Glossary of Financial Terms

Comprehensive Glossary of Financial Terms

A

  • Asset: Anything owned by an individual or entity that has economic value.
  • Annual Percentage Rate (APR): Annual rate charged for borrowing or earned through an investment.
  • Asset Allocation: Investment strategy balancing risk and reward by adjusting portfolio percentages among different asset classes.

B

  • Bear Market: A period in which stock prices fall significantly.
  • Bull Market: A period marked by rising stock prices and investor optimism.
  • Blue Chip Stocks: Stocks of well-established, financially stable companies.

C

  • Capital Gains: Profit earned from the sale of an asset or investment.
  • Compound Interest: Interest calculated on the initial principal and accumulated interest.
  • Cryptocurrency: Digital or virtual currency secured by cryptography.

D

  • Diversification: Investment strategy spreading investments across various financial instruments to reduce risk.
  • Dividend: Distribution of a portion of a company’s earnings to shareholders.

E

  • Exchange-Traded Fund (ETF): A marketable security tracking an index, commodity, or basket of assets.
  • Equity: Ownership of shares in a company or property.

F

  • Fundamental Analysis: Method of evaluating securities by analyzing a company’s financial statements and economic conditions.
  • Futures Contract: Agreement to buy or sell an asset at a predetermined future date and price.

G

  • Gross Domestic Product (GDP): Total monetary value of goods and services produced within a country.

I

  • Inflation: Rate at which the general level of prices for goods and services rises.
  • Initial Public Offering (IPO): Process where a private company first sells shares publicly.

L

  • Liquidity: Ability to quickly buy or sell an asset without significantly impacting its price.
  • Leverage: Using borrowed money to increase potential returns on investment.

M

  • Market Capitalization: Total value of a company’s outstanding shares.
  • Mutual Fund: Investment program pooling money from many investors to buy a diversified portfolio of stocks, bonds, or other securities.

N

  • Net Asset Value (NAV): Value per share of a mutual fund or ETF.
  • NASDAQ: American stock exchange known for technology companies.

O

  • Options: Financial derivatives providing the right, but not the obligation, to buy or sell an asset at a set price within a specific period.

P

  • Portfolio: Collection of investments held by an individual or institution.
  • Price-to-Earnings Ratio (P/E): Valuation ratio comparing a company’s current share price to its per-share earnings.

R

  • Return on Investment (ROI): Measure evaluating the efficiency and profitability of an investment.
  • Risk Management: Identifying, analyzing, and mitigating uncertainties in investment decisions.

S

  • Stock: Type of security signifying ownership in a corporation.
  • Short Selling: Selling borrowed securities with the intent to buy them back at a lower price to profit from a price decline.

T

  • Technical Analysis: Trading discipline evaluating investments based on statistical trends gathered from trading activity, such as price movement and volume.
  • Treasury Bonds: Long-term debt securities issued by the U.S. government.

V

  • Volatility: Degree of variation of trading prices over time.

Y

  • Yield: Income returned on an investment, such as interest or dividends.