Investing Jargon

Clay Baker
Stay Invested
52 Week High
A stock's highest trading price over the last 52-week period.
52 Week Low
A stock's lowest trading price over the last 52-week period.
1099-DIV
An IRS tax form that reports dividends or distributions you've earned on stocks or mutual funds.
1099-B
An IRS tax form that reports your gains and losses from selling stocks or other investments in your brokerage account.
401(k) plan
An employer-sponsored plan that takes money directly from an employee's salary before taxes and places it into a retirement investment account. The employee doesn't pay taxes on this money until they withdraw it. There are limits on how much an employee can contribute each year and when money can be withdrawn, and there are penalties for early withdrawals. The employee typically decides how and where the money is invested. Employers often match a percentage of employee contributions.
529 plan
A 529 plan is a U.S. state-sponsored, tax-advantaged way to invest toward the cost of education. Withdrawals from a 529 account can be used to pay for qualified educational expenses at any eligible U.S. college, university, trade school, or apprenticeship program. Withdrawals can also be used for K-12 tuition expenses.
After-tax (dollars/contributions)
Money that has already been taxed.
Alpha
Alpha (α) is a term used in investing to describe an investment strategy’s ability to beat the market, or its “edge.” Alpha is also referred to as excess return or the abnormal rate of return in relation to a benchmark, when adjusted for risk. If an investor uses the S&P 500 Index as a benchmark and invests in a stock or a fund trying to beat the index, the investor is seeking Alpha. Example: The S&P 500 delivers a 15% return for the year and the investor's stock choice delivered 22.3%. The investor generated 7.3% Alpha.
Alternative Minimum Tax
The AMT is a federal tax that targets higher-income taxpayers and tries to ensure that they pay at least a minimum amount of tax. The AMT kicks in after a specific income level. A taxpayer who has a high income and uses large tax breaks may owe a smaller percentage under the standard rules. If so, the taxpayer is obliged to recalculate the taxes owed under the alternative minimum tax system, which eliminates some of those tax breaks.
Annual contribution limits
IRS rules that determine how much you can contribute to retirement accounts for the year. This is one of the most important reasons everyone needs to Stay Invested. The IRS restricts how much you can save in a 401K or Individual Retirement Account (IRA). The IRS also requires mandatory distributions from these accounts after you reach a certain age. There are no such limitations on an individual investment account.
Annualized
A method of calculating an investment return to cover a 12-month period.
Annualized return (Annual Return)
A measure of how much value an investment has gained or lost on average each year or over several years. It takes compound growth (compounding) into account. Also called annual return.
Annual report
The yearly audited record of a corporation or a mutual fund's condition and performance. These reports are distributed to shareholders.
Appreciation
The increase in value of a financial asset. If a stock is bought for $10 per share, and a year later it's worth $15 per share, we say that the stock has appreciated 50%.
Asset allocation
An investment strategy that involves balancing asset classes (like stocks, bonds, and cash) in your portfolio, based on your goals, risk tolerance, timeline, and other factors. Also referred to as an asset mix.
Asset class
One of the three major types of investments: stocks, bonds, and cash equivalents.
Average maturity
For a bond fund, the average of the stated maturity dates of the debt securities in the portfolio. Also called average weighted maturity. In general, the longer the average maturity, the greater the fund's sensitivity to interest-rate changes, which means greater price fluctuation. A shorter average maturity usually means a less sensitive - and consequently, less volatile - portfolio.
Award agreement
A document issued by a company that details the number of shares, award price, vesting schedule, and any other terms and conditions related to a stock grant. Also referred to as a grant agreement.
Award price
The price you pay per share when you exercise your options. The award price is set by your company. Also referred to as an exercise price, grant price, option price, or strike price.
Balanced fund
Mutual funds that seek both growth and income in a portfolio with a mix of common stock, preferred stock or bonds. The companies selected typically are in different industries and different geographic regions.
Bear market
A market in which share prices have declined more than 20% from a recent high.
Benchmark
A standard, usually an unmanaged index, is used for comparative purposes in assessing the performance of a portfolio or mutual fund.
Beneficiary
A person or entity (like a charity) who is designated to receive or inherit benefits or other assets.
Best-in-class
A top-performing product, service or person within a category or peer group, or a sustainable investment style that involves investing in companies that lead their peer groups with respect to sustainability performance.
Beta
A measurement of volatility where 1 is neutral; above 1 is more volatile; and less than 1 is less volatile.
Blue-chip stock
A high-quality, relatively low-risk investment; the term usually refers to stocks of large, well-established companies that have performed well over a long period. The term Blue Chip is borrowed from poker, where the blue chips are the most valuable.
Board of Trustees
A governing board is elected or appointed to direct the policies of an institution.
Bond
A bond represents a loan you make to a government, municipality, or corporation (issuer). In return, that issuer promises to pay you a specified rate of interest to be received on a predetermined schedule (generally annually, semiannually, or quarterly).
Bond fund
A mutual fund that invests exclusively in bonds.
Bond ladder
A bond ladder is a portfolio of individual bonds that mature on different dates. This strategy is designed to provide current income while minimizing exposure to interest rate fluctuations.
Breakpoint
The level of dollar investment in a mutual fund at which an investor becomes eligible for a discounted sales fee. This level may be achieved through a single purchase or a series of smaller purchases.
Broker
A person who acts as an intermediary between a buyer and seller of securities, sometimes charging a commission.
Brokerage account
A taxable account that you open with a brokerage firm. The account allows you to invest in stocks, bonds, cash, ETFs, mutual funds, and other investments.
Bull market
A market in which share prices have risen 20% or more from recent lows.
Capital
The funds invested in a company on a long-term basis and obtained by issuing preferred or common stock, by retaining a portion of the company's earnings from date of incorporation and by long-term borrowing.
Capitalization
The market value of a company, calculated by multiplying the number of shares outstanding by the price per share.
Capital gain
Capital gain occurs when you sell a stock at a higher price than when you purchased it. For example, if you purchased a stock for $10 (and sold it after the value increased to $15), you could be taxed on the $5 capital gain.
Capital gains ex-date
The date that a shareholder is no longer eligible for a capital gain distribution that has been declared by a security or mutual fund.
Capital gains long-term
The difference between an asset's purchase price and selling price (when the difference is positive) that was earned in more than one year.
Capital gains short-term
The difference between an asset's purchase price and selling price (when the difference is positive) that was earned in under one year.
Capital gains tax
Tax on gains (profits) you make from the sale of capital assets, like stocks and other investments. Under U.S. tax laws, if you hold an investment for more than a year before you sell it for a gain, you may qualify for a long-term capital gains tax rate. Gains from investments held for less than a year are usually considered short-term capital gains and are taxed as ordinary income (which is usually a higher tax rate than long-term capital gains).
Capital loss
Capital loss occurs when you sell a stock at a lower price than when you purchased it.
Cash equivalent
A short-term money-market instrument, such as a Treasury bill or repurchase agreement, of such high liquidity and safety that it is easily converted into cash.
Certificate of deposit (CD)
CDs are bank deposits that pay a stated amount of interest for a specified period of time and promise to return your money on a specific date. They are federally insured and issued by banks and savings-and-loans institutions.
CERTIFIED FINANCIAL PLANNER™ (CFP®)
A professional planner who has met the Certified Financial Planner Board of Standards' requirements in education, experience, and ethical conduct; passed a 10-hour comprehensive examination in investment, tax, estate, retirement, and insurance planning; and agreed to follow a code of ethics.
Cliff
The date when the restrictions end the vesting of restricted stock or options. This can also be referred to as a lapse.
Common stock
Common stock is partial ownership of a company. An owner of a company's common stock is considered to have an equity position in the corporate structure of that company, which gives them voting rights on different issues. Additionally, common stockholders can collect dividends if the company distributes some of its earnings to stockholders. Common stock can also be referred to as an equity security, a share, or simply a stock.
Compound growth
An investment concept that involves reinvesting earnings from your original investment to increase your total investment and help your money grow faster over time. Also called compounding.
Corporate bond
A long-term bond issued by a corporation to raise outside capital.
Cost basis
What was initially paid for an investment, as opposed to its current fair market value.
Country breakdown
Breakdown of securities in a portfolio by country.
Cryptocurrency
Cryptocurrency is a virtual currency secured through one-way cryptography. It appears on a distributed ledger called a blockchain that's transparent and shared among all users in a permanent and verifiable way that's nearly impossible to fake or hack into. It is not reliant on any central authority, such as government or bank, to uphold or maintain it. Cryptocurrency's value stems from a combination of scarcity and the perception that it is a store of value, an anonymous means of payment, or a hedge against inflation.
Custodian
A bank that holds a mutual fund's assets, settles all portfolio trades and collects most of the valuation data required to calculate a fund's net asset value (NAV).
Default
Failure of a debtor to make timely payments of interest and principal as they come due or to meet some other provision of a bond indenture.
Distribution schedule
A tentative distribution schedule of a mutual fund's dividends and capital gains.
Diversification
An investment strategy that involves building a portfolio from a mix of asset classes (like stocks, bonds, and cash) that tend to behave differently. A diversified portfolio also includes a broad range of investments within each asset class. For example, with stocks you might want a mix of international and domestic stocks; stocks from various industries; and stocks from small, midsize, and large companies.
Dividends
Portions of a company's earnings that can be distributed to shareholders, usually in cash. Some companies pay stock dividends (additional shares) instead of cash. Not all companies pay dividends and the dividend amount can change.
Dividend yield
Annual percentage of return earned by a mutual fund. The yield is determined by dividing the amount of the annual dividends per share by the current net asset value or public offering price.
Dollar-cost averaging
Dollar-cost averaging is the practice of investing a fixed dollar amount on a regular basis, regardless of the share price.
Dow Jones Industrial Average (DJIA or "the Dow")
The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes.
Earned income
Taxable pay from employment or self-employment, including wages, salaries, tips, union strike benefits, and certain disability payments. Does not include investment, retirement, Social Security, alimony, or child support income.
Earnings season
Refers to the period at the beginning of each quarter when corporations report their earnings from the previous quarter.
Employee stock option exercise and equity award agreement
The document that gives your brokerage firm the authority to act as your broker as part of an equity award transaction.
Employee stock purchase plan (ESPP)
An ESPP allows you to buy shares of your employer's stock at a discounted price, typically through after-tax payroll deductions.
Employer-sponsored retirement account
A retirement plan provided by your employer, such as a 401(k), 403(b), 457(b), or Thrift Savings Plan (TSP). Most employer plans offer a choice of investments and have tax benefits. Many employers will also match a portion of the money you contribute to your account.
Equity compensation
A form of compensation based on the value of your company stock given to you by your employer. Equity compensation can include employee stock purchase plans (ESPPs), stock options, restricted stock awards (RSAs), restricted stock units (RSUs), performance stock awards (PSAs), and performance stock units (PSUs). These can also be referred to as equity awards.
Equity security
An equity security is partial ownership of a company. An owner of a company's common stock is considered to have an equity position in the corporate structure of that company, which gives them voting rights on different issues. Additionally, common stockholders can collect dividends if the company distributes some of its earnings to stockholders. An equity security can also be referred to as a stock, common stock, or share.
Environmental, social and governance (ESG)
The systematic inclusion of financially material ESG factors in investment analysis and investment decisions, with the goal of enhancing long-term, risk adjusted financial returns:
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Environmental - Factors that relate to the quality and functioning of the natural environment, and natural systems, e.g., carbon emissions, environmental regulations, water stress and waste.
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Social - Factors that relate to the rights, well-being, and interests of people and communities, e.g., labor management, health & safety.
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Governance - Factors that relate to the management and oversight of companies and investee entities, e.g., board structure, pay.
EPS
The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.
Equities
Shares issued by a company which represent ownership in it. Ownership of property, usually in the form of common stocks, as distinguished from fixed-income securities such as bonds or mortgages. Stock funds may vary depending on the fund's investment objective.
Equity fund
A mutual fund/collective fund in which the money is invested primarily in common and/or preferred stock. Stock funds may vary, depending on the fund's investment objective.
Ex-Dividend
The interval between the announcement and the payment of the next dividend for a stock.
Ex-Dividend date
The date on which a stock goes ex-dividend. Typically about three weeks before the dividend is paid to shareholders of record.
Exchange-traded fund (ETF)
An ETF is an investment fund or portfolio of securities that holds assets like stocks, bonds, or commodities. Like stocks, ETFs trade on an exchange and experience price fluctuations throughout the day.
Exercise
To act on the right to purchase company stock at the grant price set by the option grant.
Exercise and hold
The transaction in which you purchase your company's stock at the grant price and keep the shares in your brokerage account for sale at a future date. Also referred to as "cash purchase and hold the shares."
Exercise and sell
The transaction in which you buy and then immediately sell shares.
Exercise date
The date on which investors exercise their options.
Exercise price
The price you pay per share when you exercise your options. Also referred to as an award price, grant price, option price, or strike price.
Expense ratio
The ratio between a mutual fund's operating expenses for the year and the average value of its net assets.
Expense ratio (date)
Amount, expressed as a percentage of total investment that shareholders pay annually for mutual fund operating expenses and management fees.
Fair market value (FMV)
The amount that a willing buyer would pay a willing seller for a share of company stock. The fair market value on the day stock options are granted typically determines the award price.
Federal Funds Rate (Fed Funds Rate)
The interest rate charged by banks with excess reserves at a Federal Reserve district bank to banks needing overnight loans to meet reserve requirements. The most sensitive indicator of the direction of interest rates, since it is set daily by the market, unlike the prime rate and the discount rate, which are periodically changed by banks and by the Federal Reserve Board.
Federal Reserve Board (The Fed)
The governing board of the Federal Reserve System, it regulates the nation's money supply by setting the discount rate, tightening or easing the availability of credit in the economy.
Fixed income fund
A fund or portfolio where bonds are primarily purchased as investments. There is no fixed maturity date and no repayment guarantee.
Fixed income security
A security that pays a set rate of interest regularly.
Fractional share
Fractional shares allow you to invest in stocks based on a dollar amount, so you may end up with a fraction of a share, a whole share, or more than one share. Fractional shares pay dividends proportionate to the percentage of the share you own.
Fund
A pool of money from a group of investors in order to buy securities. The two major ways funds may be offered are (1) by companies in the securities business (these funds are called mutual funds); and (2) by bank trust departments (these are called collective funds).
Futures
Futures are a type of derivative contract agreement to buy or sell a specific commodity asset or security at a set future date for a set price.
Grant
An award of stock options, restricted stock units (RSUs), or performance stock units (PSUs).
Grant agreement
A document issued by a company that details the number of shares, award price, vesting schedule, and any other terms and conditions related to a stock grant. Also referred to as an award agreement.
Grant date
The date your stock options, restricted stock units (RSUs), or performance stock unit (PSU)s were granted to you.
Grant ID
The unique identifier for each equity award.
Grant price
The price of the award at the time of the grant. In the case of stock options, this is the price you pay per share when you exercise your options. Also referred to as an award price, strike price, option price, or exercise price.
Green bonds
A type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental friendly projects.
Growth investing
Investment strategy that focuses on stocks of companies and stock funds where earnings are growing rapidly and are expected to continue growing.
Growth stock
Typically a well-known, successful company that is experiencing rapid growth in earnings and revenue, and usually pays little or no dividend.
Growth-style funds
Growth funds focus on future gains. A growth fund manager will typically invest in stocks with earnings that outperform the current market. The manager attempts to achieve success by focusing on rapidly growing sectors of the economy and investing in leading companies with consistent earnings growth. The fund grows primarily as individual share prices climb.
Holding period
For tax purposes, this refers to the period of time you hold incentive stock options (ISO) shares or qualified ESPPs in order to receive favorable U.S. tax treatment when the shares are ultimately sold. If you fail to meet the holding period, a "disqualifying disposition" occurs, changing the tax consequences. More generally, the holding period is the period of time a company requires that granted and/or exercised shares be held before they are sold.
Impact investing
A sustainable investment style that seeks to generate measurable positive social or environmental impact alongside financial return. Investment themes include activities such as affordable housing, education and healthcare.
Incentive stock options (ISOs)
Also called "qualified" or "statutory" stock options, ISOs are considered tax-advantaged stock options based on U.S. tax law. With ISOs, the spread (the difference between the award price and the fair market value) will count as income for the alternative minimum tax (AMT) in the year you exercise your options. If you exercise and hold the shares for more than one year past the exercise date and more than two years past the original grant date, the sale of the stock becomes a qualifying disposition, and any realized profit is typically taxed at the long-term capital gains rate. If you sell earlier, the spread will be taxed at your ordinary income tax rate.
Index
A group of securities designed to represent a particular market, sector, or commodity. Well-known market indexes include the S&P 500® Index, the Dow Jones Industrial Average, the NASDAQ Composite Index, and the Wilshire 5000 Index.
Individual Retirement Account (IRA)
An IRA is an account for persons with earned income that allows them to save for retirement by providing various tax advantages.
Inflation
A rise in the prices of goods and services, often equated with loss of purchasing power.
Initial public offering (IPO)
An IPO refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors.
In-the-money stock options
Stock options that have a market price higher than the grant price. If you have in-the-money (ITM) stock options, they're already profitable. For example, if you have stock options with a grant price of $10 per share and the market value is $12 per share, you're "in the money" by $2 per share.
Interest rate
The fixed amount of money that an issuer agrees to pay the bondholders. It is most often a percentage of the face value of the bond. Interest rates constitute one of the self-regulating mechanisms of the market, falling in response to economic weakness and rising on strength.
Interest-rate risk
The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates.
Invest
Putting your money into something (like stocks, bonds, or a mutual fund) with the goal of a financial gain. All investments carry a risk of loss.
Investment advisor
An organization employed by a mutual fund to give professional advice on the fund's investments and asset management practices.
Investment grade bonds
A bond is generally considered suitable for purchase by prudent investors.
Investment objective
The goal of a mutual fund and its shareholders, e.g. growth, growth and income, income and tax-free income.
Junk bond
A lower-rated, usually higher-yielding bond, with a credit rating of BB or lower.
Lapse
The date when the restrictions end at the vesting of restricted stock or options. This can also be referred to as a cliff.
Large-cap
The market capitalization of the stocks of companies with market values greater than $10 billion.
Lipper ratings
The Lipper Mutual Fund Industry Average is the performance level of all mutual funds, as reported by Lipper Analytical Services of New York. The performance of all mutual funds is ranked quarterly and annually, by type of fund such as aggressive growth fund or income fund. Mutual fund managers try to beat the industry average as well as the other funds in their category.
Liquidity
The ability to have ready access to invested money. Mutual funds are liquid because their shares can be redeemed for current value (which may be more or less than the original cost) on any business day.
Loads
Sales charges on mutual funds. A back-end load is assessed at redemption (see contingent deferred sales charge), while a front-end load is paid at the time of purchase. No-load funds are free of sales charges.
Long-term investment strategy
A strategy that looks past the day-to-day fluctuations of the stock and bond markets and responds to fundamental changes in the financial markets or the economy.
Lookback
A designated purchase period in certain tax-qualified employee stock purchase plans (ESPPs) where stock can be purchased at the lower of two prices: either as of the initial date of the offering period or the final date of the period, whichever is lower.
Management fee
The amount paid by a mutual fund to the investment advisor for its services.
Market price
The current price a stock is trading at in the stock market.
Market risk
The possibility that an investment will not achieve its target.
Market timing
A risky investment strategy that calls for buying and selling securities in anticipation of market conditions.
Maturity
The date specified in a note or bond on which the debt is due and payable.
Mid-cap
The market capitalization of the stocks of companies with market values between $3 to $10 billion.
Modified adjusted gross income (MAGI)
Your MAGI is your adjusted gross income (AGI) with certain tax deductions and income added back in.
Money market mutual fund
A short-term investment that seeks to protect principal and generate income by investing in Treasury bills, CDs with maturities less than one year and other conservative investments.
Morningstar ratings
System for rating open- and closed-end mutual funds and annuities by Morningstar Inc. of Chicago. The system rates funds from one to five stars, using a risk-adjusted performance rating in which performance equals total return of the fund.
Mutual funds
Mutual funds pool money from many investors to purchase a broad range of investments like stocks, bonds, cash, or other types of securities. When you purchase a mutual fund, you get exposure to all the investments included in that fund. Mutual funds charge fees to manage your investment that can vary by fund and share class. Mutual funds are purchased or sold once a day at market close.
NASDAQ
National Association of Securities Dealers Automated Quotations system, which is owned and operated by the National Association of Securities Dealers. NASDAQ is a computerized system that provides brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange listed securities.
Net Asset Value per share (NAV)
The current dollar value of a single mutual fund share; also known as share price. The fund's NAV is calculated daily by taking the fund's total assets, subtracting the fund's liabilities, and dividing by the number of shares outstanding. The NAV does not include the sales charge. The process of calculating the NAV is called pricing.
Non-fungible tokens (NFTs)
NFTs are an emerging asset class. Like cryptocurrencies, NFTs are stored on a blockchain. Each NFT is unique and cannot be duplicated (i.e., non-fungible). In that sense, NFTs are more like the Hope Diamond or Picasso's Guernica—a one-of-a-kind work for which there is no substitute. Indeed, an NFT's perceived scarcity, whether because it's a unique piece of art or a limited-issue collectible, makes it potentially lucrative—but also substantially less liquid than, say, your average stock or bond. As a result, you may need to drop the price or hold on to your NFT if the demand isn't there when you want or need to sell it.
Non-qualified stock options (NQSOs)
Stock options that don't meet the requirements of a qualified (or statutory) stock option under the Internal Revenue Code. Upon exercise of a non-qualified stock option, you realize compensation equal to the spread between the fair market value of the stock on the exercise date and the price paid to purchase the shares. Compensation is taxable income, for which the company is obligated to withhold taxes. Ordinary income and tax withholding will be reported through payroll. When shares acquired through the exercise of a non-qualified stock option are subsequently sold, any gain is subject to capital gains tax. If the price of the stock goes down after exercise, you would be eligible to take a capital loss (as you would with any other security you may own).
Number of Holdings
Total number of individual securities in a fund or portfolio.
Option price
The price you pay per share when you exercise your options. Also referred to as an award price, strike price, exercise price, or grant price.
Par value
Par value is the amount originally paid for a bond and the amount that will be repaid at maturity. Bonds are typically sold in multiples of $1,000.
Penny stock
A stock that trades for less than $5 per share and is not traded on a U.S. stock exchange is commonly referred to as a penny stock.
Performance stock units (PSUs) and performance stock awards (PSAs)
A form of equity compensation that is awarded to employees based on the company's performance over a given period and meeting a service (time) requirement.
Portfolio
The combined holding of stocks, bonds, cash, and other investments held by an individual investor, mutual fund, exchange-traded fund (ETF), or financial institution.
Portfolio allocation
Amount of assets in a portfolio specifically designated for a certain type of investment.
Portfolio holdings
Investments included in a portfolio.
Portfolio manager
The person or entity responsible for making investment decisions of the portfolio to meet the specific investment objective or goal of the portfolio.
Preferred stock
A class of stock that has a priority claim on the company's earnings before payment is made on the common stock if the company declares a dividend.
Premium
The amount by which a bond or stock sells above its par value.
Pre-tax (dollars/contributions)
Money that has not yet been taxed.
Price/Book Ratio (P/B)
The price per share of a stock divided by its book value (net worth) per share. For a stock portfolio, the ratio is the weighted average price-to-book ratio of the stocks it holds.
Price-to-earnings Ratio (P/E)
A stock's price divided by its earnings per share, which indicates how much investors are paying for a company's earning power.
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TTM P/E Ratio (1 yr trailing): Price of a stock divided by its earnings from the latest year.
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Forward P/E Ratio (1 yr forecast): Price of a stock divided by its projected earnings for the coming year.
Prospectus
Formal written offer to sell securities that sets forth the plan for proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision. Prospectuses are also issued by mutual funds, containing information required by the SEC, such as history, background of managers, fund objectives and policies, financial statement, risks, services and fees.
Proxy
A shareholder vote on matters that require shareholders' approval.
Qualified stock options
See incentive stock options (ISOs).
Rebalancing
Adjusting your portfolio periodically to keep it in line with your chosen asset allocation and risk level. In other words, maintaining the relative percentages of stocks, bonds, cash, and other investments you originally selected.
Recession
A downturn in economic activity, defined by many economists as at least two consecutive quarters of decline in a country's gross domestic product.
Redemption
Sale of mutual fund shares by a shareholder.
Reinvestment option
Refers to an arrangement under which a mutual fund will apply dividends or capital gains distributions for its shareholders toward the purchase of additional shares.
Required minimum distributions (RMDs)
RMDs are IRS-mandated withdrawals from your tax-deferred retirement accounts (like a 401(k) or traditional IRA) that you must take each year, starting at a certain age to avoid a tax penalty.
Restricted stock awards (RSAs) and restricted stock units (RSUs)
A form of equity compensation in which the company typically awards stock at a future date when the service (time) requirement is met. When these conditions are met, vesting occurs and shares are usually delivered. The shares then become the employee's assets.
Risk tolerance
How an investor feels about risk, the level of risk an investor is willing to take. Your risk tolerance helps you decide whether to invest more conservatively or more aggressively.
Robo-advisor
Robo-advisors are online services that provide automated portfolios based on your preferences. The robo-advisor automatically builds a diversified portfolio of funds based on your preferences, and the portfolio is automatically rebalanced by an algorithm.
Rollover IRA
A Rollover IRA is an account that allows you to move funds from your prior employer-sponsored retirement plan (like a 401(k) plan) into an IRA. With an IRA rollover, you can preserve the tax-deferred status of your retirement assets, without paying current taxes or early withdrawal penalties at the time of transfer.
Roth IRA
A Roth Individual Retirement Account (IRA) is a retirement account to which you contribute after-tax dollars. While there are no current-year tax benefits, your contributions and potential earnings can grow tax-free, and you can withdraw them tax- and penalty-free after age 59½ and once the account has been open for five years.
Sale price
The specific market price at which a security is sold.
Sector
A group of similar securities, such as equities in a specific industry.
Security
A financial security is defined broadly to include an array of tradable investments like stocks, bonds, exchange-traded funds (ETFs), and mutual funds. Securities are financial assets that have value and can be bought, sold, or traded in a financial market.
Securities and Exchange Commission (SEC)
A U.S. government oversight agency responsible for regulating the securities markets and protecting investors.
Share
A share represents partial ownership of a company. An owner of a share is considered to have an equity position in the corporate structure of that company, which gives them voting rights on different issues. Additionally, shareholders can collect dividends if the company distributes some of its earnings to shareholders. Shares can also be referred to as common stock, stock, or equity securities.
Sharpe Ratio
A risk-adjusted measure that measures reward per unit of risk. The higher the sharpe ratio, the better. The numerator is the difference between the Fund's annualized return and the annualized return of the risk-free instrument (T-Bills).
Short selling
Short selling involves borrowing a security and selling it on the open market. You then purchase it later at a lower price, pocketing the difference after repaying the initial loan. For example, let's say a stock is trading at $50 a share. You borrow 100 shares and sell them for $5,000. If the price suddenly declines to $25 a share, at which point you purchase 100 shares to replace those you borrowed, you net $2,500 in the bargain.
Short-term investment
Asset purchased with an investment life of less than a year.
Small-cap
The market capitalization of the stocks of companies with market values less than $3 billion.
Spread
The difference between an equity award price and the fair market price of stock on a specific date.
Standard and Poor's S&P 500® Index
This is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.
Stock Appreciation Rights (SARs)
Stock Appreciation Rights (SARs) are a form of equity compensation tied to your company's stock performance over a specific period. If the stock's value climbs during that preset time, you have the right to receive a portion of the increase in either cash or stocks.
Stock
Stock is partial ownership of a company. An owner of a company's stock is considered to have an equity position in the corporate structure of that company, which gives them voting rights on different issues. Additionally, stockholders can collect dividends if the company distributes some of its earnings to stockholders. Stock can also be referred to as equity securities, common stock, or shares.
Stock option
A stock option gives you the right but not the obligation to buy stock at a specific price in the future for a set period of time.
Stock slices
Stock slices are fractional shares. Fractional shares allow you to invest in stocks based on a dollar amount, so you may end up with a fraction of a share, a whole share, or more than one share. Fractional shares pay dividends proportionate to the percentage of the share you own.
Stock symbol
See ticker symbol.
Stock ticker
The continuously updated price of a security during the trading session.
Strike price
The price you pay per share when you exercise your options. Also referred to as an option price, exercise price, or grant price.
Tax-deferred
Tax-deferred contributions and earnings are not usually subject to federal, state, or local taxes until you withdraw them from your retirement account.
Tax-exempt income
Tax-exempt income is income that is exempt from income taxes. A purchaser of state municipal bonds is exempt from federal taxation on the income earned from the bonds.
Tax-loss harvesting
Tax-loss harvesting is the process of selling a security at a loss with the goal of offering current or future capital gains realized from selling securities at a profit. This allows investors to generate tax deductions for federal income tax purposes that can be used to offset recognized capital gains and up to $3,000 of ordinary income a year. Additional captured losses can be carried forward into future years if not used in the year in which they occurred.
Thematic investing
Thematic investing is an investment approach that uses research to identify trends, opportunities, and relevant companies and groups them into overarching themes to invest in.
Ticker symbol
An arrangement of letters or characters that represent securities (stocks, mutual funds, etc.) that are publicly traded. For example: AMZN for Amazon.com Inc., AAPL for Apple Inc., and IBM for International Business Machines Corporation (IBM). A ticker symbol is also referred to as a stock symbol.
Time horizon
The time when you plan to withdraw the money you've invested. Goals like saving for college or retirement tend to have longer time horizons than saving for a vacation or a down payment on a house. In general, the longer your time horizon, the more risk you can assume because you have more time to recover from a loss.
Top 10 holdings
Ten largest holdings in a portfolio based on asset value.
Total return
Accounts for all of the dividends and interest earned before deductions for fees and expenses, in addition to any changes in the value of the principal, including share price, assuming the funds' dividends and capital gains are reinvested. Often, this percentage is presented in a specified period of time (one, five, ten years and/or life of fund). Also, a method of calculating an investment's return that takes share price changes and dividends into account.
Traditional IRA
A Traditional Individual Retirement Account (IRA) is a type of IRA in which you can make pre-tax contributions that can grow tax-deferred. With a traditional IRA, you'll pay ordinary income tax on your withdrawals, and you must start taking distributions once you reach your RMD age.
Treasury bill
Negotiable short-term (one year or less) debt obligations issued by the U.S. government and backed by its full faith and credit.
Treasury bond
Negotiable long-term (10 years or longer) debt obligations issued by the U.S. government and backed by its full faith and credit.
Treasury note
Negotiable medium-term (one year to 10 years) debt obligations issued by the U.S. government and backed by its full faith and credit.
Trustee
1. An organization or individual who has responsibility for one or more accounts.
2. An individual who, as part of a fund's board of trustees, has ultimate responsibility for a fund's activities.
Turnover Ratio
Percentage of holdings in a mutual fund that are sold in a specified period.
Underwater
The award price of a stock option is greater than the current market price of the underlying stock.
Unvested grant
The portion of a grant that has not yet met the vesting criteria as set forth in the grant agreement.
Valuation
An estimate of the value or worth of a company; the price investors assign to an individual stock.
Value investing
A strategy whereby investors purchase equity securities that they believe are selling below estimated true value. The investor can profit by buying these securities then selling them once they appreciate to their real value.
Value stock
Typically an overlooked or underpriced company that is growing at slower rates.
Value-style funds
Value-style funds typically hold company stocks that are undervalued in the market. Fundamentally strong companies whose stocks are inexpensive but trending upward may also be selected for value funds.
Vest/vesting
When an equity award is generally no longer subject to forfeiture and the employee acquires either the stock or the right to exercise a stock option.
Vested grant
A grant that has met the vesting criteria as set forth in the grant agreement. When an RSU vests, in most countries it's a taxable event and tax withholding is due. The most common method of funding this tax liability is to sell a portion of the now-vested shares.
Vesting period
The length of time or waiting period before an award vests.
Vesting schedule
A schedule that establishes the number of stock awards that vest each year over a specific period of time.
Volatility
Volatility refers to the fluctuation of a company's stock price, or to fluctuation of stock prices throughout the market.
W-8BEN
The W-8BEN is an IRS form used by non-U.S. citizens to certify their foreign status. Non-U.S. citizens are typically taxed less than U.S. citizens. Having a valid W-8BEN on file helps ensure non-U.S. citizens will be taxed at the correct rate.
W-9
The form used by U.S. persons, including resident aliens, to certify their Taxpayer Identification Number or Social Security number. A W-9 also certifies that the person is not subject to backup withholding (unless you are a U.S. exempt payee).
Weighted Average Market Cap
Weighting the market capitalization of each stock on an index. In such an index, larger companies account for a greater portion of the index. An example is the S&P 500 Index.
Yield
Annual percentage rate of return on capital. The dividend or interest paid by a company expressed as a percentage of the current price.
YTD
Year-to-date return on an investment including appreciation and dividends or interest.
YTD total return
Year-to-date return on an investment including appreciation and dividends or interest.