is someone who has a legal responsibility to put your needs above their own. A broker or financial planner working under a fiduciary standard is ethically bound to act in his or her client’s best interests.
Float - Float refers to the number of shares that a company issues that are available for trading on secondary markets without restriction.
Front-End Load - A front-end load is a sales charge that an investor pays at the time they purchase shares in a mutual fund.
Fundamental Analysis - Fundamental analysis, like technical analysis, attempts to predict which stocks are valuable and which are not, through analyzing a number of factors that affect stock prices such as sales, price to earnings (P/E) ratio, profits, earnings per share (EPS), and industry-specific factors.
Futures Contract - A futures contract, otherwise known as trading futures involves a buyer and a seller who enter a legally binding contract to trade a specified amount of an asset at a particular date for a specific price.
Google Finance - Google Finance is a search tab within that allows investors to track investment and screen stocks according to the relevance of their preferences.
Google Finance Portfolio - Google Finance portfolio allows investors to add an investment portfolio or stock watchlist and track the day-to-day performance of current holdings, and get individual charting.
Growth Stocks - Growth stocks are companies that tend to increase in capital value rather than yield high income. This growth, in turn, allows their stock prices to rise, usually at a pace that will outperform the broader stock market.
Hedge Funds - A hedge fund is an alternative to traditional forms of investing. Hedge funds use a pool of funds from investors who meet certain criteria in an effort to achieve a positive absolute return for their investors.
Index Funds - An index fund is a type of mutual fund that includes a portfolio of equities designed to match or track a specific market index.
Inflation - Inflation is a general rise in the cost of goods and services which is offset by a symmetrical decline in the purchasing power of a currency.
Initial Public Offering (IPO) - An Initial Public Offering (IPO) is a formal process in which a previously private company for the first time raises money through the sale of shares to institutional (and on rare occasions) retail investors on a major stock exchange
Insider Trading - Insider trading is the action of buying or selling (“trading”) a security based on material information that is not available to the public.
Institutional Investors - Institutional investors are large firms that buy and sell securities and make other investment decisions, on behalf of individual members or shareholders.
Intrinsic Value - In simple terms, intrinsic value helps an investor determine whether a company’s stock is overvalued or undervalued. Determining a stock’s intrinsic value is one way to do this.
Leveraged Buyout (LBO) - A leveraged buyout (LBO) is a financial transaction, an acquisition of a company that is financed almost entirely by debt. The concept of a buyer being able to “take over” another entity without putting a lot of their capital at risk is why this is referred to as a “leveraged” buyout.
LIBOR - The London Interbank Offered Rate is the lowest rate that banks charge to lend to each other.
Liquidity - Liquidity is a non-statistical measurement of how easily an asset (cash, securities, collectibles, real estate, etc.) can be bought or sold without affecting the asset’s price.
Lock-Up Period Expiration - A lock-up period (also known as a lock-up agreement) is a period of time (usually between 90-180 days) when investors are not allowed to buy or redeem shares.
Marijuana Stocks - When looking at marijuana stocks, you’re looking for the same fundamentals that you would with any other business including their growth opportunities, the quality of the product, their location and their management team. 
Market Capitalization - Market capitalization is the market value of a company's outstanding shares and is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures.
Momentum Investing - Momentum investing is a trading strategy that requires investors to identify chart patterns for indications of stocks that are riding a trend.
Moving Average (MA) - A moving average is a lagging indicator that is intended to give investors a view of where a security is trending without the outlying moves in price
Municipal Bonds - Municipal bonds (otherwise known as “Munis”) are government-issued debt securities that are used to fund day-to-day operating expenses or to fund large-scale capital projects like building schools and repairing highways and bridges.
Mutual Funds - Every mutual fund is a company that combines money from multiple investors and invests those funds into securities that are dictated by the fund’s prospectus.
NASDAQ - The Nasdaq Stock Market or NASDAQ. is an American stock exchange. It is the second-largest exchange in the world by market capitalization,
Net Asset Value - Net asset value is the value of a fund’s assets minus its liabilities (i.e. net assets) relative to their outstanding shares.
Net Income - Net income is the measurement of whether or not a company is making money and, if so, how much profit they are retaining.
Net Margin - Net margin (also known as net profit margin) is the amount of revenues that remains as profit after a given period of time.
No Load Funds - The standard load for most funds is somewhere between 4% and 6%. A no-load fund, by contrast, does not charge a sales fee for transactions.
Options Trading - Options trading is the sale of a contract between a buyer and a seller in which the buyer of the contract is purchasing the right, but not the obligation, to buy or sell a quantity of a security at a specified price on or before a specified date.
Outstanding Shares - Outstanding shares are all the shares of a corporation or financial asset that have been authorized, issued and purchased by investors and are held by them. They have rights and represent ownership in the corporation by the person who holds the shares.
Penny Stocks - Penny Stocks are common shares of small public companies that trade at low prices per share. The U.S. Securities and Exchange Commission (SEC) defines a penny stock as a security that trades below $5-per-share.
Preferred Stock - Preferred stock is a class of stock that has a higher (or preferred) claim to the assets and earnings of a corporation than owners of common stock.
Price to Earnings Ratio (PE) - The price to earnings ratio (P/E) measures its current share price relative to its per-share earnings. The ratio is used in valuing companies.
Price-Sales Ratio - Valuation is a term investors use to indicate the degree to which a stock is accurately priced. The price-sales ratio does this by comparing a company’s stock price to its revenues.
Put Option - A put option is a financial contract between a buyer and a seller. The owner of the put buys the right, but not the obligation, to sell the buyer of the contract 100 shares of a given stock at an agreed-upon price on or before the option's expiration date.
QQQ ETF - The QQQ ETF is also known as the PowerShares QQQ. This is one of the most widely held and traded exchange-traded funds (ETF)
Quick Ratio - The quick ratio (also known as the acid-test ratio) is a liquidity ratio that can be used as a stand-alone metric of liquidity or used to refine the current ratio.
Quiet Period - For businesses that are issuing an Initial Public Offering (IPO) that will allow them to enter the capital market and begin to trade their stock on a major exchange, the quiet period refers to the period of time (called the waiting period) that starts once the company and the underwriters of the IPO agree to proceed with the offering.
Quiet Period Expirations - Quiet period expirations are the dates upon which a company’s registration for an Initial Public Offering (IPO) has been approved by the Securities & Exchange Commission (SEC).
Relative Strength Index - Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between zero and 100.
Retained Earnings - Retained earnings tell you how much profit a company has left over after they have paid out dividends. Retained earnings are different from revenue in the way that disposable income is different from salary.
Return On Assets - The return on assets (ROA) ratio is one of several profitability measures that investors use to measure their return on investment (ROI).
Return on Equity (ROE) - Return on equity is a measurement of how efficient a company is in using its assets from their shareholders to create earnings.
Return on Investment (ROI) - Return on investment (ROI) is a performance measurement that shows your profit on an investment as a percentage of your overall investment.
Reverse Stock Split - A reverse stock split is a deliberate corporate action where a company reduces the number of outstanding shares in the market while increasing the price per share by a proportional amount, therefore, keeping the market value of the shares the same.
Risk Tolerance - Risk tolerance is a measurement of an investor’s willingness to accept a degree of variability in their investment returns
Roth IRA - A Roth IRA is an individual retirement account with several unique features that separate it from other retirement plans.
Rule of 72 - The Rule of 72 is a simplified equation that can help estimate the number of years required to double the money that is growing at a specified rate of return.
S&P 500 Index - The Standard and Poor’s (S&P) 500 index is a widely used stock market index that follows the stock price performance of 500 large cap companies.
SEC Filing - An SEC filing is a series of documents that a publicly traded company must file with the United States Securities & Exchange Commission (SEC).
Short Selling - Short selling refers to the sale of a security, such as a stock, not owned by the seller or that the seller has borrowed. The trading strategy is motivated by the belief that the prices of a security will drop
Stochastic Momentum Index (SMI) - The Stochastic Momentum Index (SMI) is an indicator of momentum for a security. The SMI is used in technical analysis as a refined alternative to a traditional stochastic oscillator.
Stock Split - A stock split is an action taken by a corporation through which they increase the number of their outstanding shares by dividing (or splitting) each share.
Stock Symbol - A stock symbol is an abbreviation used to identify publicly traded shares of a particular stock on a particular stock market. A stock symbol may consist of letters, numbers or a combination of both.
Stop Order - A stop order is a trading mechanism that automatically issues a market order to buy or sell a stock once its price reaches a predetermined target.
Straddles - A straddle is an options trading strategy that takes advantage of the implied volatility (i.e. the price movement) of an underlying asset even when they do not know the exact direction of that movement.
Strangles - The strangle strategy in trading options is premised on the anticipation of strong price movement in one direction or another by a particular security.
Strike Price - The strike price is the price at which the buyer of the option can exercise his option. This is why the strike price is called the exercise price.
Swap - A swap is a form of a derivative instrument where two parties enter into a contract to exchange a sequence of cash flows. This exchange takes place on a specific date or at specific intervals as specified in the contract. 
Systematic Risk - Systematic risk is most simply defined as the inherent risk an investor takes by having money invested into a specific asset class.
Tariff - A tariff is a tax (also referred to as a customs duty) that is applied to foreign goods entering another country.
Technical Analysis - Technical analysis is the interpretation of the price action of a company's underlying stock using various charts and statistical indicators to determine price support/resistance, range, and trends.
Trading Ex-Dividend - Trading ex-dividend means to enter a trade prior to a stock’s ex-dividend date and closing the trade shortly after the date.
Trading Strategy - A trading strategy in the stock market is simply a plan designed to make a profit in the stock market by selling short or buying long.
Treasury Bonds - A treasury bond is a government bond issued by the United States Treasury Department. Treasury bonds are one fixed-rate security that the United States issues to fund its national debt.
Yield Curve - The yield curve is a visual representation of the relationship between bond yields and the maturity length of different bonds.

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