Glossary

Accrued Interest

Accrued interest is the interest that accumulates on a loan or investment over time.

Annual Percentage Rate (APR)

Annual Percentage Rate (APR) is the annual rate charged for borrowing, expressed as a single percentage number that represents the actual yearly cost over the life of a loan.

Asset

An asset is anything that has the potential to generate income or appreciate in value.

Balance Sheet

Your balance sheet is a snapshot of your assets, liabilities and net worth at a specific point in time.

Bank Failures

A bank failure is the closure of a bank by a government or regulatory agency. It can be caused by the bank's insolvency, a lack of liquidity, or improper management.

Bankruptcy

Bankruptcy is a legal process that allows individuals or businesses to have some or all of their debt forgiven.

Bear Market

A bear market is a financial market in which prices are declining or are expected to decline.

Brokerage Firm

A brokerage firm is a company that helps people buy and sell stocks, bonds, and other types of investments. The brokerage firm charges a commission for its services.

Budget

A budget tells you how much money you have to spend, save, and invest.

Bull Market

A bull market is a financial market in which prices are rising or are expected to rise.

Capital

Capital refers to the total value of a company or an owner's assets. This includes things like cash, property, investments, and inventory.

Certificate of Deposit (CD)

A certificate of deposit (CD) is a type of savings account that offers a higher interest rate than a traditional savings account.

Checking Account

A checking account is a bank account where people deposit their money and use it to write checks or make electronic payments.

Collateral

Collateral is something of value that you pledge to a lender as a guarantee that you will repay a loan.

Commission

A commission is a fee that is charged by a salesperson or an investment advisor for brokering or recommending the purchase of securities.

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on top of interest.

Correlation

In the world of personal finance and investing, correlation is a statistical measure that assesses the strength of the relationship between two variables. In other words, it tells you how closely aligned two things are.

Credit Union

A credit union is a not-for-profit financial cooperative, owned and controlled by its members.

Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to pay its short-term liabilities with its short-term assets. The current ratio is calculated by dividing a company's current assets by its current liabilities.

Debit Card

A debit card is a plastic card that gives the cardholder a set amount of funds against each purchase that they make. The funds are taken directly from the cardholder's bank account, so it works as a virtual checkbook.

Debt

Debt is a commitment to pay money that you borrow from someone else.

Debt Ratio

Debt Ratio is a calculation used by investors and analysts to measure a company's financial leverage and assess its ability to repay its debts. The debt ratio is simply total liabilities divided by total assets.

Demand

Demand is the quantity of a good or service that people are willing and able to buy at a given price during a specific period of time.

Dividend

A dividend is a payment made by a company to its shareholders out of its profits.

Dividend Yield

Dividend Yield is a ratio that measures how much a company pays out in dividends each year relative to its stock price.

Dividends

Dividends are distributions of cash or assets paid to shareholders out of a company's profits.

Dollar-cost averaging (DCA) is a technique of periodically buying a fixed dollar amount of a particular investment.

Economies of Scale

Economies of scale is an economic theory that states that businesses can achieve greater efficiency and productivity when they produce large quantities of goods or services.

An emergency fund is a savings account that is designated for unexpected expenses.

Exchange-Traded Fund (ETF)

An exchange-traded fund (ETF) is a security that typically tracks an index, a commodity, or a basket of assets like stocks and bonds.

Ex-Dividend

Stocks not trading with the value of the next dividend payment are known as being ex-dividend.

Ex-Dividend Date

An ex-dividend date is the first day of a period during which shareholders of a company entitled to receive dividends will be paid.

Exchange Rate

The exchange rate is the price of one currency in terms of another currency.

Federal Deposit Insurance Corporation

The FDIC is an independent agency of the United States government that protects the money in your bank account if your bank fails.

Fixed Income Security

A fixed income security generally referred to as a type of debt security in which the borrower agrees to make payments of a fixed sum of money at regular intervals, usually over a period of several years.

Fixed Interest Rate

A fixed interest rate is a type of interest rate that doesn't change throughout the life of the loan.

Gross Income

Gross income is the total amount of money you earn in a year from all sources, before any deductions are taken out.

Gross Profit

Gross profit is the revenue earned by a company minus the cost of goods sold

Hedge Fund

A hedge fund is a private investment fund that pools money from accredited or institutional investors and invests in a variety of assets.

High-Yield Savings Account

A high-yield savings account is a savings account that offers a higher interest rate than a typical checking or savings account.

Income Statement

An income statement is a financial statement that shows how much revenue a company has generated over a specific period of time and how much of that revenue was profit. It also shows the company's expenses during that same period.

Index Fund

An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500).

Individual Retirement Account (IRA)

An IRA allows you to set aside money each year, on a before-tax basis, and grow your savings tax-deferred. That means you won't pay taxes on your investment gains until you withdraw the money in retirement.

Inflation

Inflation is the rate at which the prices of goods and services increase.

Inheritance

An inheritance is a sum of money or other assets that someone receives from a relative or friend who has died.

Initial Public Offering (IPO)

An Initial Public Offering (IPO) is the first sale of shares by a company to the public.

Insider Training

Insider trading refers to the buying or selling of a security by someone who has access to material, nonpublic information about the security.

Insurance

Insurance is a financial product that helps protect individuals and businesses from some of the risks associated with everyday life, such as accidents, illness, or damage to property.

Insurance Premium

An insurance premium is the amount of money a policyholder pays to an insurance company in exchange for coverage.

Interest

Interest is the cost of borrowing money, usually expressed as a percentage of the amount borrowed.

Interest Rate

Interest rates are a percentage charged by a lender to a borrower for the use of borrowed money.

Inverted Yield Curve

When the yield curve inverts (meaning that the yield on short-term debt is higher than the yield on long-term debt), it means that investors expect interest rates to decrease in the future, which is a relatively reliable indicator of an impending recession.

Junk Bond

A Junk Bond is a type of bond that is issued by companies with a lower credit rating.

Limited Partnership (LP)

A limited partnership is a business entity formed when two or more people join together to operate a business.

Lump Sum Investing

Lump sum investing is when you invest a one-time sum of money.

Macroeconomics

Macroeconomics a branch of economics that deals with issues that affect the entire economy, such as monetary policy and fiscal policy.

Margin

Margin is a term used in personal finance and investing to describe the amount of money that is borrowed to purchase securities

Market Share

Market share is simply the percentage of total sales that a company has in a particular market.

Merger and Acquisitions (M&A)

Mergers and Acquisitions (M&A) is the process where businesses come together to form a new, larger business.

Mutual Fund

Mutual funds are a type of investment vehicle that pools money from many investors and invests it in a variety of securities, such as stocks, bonds, and money market instruments.

NASDAQ

Nasdaq is a global electronic marketplace for buying and selling securities.

Net Income

Net income is the amount of money a company makes after accounting for all of its expenses.

Net Worth

Net worth is calculated to be the difference between an individual's total liabilities and total assets.

New York Stock Exchange

The New York Stock Exchange, or NYSE, is home to some of the world's biggest companies, and is where many people go to buy and sell stocks.

North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA) is an agreement signed by the governments of Canada, Mexico and the United States to promote trade and investment between the three countries.

Opportunity Cost

The opportunity cost of a decision is the value of the best alternative option that you did not choose.

Periodic Investing

With periodic investing, you are investing regularly as more funds become available either through your primary income or other sources.

Personal Finance

Personal finance is the management of money. It includes activities like budgeting, saving, and investing.

Post-Tax

A post-tax is the total amount of money that you have after all government taxes have been deducted from your income.

Price-to-Earnings Ratio (P/E Ratio)

It is calculated by dividing the price of a stock by the earnings per share of that stock.

Principal

Principal refers to either the original sum of money that was invested or, more commonly, the amount of money that remains unpaid on a debt.

Savings Account

A savings account is a bank account where you put your money to save it.

Simple Interest

With simple interest, you are charged interest only on the amount you borrow.

Stock

A stock is a certificate of ownership in a publicly-traded company.

Wealthfront

Wealthfront is an automated investment service firm in the United States. It offers services such as wealth management, financial planning, and investment advice.