Asset Allocation: The process of dividing investments among different asset categories, such as stocks, bonds, and cash, to optimize the balance of risk and reward based on an individual's goals and risk tolerance.

 

Bond: A fixed income instrument representing a loan made by an investor to a borrower, typically corporate or governmental. Bonds pay periodic interest and return the principal at maturity.

 

Capital Gain: The profit realized when an investment is sold for a higher price than its purchase price.

Diversification: A risk management strategy that mixes a wide variety of investments within a portfolio to reduce exposure to any single asset or risk.

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Dividend: A portion of a company's earnings that is paid to shareholders, typically on a quarterly basis.

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Exchange-Traded Fund (ETF): A type of investment fund that is traded on stock exchanges, similar to stocks. ETFs hold assets such as stocks, commodities, or bonds and generally operate with an arbitrage mechanism designed to keep trading close to its net asset value.

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Index Fund: A type of mutual fund or ETF designed to replicate the performance of a specific index, such as the S&P 500.

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Inflation: The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Initial Public Offering (IPO): The process through which a private company offers shares to the public for the first time.

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Mutual Fund: An investment vehicle that pools money from many investors to purchase securities such as stocks, bonds, and other assets.

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Net Asset Value (NAV): The value per share of a mutual fund or ETF, calculated by dividing the total value of all the assets in the portfolio, minus any liabilities, by the number of shares outstanding.

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Portfolio: A collection of investments owned by an individual or an institution.

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Price-to-Earnings (P/E) Ratio: A valuation ratio of a company's current share price compared to its per-share earnings. It is used to determine the relative value of a company's shares.

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Return on Investment (ROI): A measure of the profitability of an investment, calculated as the net profit divided by the initial cost of the investment.

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Risk Tolerance: An investor's ability and willingness to endure fluctuations in the value of investments.

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Securities: Financial instruments that represent some type of financial value, such as stocks, bonds, or options.

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Stock: A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

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Yield: The income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost or current market value.

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Volatility: A statistical measure of the dispersion of returns for a given security or market index. High volatility means the price of the asset can change dramatically over a short period.

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Blue Chip Stock: Shares in a large, well-established, and financially sound company that has operated for many years and typically has a strong record of performance and reliability.

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Bear Market: A market condition where prices are falling or are expected to fall, typically by 20% or more from recent highs, leading to a general pessimism and a negative sentiment among investors.

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Bull Market: A market condition where prices are rising or are expected to rise, typically by 20% or more from recent lows, leading to general optimism and positive sentiment among investors.

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Call Option: A financial contract that gives the holder the right, but not the obligation, to buy a stock or other asset at a specified price within a specific time period.

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Put Option: A financial contract that gives the holder the right, but not the obligation, to sell a stock or other asset at a specified price within a specific time period.

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Credit Rating: An assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. It is used by lenders to gauge the risk of lending money.

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Derivative: A financial security whose value is dependent upon or derived from an underlying asset or group of assets, such as options, futures, and swaps.

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Dividend Yield: A financial ratio that shows how much a company pays out in dividends each year relative to its share price. It is calculated as annual dividends per share divided by the price per share.

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Expense Ratio: A measure of what it costs an investment company to operate a mutual fund or ETF, expressed as a percentage of the fund's average net assets.

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Fundamental Analysis: A method of evaluating a security by attempting to measure its intrinsic value, analyzing related economic, financial, and other qualitative and quantitative factors.

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Growth Stock: Shares in a company expected to grow at an above-average rate compared to other companies. These stocks generally do not pay dividends.

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Hedge: An investment made to reduce the risk of adverse price movements in an asset, typically involving positions in both the asset and a related derivative.

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Inflation Risk: The risk that the value of assets or income will decrease as inflation decreases the purchasing power of a currency.

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Interest Rate Risk: The risk that changes in interest rates will negatively affect the value of an investment, particularly bonds.

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Liquidity: The ease with which an asset can be converted into cash without affecting its market price.

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Market Capitalization (Market Cap): The total market value of a company's outstanding shares, calculated as the share price times the number of outstanding shares.

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Penny Stock: A small company's stock that typically trades for less than $5 per share and is usually highly speculative and illiquid.

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Recession: A period of temporary economic decline during which trade and industrial activity are reduced, typically defined as a fall in GDP in two successive quarters. 

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REIT (Real Estate Investment Trust): A company that owns, operates, or finances income-producing real estate and is traded like a stock on major exchanges.

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Sharpe Ratio: A measure of the risk-adjusted return of an investment, calculated as the average return earned in excess of the risk-free rate per unit of volatility or total risk.

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Short Selling: The practice of selling securities or other financial instruments that are not currently owned, and subsequently repurchasing them ("covering") to profit from a decline in the price.

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Small-Cap Stock: Shares of a publicly traded company with a relatively small market capitalization, typically between $300 million and $2 billion.

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Stop-Loss Order: An order placed with a broker to buy or sell once the stock reaches a certain price, designed to limit an investor's loss on a security position.

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Time Horizon: The expected length of time that an investment is held before it is liquidated.

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Treasury Bond: A long-term, fixed-interest government debt security with a maturity of more than ten years.

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Value Stock: Shares of a company that appear to trade at a lower price relative to its fundamentals, such as dividends, earnings, or sales, making it attractive to value investors.

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Venture Capital: A form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.

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Yield Curve: A graph that shows the relationship between interest rates and bonds of equal credit quality but different maturity dates, often used as an economic indicator.

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Earnings Per Share (EPS): A company's profit divided by the outstanding shares of its common stock, indicating the company's profitability.

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Market Order: An order to buy or sell a stock immediately at the best available current price.

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Limit Order: An order to buy or sell a stock at a specific price or better.