Glossary

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Glossary Entries
Word(s)	Definition	Image	Caption	Link	Source
all or none	A security transaction order to buy or sell a stock that must be executed in its entirety, or not executed at all.
bear market	A general decline of over 20% in a market.
bull market	A market that is experiencing rising prices.
10-K and 10-Q reports	Annual and quarterly reports required to be filed by all publicly traded corporations. Available online via SEC EDGAR system.
12b-1 fees	Mutual fund fees that cover the cost of marketing, distribution, and advertising.
401(k)	Very popular employer-sponsored retirement savings accounts. Contributions come directly from employees’ paychecks. Also known as defined contribution retirement plans.
403(b)	The version of a 401(k) for non-profit organizations.
accounts receivables turnover, aka receivables turnover –	A measure of how efficiently a company is managing their accounts receivable. Accounts receivables are monies that are owed to the company.
accredited investor	Accredited investors meet certain financial requirements which allows them to invest in restricted investments not available to the general public. The accredited investor is supposedly better able to discern riskier investments and better able to withstand significant losses.
acid test ratio, aka quick ratio	A measure of the ability of a company to meet their short-term financial obligations even if their inventory becomes obsolete or otherwise unable to sell.
active money management	The investment strategy that entails a professional money manager actively identifying, choosing, and monitoring individual investments on behalf of their clients.
aggressive growth	The investment strategy designed to produce very high returns in a short period of time. This strategy also typically exhibits very high risk as measured by extreme volatility.
alpha	A measurement of the outperformance or underperformance of an investment relative to an appropriate benchmark index.
American Depository Receipt (ADR)	Dollar denominated shares of a foreign company available for purchase in the United States.
AMEX, aka the American Exchange, now called the NYSE American Exchange	One of the minor United States stock exchanges, offering shares of smaller, lesser-known corporations. The AMEX is now owned by the New York Stock Exchange.
annual rate of return	The rate of growth of an investment, measured on an annual basis. It is used to compare investments within an asset class and investments among different asset classes.
annuity	(1) A sum of money payable over a certain period of time. (2) A life insurance product with a deservedly horrible reputation. Stay away from these! Instead, take Introduction to Investments and learn about many other alternatives, almost all of which will give you a better return over the long-term. Of course, if you are a life insurance agent and have no ethics, the commissions from selling annuities are very enticing.
arrears	With regard to dividends from cumulative preferred stock, these are dividend payments that must be paid first before any new dividends can be paid to stockholders.
art	(1) Something that you can purchase to bring you beauty, joy, or wonder. (2) A dubious investment with less potential than a lottery ticket to make you wealthy.
ask price	The retail price of a security. This is the price that a retail investor will pay for the security when they buy. See bid price.
asset play stock	A company that is sitting on an asset that could be sold or spun off. Examples include utilities and railroad companies that own large tracts of real estate
Assets Under Management (AUM)	The value of the total investments that a brokerage or other securities firm manages on behalf of their clients. Often used to soak their clients, ooops!, we mean charge for investment services.
automatic investment plan, aka dollar cost averaging, systematic investment plan (SIP)	A system of buying an investment at regular intervals with a fixed dollar amount. Also known as systematic investment plan and dollar cost averaging
automatic withdrawal plan	A system of withdrawing monies from an investment program monthly, quarterly, semiannually, or yearly. Also known as systematic withdrawal plan.
balance sheet	A financial summary of a firm’s assets, liabilities, and shareholders’ equity at a given point in time. Publicly traded corporations must publish their balance sheet every quarter.
balanced fund	A mutual funds whose objective is to generate a balanced return of both current income and long-term capital gains. A balanced fund will invest in both stocks and bonds and typically have a balanced allocation of both. The allocation can change as the investment environment changes.
banker’s acceptance note	A short-term, low-risk investment vehicle arising from bank guarantees of business transactions. Typically sold in $100,000 denominations.
basis point	A silly way of denoting one-hundredth of a percent, 0.01%. One hundred basis points equal one percent. Guaranteed to make you sound as if you know what you are talking about with regard to investments. You can even tell them you took a college class.
bear	In the world of investments, a bear is someone who believes a particular market will fall.
bearer bond	Obsolete bonds that had no registered owner. Whoever had possession of the bond received the interest and principal payments.
beta	An imperfect assessment of the risk of an investment as measured by its volatility relative to an appropriate benchmark index.
bid price	The wholesale price of a security. This is the price that a retail investor will receive for the security when they sell. See ask price.
bid-ask spread	The difference between the bid price (wholesale price) and the ask price (retail price). The dealers and market makers earn money from the bid-ask spread.
blue chip stock	Financially strong, high-quality businesses with long and stable records of earnings and dividends.
Board of Directors	The governing body of a corporation or mutual fund, elected by the shareholders, to oversee the activities of the organization.
bond rating	A letter grade that designates investment quality and are assigned to a bond issue by designated rating agencies.
bond	Negotiable, publicly traded long-term debt securities, whereby the issuer agrees to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal at maturity. Also known as fixed-income investments or debt financing.
book value	The amount of shareholders’ equity in a firm. Equals the amount of the firm’s assets minus the firm’s liabilities and preferred stock.
broker	Licensed professional that advises clients on securities investments and may manage their investment portfolios. Also known as registered representative or registered investment advisor
bubble	An occasional market phenomenon consisting of rapid and irrational price increases, typically followed by a subsequent crash. Also known as mania.
bull	In the world of investments, a bull is someone who believes a particular market will rise.
business cycle	The cycle of growth and decline of the production and consumption of goods and services.
business risk	The risk of a particular business failing.
buy and hold	The investment strategy that emphasizes the use of fundamental analysis to identify high-quality companies with good growth prospects and potential for dividends at reasonable prices and holding them for the long-term. Sometimes referred to as value investing.
buying on margin	The practice of borrowing monies from your brokerage firm to purchase securities, allowing an investor the possibility to magnify their returns but also the possibility of magnifying their losses. (Psst. Don’t do it. It’s dangerous. Well, maybe after many years of prudent investing and you need some money for the short-term, you can borrow from yourself for the short-term instead of having to sell your investments and then buying the investments back.)
call option contract	A security that gives the holder the right to buy a certain amount of an underlying financial asset at a specified price for a specified period of time. (Warning! Caution! Stay far away from these things. It is gambling, pure and simple.) Also known as a call option or call.
call premium	The provision that specifies whether and under what circumstances a bond issuer can retire, aka prepay, the bond prior to its maturity date.
capex	(1) Abbreviation for capital expenditure. (2) Sure-fire way to impress your friends and family members so everyone will know you are informed investor. A gig as an investment pundit might even be in your future if you use capex copiously.
capital	Various forms of wealth, monies, and other resources including human resources used in the production of goods and services.
capital appreciation	An investment strategy that concentrates on raising the value of an investment, typically but not limited to paying close attention to the growth of earnings.
Capital Asset Pricing Model (CAPM)	(1) A model that describes the relationship of risk and expected return. (2) A not very useful system that, when mentioned by someone during a cocktail party, will let others know that the individual in question took an investment class other than BUS-123, Introduction to Investments.
capital gain	The profit from the sale of an investment when the sales proceeds are greater than the purchase price.
capital loss	The loss from the sale of an investment when the purchase price was greater than the sales proceeds.
capitalism	An economic system based on the private ownership of the means of production and their operation for profit.
cash flow statement	A financial summary of a firm’s cash flow and other events that caused changes in the company’s cash position, typically quarterly and annually. Also known as statement of cash flows
Certificate of Deposit (CD)	A short-term savings instruments in which funds must remain on deposit for a specified period. There is typically a penalty for early withdrawal of the funds.
Chicago Board Options Exchange (CBOE)	The largest U.S. options exchange. CBOE offers options on over 2,200 companies, 22 stock indices, and 140 exchange-traded funds. (Psst. Stay away from options! You have been warned!)
closed-end mutual fund	A type of investment company that operates with a fixed number of shares outstanding. Shares are purchased and sold on the securities exchanges.
Collateralized Mortgage Obligation (CMO)	A type of bond that contains a pool of mortgages bundled together and sold as an investment. The mortgage interest and principal payments are passed through to the investors.
collectibles	A item of value bought, collected, and sold by individuals and dealers.
commercial paper	Short-term, unsecured promissory notes (IOUs) issued by corporations with very high credit standings, typically issued in $100,000 denominations and held by institutional investors such as mutual funds, life insurance companies, and pension funds.
commissions	An amount of money paid to an agent in a commercial transaction, typically a declared dollar amount of a set percentage of the value involved or a set dollar amount per transaction.
compounding	The increasing value of an investment due to the investment rewards of cash flows or capital gains or both. It is the opposite of discounting.
contrarian	(1) A strategy of investing in vehicles that ore out of favor with the market for some reason. (2) An investor who adheres to a contrarian strategy.
conversion privilege	With regard to convertible securities, the conversion privilege allows a hybrid security investor to convert their hybrid security into common stock shares of the corresponding company. Examples included convertible bonds and convertible preferred stock. The term is also used in the life insurance industry with regard to life insurance policies.
conversion value	Indication of what a convertible issue would trade for if it were priced to sell on the basis of its corresponding common stock market price.
convertible bond	A bond that can be exchanged for a declared number of shares of common stock of the corresponding company.
convertible preferred stock	Preferred stock shares that can be exchanged for a declared number of shares of common stock of the corresponding company.
convertible security	Any security that can be exchanged for a set number of common stock shares of the corresponding company. Examples include convertible bonds and convertible preferred stock.
corporate paper	Short-term, low-risk, unsecured promissory notes (IOUs) issued by corporations with very high credit standings. Typically sold in $100,000 denominations.
corporation	A legal structure that allows a company or group of people to act as a single entity.
correlation	The tendency of the returns of two assets to move together.
coupon rate	The feature of a bond that defines the amount of annual interest income, expressed as an interest rate. The term comes from the time when bonds had coupons attached to them. The investor sent in the coupon when the semiannual interest was due and the bond issuer would then send the investor a check. Also known as coupon yield, nominal rate, or nominal yield.
covered options	An option transaction in which the seller of the option has a position opposite their options position. They are thus protected against large losses. (Don’t do it! Don’t gamble with options!)
crash	A sudden and dramatic decline in prices in a particular market, often driving by panic selling and fears of the end of the world. Chances are an investor will experience at least one and probably more crashes in their lifetime. (Keep a long-term perspective and don’t panic!) Also known as a market crash.
credit agency	A for-profit company that researches, compiles, and publishes credit ratings about publicly traded corporations.
credit rating	A rating assigned by a credit agency to a company designed to measure the likelihood of the company defaulting on its debt obligations.
cryptocurrency	(1) A digital currency in which transactions are maintained by a decentralized algorithm spread across multiple computer systems. (2) A great way for crooks to try to evade the law. (3) A modern-day Ponzi scheme based upon pure speculation and designed to separate suckers from their money. Also known as klepocurrency.
cumulative preferred stock	Preferred stock whose dividends, if skipped in any given year, are said to be “in arrears” and must be paid before any other dividends can be paid.
currency futures contracts	A security that is a contract between individuals that allows the exchange of one currency for another currency at a given price in the future. (Stay far, far away from futures in any form!)
currency risk	The risk associated with the change in value of a foreign asset held by an investor because of the fluctuation of the exchange rate between the foreign currency of the investment and the investor’s domestic currency. Also known as exchange rate risk.
current ratio	The interest rate and amount of current income a bond provides relative to its market price. Also known as current rate.
current yield	The interest rate and amount of current income a bond provides relative to its market price. Also known as current rate.
cyclical stock	Companies whose earnings and overall market performance are closely linked to the general state of the economy. Examples include automobile and basic materials companies.
date of record	The date on which an investor must be a registered shareholder of a firm to be entitled to receive a dividend.
dealers	Traders who “make markets” by offering to buy and sell certain securities at stated prices from their own inventories. Also known as market makers.
death cross	Yet another dubious technical indicator that states when a shorter-term moving average crosses below a longer-term moving average, it’s time to sell the security. (Psst. It’s usually too late.) See golden cross.
debenture	Unsecured corporate bond backed only by the full faith and credit of the issuing corporation.
debt financing	Negotiable, publicly traded long-term debt securities, whereby the issuer agrees to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal at maturity. Also known as bonds or fixed income securities.
debt-to-equity ratio	A measure of a company's financial leverage calculated by dividing long-term debt by shareholders’ equity. It indicates what proportion of equity and debt the company is using to finance its assets.
default risk	The risk that an entity will be unable to make their required interest and principal payments.
defensive stock	Companies that tend to hold their own, and even do well, when the economy starts to falter. Examples include consumer staples and food companies.
depression	A sustained period of depressed economic activity, resulting in severe deprivation. Unlike a recession which is defined as six months of economic decline, there is no generally accepted definition of a depression.
derivative	A security that derives its value from an underlying security or asset normally highly speculative. Example included options contracts and futures contracts. (Stay far away from derivatives! I mean it. They are weapons of mass financial destruction.)
desired rate of return	The rate of return used to compute the present value of a future stream of cash flows. (Ah, study chapter 4 thoroughly. You can’t leave our class without knowing how to do this. It ain’t that hard once you have done it a few times. All you need is a 99¢ calculator and the present value table from chapter 4!) Also known as the required rate of return, expected rate of return, and discount rate.
developing market	The economy of a nation that is working toward becoming more industrialized and advanced. Also known as an emerging market.
dilution	Stock dilution occurs when a company issues additional shares of stock. This reduces the proportional ownership to existing shareholders.
Director	A member of the Board of Directors, elected by the shareholders, to oversee the activities of the corporation or other type of organization such as a non-profit entity.
discount bond	A discount bond is a bond that is selling for less than its par value.
discount method	Method of earning interest on a security by purchasing it at a price below its redemption value. The difference is the interest earned and the interest “accrues” on the investment as the security gets closer to its maturity date. Examples include Treasury bills and commercial paper.
discount rate	The rate of return used to compute the present value of a future stream of cash flows. (Ah, study chapter 4 thoroughly. You can’t leave our class without knowing how to do this. It ain’t that hard once you have done it a few times. All you need is a 99¢ calculator and the present value table from chapter 4!) Also known as the required rate of return, expected rate of return, and desired rate of return.
discounting	The very unfortunate word we use to describe the process of computing the present value of a future stream of cash flows from an investment. It is the opposite of compounding.
distribution date	The date on which the company pays their dividend to their shareholders, normally a few weeks after the date of record.
diversification	The process of spreading your investments across a number of assets and asset classes to eliminate some, but not all, of the risks of investing.
dividend	Optional distributions of earnings to the shareholders, typically paid quarterly in the United States and other countries that were at one time associated with the British Empire.
dividend payout ratio	A measure expressed as a percentage of how much of a company’s earnings are being paid out to shareholders in the form of dividends. Also known as the payout ratio.
Dividend Reinvestment Plan (DRIP)	A plan in which shareholders have cash dividends automatically reinvested into additional shares of the firm’s common stock.
dividends per share	A measure that relates dividends to share price and puts stock dividends on a relative (percentage) basis rather than an absolute (dollar) basis.
dollar cost averaging	A system of buying an investment at regular intervals with a fixed dollar amount. Also known as an automatic investment plan, and a systematic investment plan.
domestic	An investment based within in the United States.
Dow Jones Industrial Average	Stock market average made up of 30 high-quality stocks selected for total market value and broad public ownership and believed to reflect overall market activity. Also known as the Dow and DJIA.
Dow Jones U.S. Completion Total Stock Market Index	Popular stock market index meant to measure the performance of mid-cap and small-cap companies in the United States. Previously known as the Wilshire 4500. (If you can remember the same, you are a better person than I am. I still call it the Wilshire 4500.)
Dow Jones U.S. Total Stock Market Index	Stock market index designed to the track the performance of the overall United States stock market including large-cap, mid-cap, and small-cap companies. Previously known as the Wilshire 5000.
Dow Theory	A technical analysis theory that was originally proposed by Charles Dow, one of the co-founders of the Wall Street Journal and the Dow Jones Industry Average. If someone can explain to me, please contact me. I think it says that the market will go up and down.
downside capture ratio	A statistical measure of the past performance of a money manager when asset prices are falling. See upside capture ratio.
duration	A measure of a bond price’s sensitivity to changes in interest rates and bond yields, capturing both price and reinvestment risk.
Earnings Per Share (EPS)	A company’s net income divided by the number of shares outstanding. A very and popular important statistic.
educational savings account	A tax-qualified investment account that offers tax-exempt earnings for qualified educational expenses.
Efficient Market Theory	The theory that in an efficient market, securities will reflect all possible information quickly and accurately and securities prices will adjust quickly and accurately. Thoroughly debunked by Nobel Prize winner Daniel Kahneman in his book, Thinking Fast and Slow.
emerging market	The economy of a nation that is working toward becoming more industrialized and advanced. Also known as a developing market.
Environmental Governance and Social (ESG)	A complicated mixture of three disparate aspects of a corporation’s activities and behaviors. Typically, the goal is to measure to what extent the corporation is working toward the overarching goal of planetary sustainability.
equity	An investment that represents ownership and a popular term for a stock investment.
equity income	A stock investment strategy that emphasizes dividends over capital appreciation.
exchange rate	The rate at which one currency will be exchanged for another.
exchange rate risk	The risk associated with the change in value of a foreign asset held by an investor because of the fluctuation of the exchange rate between the foreign currency of the investment and the investor’s domestic currency. Also known as currency risk.
Exchange-Traded Fund (ETF)	An open-end mutual fund that trades as a listed security on a stock exchange similar to a closed-end mutual fund.
ex-dividend date	The date upon which a stock will begin trading without the upcoming dividend. This is two days before the date of record.
exercise price	The agreed upon contract price between the buyer of an option and the seller of the option. Also known as the strike price.
expected rate of return	The rate of return used to compute the present value of a future stream of cash flows. (Ah, study chapter 4 thoroughly. You can’t leave our class without knowing how to do this. It ain’t that hard once you have done it a few times. All you need is a 99¢ calculator and the present value table from chapter 4!) Also known as the required rate of return, desired rate of return, and the discount rate.
expiration date	The date upon which an options contract or futures contract expires.
face value	The named value of a security. With regard to bonds, the amount that will be repaid upon maturity. Also known as the par value.
Fannie Mae	The popular nickname for the Federal National Mortgage Association, a for-profit corporation sponsored by the United States government tasked with helping increase home ownership by making mortgages more affordable.
Federal agency bonds	Debt securities issued by agencies or corporations sponsored by the Federal government for the purpose of promoting a public interest.
Federal Deposit Insurance Corporation (FDIC)	Federal agency tasked with insuring savers’ deposits in United States banks.
Federal Funds rate	The interest rate that banks charge each other to borrow money. This rate is set by the Federal Reserve Banking System.
Federal Reserve Banking System	The central banking system of the United States, responsible for administering monetary policy and setting short-term interest rates. Popularly called the Fed.
financial futures contracts	A security that is a contract between individuals that allows the purchase or sale of a financial asset at a given price in the future. (Warning! Danger! These are not for the typical individual retail investor! Stay away!)
financial intermediary	An institution that acts as a facilitator between individuals and organizations to facilitate trade and investment transactions. Examples include banks, credit unions, and mutual funds.
financial leverage	The use of borrowed money to enhance the returns of a financial investment. (Careful! This technique can magnify your returns but it can also magnify your losses.)
financial risk	The possibility of losing money when investing.
fiscal policy	The tools available to the United States Congress and other governments to influence and promote economic activity. See monetary policy.
fixed-income security	Negotiable, publicly traded long-term debt securities, whereby the issuer agrees to pay a fixed amount of interest over a specified period of time and to repay a fixed amount of principal at maturity. Also known as bonds and debt financing.
foreign	An investment based outside the United States. Also known as international and overseas.
forex	The global marketplace for trading currencies, both for immediate transactions (spot market) and future transactions (forward and futures contracts markets). Very dangerous! Unless you enjoy losing money at the casino, for example, stay far away from this place!
fourth market	Privately owned electronic trading networks that automatically match buy and sell orders that customers place electronically, designed to bypass the traditional securities exchanges. Examples include BATS and NYSE Arca. Also known as Electronic Communications Networks (ECNs).
Freddie Mac	The popular name for the Federal Home Loan Mortgage Corporation, a for-profit corporation sponsored by the United States government tasked with helping increase home ownership by making mortgages more affordable.
fundamental analysis	The process of examining a firm’s accounting statements and other financial and economic information to assess the economic value of a company’s stock.
future value	The expected value of an investment sometime in the future given an expected rate of return. It is the opposite of present value.
futures contract	A security that is a contract between individuals that allows the purchase or sale of a commodity or financial asset at a given price in the future. Also known as futures. (Do not trade futures! They are radioactive and you can lose a ton of money very quickly. To steal from Nike, just don’t do it!)
futures price	The agreed upon price that the commodity or financial asset will be bought and sold when the futures contract matures.
General Obligation bond (GO)	A municipal bond backed by the full faith, credit, and taxing power of the issuer.
Ginnie Mae	The popular name for the Government National Mortgage Association, a government-owned corporation of the United States Federal Government within the Department of Housing and Urban Development, dedicated to helping increase home ownership.
global	An investment that is based anywhere around the world.
golden cross	Yet another dubious technical indicator that states when a shorter-term moving average crosses above a longer-term moving average, it’s time to buy the security. (Psst. It’s usually too late.) See death cross.
Greater Fool Theory	The belief that there exists a Greater Fool who will purchase an asset for more than I paid for it. Typically used by short-term traders who do not concern themselves with the underlying valuation of an asset. Not recommended for prudent, long-term investors such as yourself.
Gross Domestic Product (GDP)	The measure of all goods and services produced by an economy.
gross margin	The rate of profit being earned from gross profit.
growth	An investment strategy that emphasizes capital gains over dividends by typically investing in companies that are aggressively growing their earnings.
growth and income	An investment strategy that emphasizes both growth of earnings and dividends.
growth stock	A company that is experiencing a high rate of growth of operations and earnings.
head and shoulder charting pattern	The most infamous technical analysis charting pattern. They tell me that it is supposed to be bad but you will have to decide for yourself if it is good or bad.
health savings account (HSA)	A type of qualified investment account that allows an individual to accumulate tax-exempt monies that can be used for medical expenses.
hedging	The process of taking a position opposite to an existing position in an underlying security, often used in high-risk securities such as options and future contracts.
high-yield bond	A high-risk bond from a corporation or municipality that has a low credit rating but typically pays high income. Also known as a junk bond.
hybrid security	An investment designed to offer the stability of fixed-income investments such as bonds with the opportunity for capital growth of equity investments such as stocks.
hypothetical illustration	An example of the past returns of an investment with lots of disclaimers about how past returns are not guarantees of future results and other legal mumbo jumbo. Also known as an illustration.
income	Cash received from an investment. Examples include interest, dividends, and rent.
income bond	An unsecured corporate bond requiring that interest be paid only after a certain amount of income is earned.
income statement	A financial summary of the operating results of firm covering a specified period of time, typically quarterly and annually.
income stock	A stock investment with long and sustained records of paying higher-than-average dividends. Examples include utilities and banks.
indenture	The contract that sets forth the terms between the bond issuer and the bond investors. Also known as a trust indenture.
index fund	A mutual fund that buys and holds a portfolio of stocks or bonds equivalent to those in a specific market index. This strategy is called passive money management.
Individual Retirement Account (IRA)	A tax-qualified investment account designed to accumulate retirement funds for wage earners. The real name is Individual Retirement Arrangement but only the IRS uses this term.
inflation risk	The risk of an investment will fail to keep pace with inflation, thereby reducing the investor’s purchasing power. Also known as purchasing power risk.
inflation-indexed	A security that promises to match or surpass the inflation rate.
Initial Public Offering (IPO)	(1) The first public sale of company’s stock. (2) It’s Probably Overpriced. (3) Imaginary Profits Only. (4) Insiders’ Profit Opportunity. Definitions 2 through 4 courtesy of Benjamin Graham from his landmark book, The Intelligent Investor.
insider information	Any important information about a publicly traded company that is not yet been made public using the proper regulated procedures. Trading on insider information is illegal but is believed to be widespread. The legal term is material non-public information.
interest	Payment from a borrower to an investor in return for the use of borrowed money.
interest rate risk	The risk that changing interest rates will adversely affect fixed-income investments such as bonds. When interest rates rise, bond prices fall.
intermediate-term	In the investment industry, an intermediate-term time frame for retail investors is generally considered from two to five years.
Internal Rate of Return (IRR)	A popular method of calculating the return on an investment given its predicted series of cash outflows and inflows.
international	An investment based outside the United States. Also known as foreign and overseas.
intrinsic value	The underlying or inherent value of a stock, as determined through security analysis.
inventory turnover	A measure of how efficiently a company is managing its inventory.
investment	Any vehicle into which resources can be placed with the expectation that it will generate positive income, or that its value will be preserved or increased, or both.
investment bank	A financial institution dedicated to facilitating the process of initiating an Initial Public Offering for a company. Also involved in bringing fixed-income investments such as bonds to the public markets on behalf of corporations and governmental entities.
junk bond	A high-risk bond from a corporation or municipality that has a low credit rating but typically pays high income. Also known as high-yield bond.
Keogh	A type of qualified retirement account used by small businesses.
large-cap	A corporation whose market value is greater than US$10 billion. Lately, some in the industry have promoting the idea that a company’s market value needs to be at least US$15 billion to be considered large-cap.
leverage	The use of borrowed monies to finance investments. Leverage can magnify an investor’s gain but also carries the possibility of magnifying their losses.
lifestyle mutual fund	A mutual fund designed to allocate automatically the proper mixture of investments, given an individual’s expected year of retirement. As the year of retirement approaches, the mutual fund will become more conservative. Also known as retirement fund and target date fund.
limit order	A security transaction that will only be executed at a specific price or better. The investor runs the risk of the transaction never being executed if the specified price is never reached.
limited liability	An important aspect of corporations and other legal entities that states that losses are limited to the amount of resources invested. The shareholders are thus only liable for the investment and nothing more.
Limited Liability Corporation (LLC)	A legal business entity that limits the liability of the owners and protects their personal assets.
liquidity	An aspect of an investment that refers to its ease or difficulty of converting the investment into cash. Examples of liquid investments are stocks, bonds, and mutual funds. Examples of illiquid investments are real estate, art, and collectibles.
load fund	A mutual fund that charges a commission when shares are bought.
long position	A transaction in which investors buy securities in the hope that they will increase in value and can be sold at a later date for profit. Buy low, sell high.
long-term	In the investment industry, a long-term time frame for retail investors is generally considered five years or longer.
maintenance margin	The absolute minimum amount of margin (equity) that an investor must maintain in the margin account at all times. Cannot be less than 25% as of this writing.
mania	An occasional market phenomenon consisting of rapid and irrational price increases, typically followed by a subsequent crash. Also known as a bubble.
margin	The portion of the value of an investment that is not borrowed when using leverage to purchase securities. The amount of equity stated as a percentage in the investment.
margin account	A brokerage account in which, subject to limits, securities can be bought and sold on credit. The investor will borrow money from the brokerage firm to purchase securities. This use of borrowed money to purchase securities is called leverage and can magnify the returns to an investor but also has the possibility of magnifying the losses. Very risky!
margin call	Notification of the need to bring the equity of an account whose margin is below the maintenance level up to the initial margin level or to have enough margined holdings sold to reach this standard. “Never meet a margin call!” – Old Wall Street Saying
margin requirement	The minimum amount of equity that must be a margin investor’s own funds, currently set by the Federal Reserve Board at 50%. Also known as the initial margin.
marginal tax rate	The percentage tax rate on the next dollar of income earned. Poorly understood but important statistic when analyzing and planning personal finances for tax purposes.
market order	A security transaction that seeks to fulfill the order at the best price currently available. Typically, market orders are fulfilled in microseconds.
market risk	The risk of losses arising from price movements in a particular market. (Keep a long-term perspective, Dear Readers.)
market timing	The dubious strategy of trying to predict the short-term behavior of a particular market. “Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.” – Bernard Baruch.
Markowitz portfolio theory	Another theory about the benefits of diversification that will impress your friends and influence people when you mention it at a cocktail party. You don’t really have to understand it or use it. (Just remember the important part: Diversification is a good thing.)
maturity date	The date upon which a security such as a bond matures.
mega-cap stock	Any large-cap company with a market valuation above US$100 billion. Recently, some in the industry are using US$200 billion as the threshold.
micro-cap stock	Any small-cap company with a market valuation below US$100 million. Recently, some in the industry are using US$300 million as the threshold.
mid-cap stock	Any company with a market valuation between US$2 billion and US$10 billion. Recently, some in the industry are using between US$5 or US$6 billion and US$15 billion as the criteria.
mixed lot	A stock transaction that involves a number of shares greater than 100 but not divisible by 100. See round lot and odd lot.
momentum trading	A strategy that advocates short-term trading that seeks to take advantage of the current momentum of a particular market. Typically uses the Greater Fool Theory. “Somewhere there is a Greater Fool that will buy this asset at a higher price than I paid for it.”
monetary policy	The tools available to central banks such as the United States Federal Reserve Bank to influence and promote economic growth. See fiscal policy.
money market account	A short-term investment account at a bank or credit union similar to a money market mutual fund but carries the current government guarantee of protection up to US$250,000.
money market mutual fund	A short-term investment that utilizes guaranteed or very close to guaranteed short-term instruments. The possibility of loss is minuscule and typically, so are the returns. “A place to park your money.”
mortgage bond	A bond that is secured by mortgages or other real estate assets. The bond typically “passes through” the interest and principal payments to the mortgage bond investor.
moving average	A dubious technical analysis indicator that calculates an average price or index level, using a fixed number of previous days’ prices or levels. Popular moving average periods are 10-day, 50-day, and 200-day.
MSCI All-Country World Index	A global stock market index designed to measure the returns from companies based all around the world. Has replaced the MSCI World Index.
MSCI All-Country World Index ex-USA	An international stock market index designed to measure the returns from companies based outside the United States. Has replaced the MSCI EAFE Index.
MSCI EAFE Index	Traditionally, the international stock market index designed to measure the returns from companies based outside the United States. Has been replaced by the MSCI All-Country World Index ex-USA.
MSCI World Index	Traditionally, the global stock market index designed to measure the returns from companies based all around the world. Has been replaced by the MSCI All-Country World Index.
municipal bond	A fixed-income investment that is issued by municipalities such states, counties, cities, and other political subdivisions. The interest payments from most municipal bonds are exempt from Federal income taxes.
mutual fund	An investment company that invests its shareholders’ money in a diversified portfolio of securities. Investors typically receive professional money management and instant broad diversification.
mutual fund share classes	The dizzying array of different classes of mutual funds with various methods of soaking their investors, ooops!, we mean charging for their services.
naked option	An options contract that is written on securities not owned or sold short by the writer. Also known as an uncovered option. (Don’t do it! Don’t gamble with options!)
NASDAQ	The second-largest stock exchange in the United States, known for its large percentage of technology stocks, formerly the National Association of Securities Dealers Automated Quotation system.
National Credit Union Administration (NCUA)	Federal agency tasked with insuring savers’ deposits in United States credit unions.
Net Asset Value (NAV)	The underlying value of one share in a particular mutual fund.
net profit margin	The rate of profit being earned from earnings after expenses and taxes.
net working capital	The absolute dollar measure of liquidity, computed by subtracting the current liabilities from the current assets.
New York Stock Exchange (NYSE)	The largest stock exchange in the United States, established in 1792. Also known as the Big Board.
NFT	The current tulip bulb mania. Someone will sell you a graphic image that anyone can download from the Internet for free. Sounds like a good deal to me! The full name is Non-Fungible Token.
no-load mutual fund	A mutual fund that does not charge a commission when shares are bought.
nominal rate	The feature of a bond that defines the amount of annual interest income, expressed as an interest rate. The term coupon comes from the time when bonds had coupons attached to them. The investor sent in the coupon when the semiannual interest was due and the bond issuer would then send the investor a check. Also known as the nominal yield, coupon rate, and coupon yield.
noncumulative preferred stock	Preferred stock whose dividends, if skipped in any given year, are not required to be paid before any other dividends can be paid.
non-qualified account	A type of investment account that for which all capital gains and income are taxable in the year the proceeds from the capital gains or income are received. Also known as regular account and taxable account.
odd lot	A stock transaction that involves a number of shares less than 100. See round lot and mixed lot.
open interest	The number of options or futures contracts that are trading on an exchange at any given time. (I told ya’ to stay away from options and future contracts, right?)
Open Market Operations	The system used by central banks such as the U.S. Federal Reserve Bank to influence short-term interest rates.
open-end investment company	A type of investment company in which investors buy shares from, and sell them back to, the mutual fund itself, with no limit on the number of shares the fund can issue.
operating profit margin	The rate of profit being earned from a company’s operating income.
option contract	A security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time. Also referred to simply as an option. (Pure gambling and speculation! Stay far, far away from these ... unless you love going to Las Vegas and losing your hard-earned money.)
option premium	The proper term yet not popular term for the amount that one pays for or receives from an option contract is the option premium. However, most people just call it the option price.
overseas	An investment based outside the United States. Also known as international and foreign.
Over-the-Counter Market (OTC)	Widely scattered telecommunications network through which transactions are made in outstanding securities and smaller IPOs. Examples include the OTC Bulletin Board and OTC Markets Group, née Pink Sheets. (Careful! These are where the scam penny stocks skulk in the shadows. Stay away!)
P/E	The Price-to-Earnings Ratio is the most widely watched stock market statistic! Computed by dividing the market price of a stock by the earnings of the company. Also computed for a stock market or segment of a stock market as a whole. Also abbreviated as PE.
par value	The named value of a security. With regard to bonds, the amount that will be repaid upon maturity. Also known as face value.
partnership	A legal entity where two or more individuals agree to operate a business or other entity and share in the proceeds.
passive money management	An investment strategy that advocates buying and holding a portfolio of stocks or bonds equivalent to those in a specific market index.
payout ratio	A measure expressed as a percentage of how much of a company’s earnings are being paid out to shareholders in the form of dividends. Also known as the dividend payout ratio.
PEG Ratio	The Price-to-Earnings Ratio-to-Growth Ratio. The relationship of the P/E ratio of a company and their earnings growth rate.
penny stock	A stock from a sham corporation based in someone’s garage in Idaho or Iowa or one of those states that starts with the letter I. Typically found on the OTC Bulletin Board or the OTC Markets Group, formerly the Pink Sheets. Penny stocks should not be discussed in polite company. And don’t think you can beat the scam artists at their own game. If you don’t know who the patsy is as the poker table, the patsy is you
point-and-figure chart	A type of chart used in technical analysis. The use of point-and-figure charts for predicting short-term price movements has been shown to be better than howling at the full moon on hot summer nights while dancing naked around a bonfire, but not that much better.
portfolio allocation	A fancy term for how much should we have in stocks, how much in bonds, etc. Assuming you won’t panic when the markets fall, keep the vast majority of your financial investments in stocks when you are younger. As you get closer to retirement, start to migrate your financial investments toward bonds and high-quality income-producing stocks. But don’t give up on stocks entirely! Lord willin’, you will be in retirement for a long time.
precious metals	Relatively rare metallic elements, some with high economic value. They pay no interest or dividends, don’t grow any earnings, don’t create new products, expand into new markets, etc. There’s a whole lot not to like about precious metals. They do look cool, though.
preferred stock	Stock investments that have a prior claim ahead of common stocks on the income and assets of the issuing firm. Preferred stocks are generally purchased for the reliable stream of dividend payments they produce. There are tax advantages for corporations to own the preferred stock of other companies. Hence, preferred stock is typically not a good choice for individual retail investors.
premium bond	A premium bond is a bond that is selling for more than its par value.
present value	The current value of an investment today from the predicted cash flows of capital gains or income or both sometime in the future given an expected rate of return. It is the opposite of future value. (Please study chapter 4 thoroughly.)
Price-to-Book Value Ratio	Ratio of the current market price to the book value per share.
Price-to-Cash Flow Ratio	Ratio of the current market price to the company’s current cash flow per share.
Price-to-Earnings Ratio	The Price-to-Earnings Ratio is the most widely watched stock market statistic! Computed by dividing the market price of a stock by the earnings of the company. Also computed for a stock market or segment of a stock market as a whole. Normally abbreviated as P/E/ and also abbreviated as PE.
Price-to-Sales Ratio	Ratio of the current market price to the company’s current sales per share.
primary market	The market in which new issues of securities are sold to the public via Initial Public Offerings (IPOs).
principal	(1) The original sum invested. (2) The amount returned upon the maturity of security, typically a fixed-income investment such as a bond.
private placement	An investment that is sold directly to accredited or sophisticated investors and not available to the retail public.
professional money management	Investment professionals who manage the investments for others. Actively managed mutual funds hire professional money managers to identify, investigate, choose, and monitor the stocks, bonds, and other securities that populate the mutual fund.
purchasing power risk	The risk of an investment will fail to keep pace with inflation, thereby reducing the investor’s purchasing power. Also known as inflation risk.
put option contract	A security that gives the holder the right to sell a certain amount of an underlying financial asset at a specified price for a specified period of time. (Warning! Caution! Stay far away from these things. It is gambling, pure and simple.) Also known as a put option or just simply as a put.
qualified account	An account that has some type of tax advantage as outlined in the Internal Revenue Code. Examples include retirement accounts, educational savings accounts, and health savings accounts. Also known as a tax-qualified account.
quick ratio	A measure of the ability of a company to meet their short-term financial obligations even if their inventory becomes obsolete or otherwise unable to sell. Also known as the acid test ratio.
Random Walk Theory	The theory that stock price movements are unpredictable in the short-term.
rate of return	The reward expressed as a percentage from the capital gains or income or the combination of capital gains and income from an investment over a specified period of time.
Real Estate Investment Trust (REIT)	A company that owns and operates income-producing real estate. Similar to a mutual fund but instead of stocks and bonds, they invest in real estate. An alternative that may be worthwhile for those who want to invest in real estate but do not want to be a landlord.
receivables turnover	A measure of how efficiently a company is managing their accounts receivable. Accounts receivables are monies that are owed to the company. Also known as accounts receivables turnover.
recession	Popularly defined as a two consecutive quarters (six months) of economic contraction.
regional fund	A mutual fund that limits its investments to securities of a particular region such as Latin America, the Far East, Eastern Europe, etc.
registered representative	Licensed professional that advises clients on securities investments and may manage their investment portfolios. Also known as broker, stockbroker, and registered investment advisor.
regular account	A type of investment account that for which all capital gains and income are taxable in the year the proceeds from the capital gains or income are received. Also known as non-qualified account and taxable account.
reinvestment risk	The uncertainty about the future value of an investor’s bond investments that result from the need to reinvest bond interest payments and redemptions at yields not known in advance.
required rate of return	The rate of return used to compute the present value of a future stream of cash flows. (Ah, study chapter 4 thoroughly. You can’t leave our class without knowing how to do this. It ain’t that hard once you have done it a few times. All you need is a 99¢ calculator and the present value table from chapter 4!) Also known as expected rate of return, desired rate of return, and discount rate.
restricted securities	Investments that are only available to accredited and sophisticated investors. Off limits to the general public. Typically very speculative but offer tremendous returns if the venture succeeds.
retirement account	A tax-qualified account designed to accumulate monies for an individual’s retirement. Examples include the Traditional IRA, Roth IRA, 401(k), 403(b).
retirement mutual fund	A mutual fund designed to allocate automatically the proper mixture of investments, given an individual’s expected year of retirement. As the year of retirement approaches, the mutual fund will become more conservative. Also known as lifestyle fund and target date fund
Return on Assets (ROA)	A measure of how profitable a company is relative to its total assets.
Return on Equity (ROE)	A measure of the overall profitability of a company in relation to the shareholders’ equity.
Return on Invested Capital (ROIC)	A measure of the overall profitability of a company in relation to both its debt and equity. There are various versions of ROIC.
revenue bond	A municipal bond that requires payment of principal and interest only if sufficient revenue is generated by the issuing municipality.
risk	In the investment world, risk is defined as the probability that actual investment returns will differ from the expected investment returns.
risk-free rate of return	The return on guaranteed short-term investments. The quoted risk-free rate of return is typically the three-month U.S. Treasury bill.
Roth IRA	A tax-qualified retirement account that offers tax-exempt earnings in retirement. (Very cool! Open your Roth IRA now!)
round lot	A stock transaction that involves a number of shares divisible by 100. See odd lot and mixed lot.
Russell 2000	A popular index designed to measure the performance of mid-sized and small companies in the United States.
savings account	A guaranteed demand account at a bank or credit union that normally pays little interest but will often be offered with a toaster or waffle iron which makes it all worthwhile.
secondary market	The market in which securities are traded after they have been issued to the public. The vast majority of transactions take place in the secondary market.
sector funds	A mutual fund that concentrates its holdings in a particular sector of the economy such as energy, technology, or health care. Typically defeats one of the two main advantages of investing in a mutual fund, diversification.
sector rotation	A strategy of buying stocks in hot sectors and selling those stocks in stale sectors. It is similar to market timing strategies and not recommended for prudent, long-term investors such as yourself.
Securities and Exchange Commission (SEC)	The Federal agency charged with regulating the securities industry and protect against market manipulation and other illegal activities.
Securities Industry Essential (SIE) Exam	The exam recently instituted to encourage more professionals to enter the investment industry because of the difficulty of the Series 7 Stockbroker Exam. If you pass the SIE Exam, the industry will come a’ callin’. Think about it. The industry needs you!
Securities Investor Protection Corporation (SIPC)	Similar to how FDIC insures bank deposits, the SIPC is an insurance fund designed to protect investors’ deposits of securities from malfeasance or other misconduct. They do not protect loss of monies from market fluctuations.
securitization	The process of transforming lending vehicles such as mortgages into marketable securities.
security	The unfortunate term for an investment that represents debt or ownership or the legal right to acquire or sell an ownership interest. A better term would be financial investment.
serial bond	A bond issue that has series of maturities instead of the typical term bond issue where all the bonds mature at the same time.
Series 7 Stockbroker Exam	The difficult licensing exam that gives an individual the ability to sell a broad range of securities. The proper name is the Series 7 General Securities Representative Exam since the legal name for stockbroker is a Registered Representative. Because the number of stockbrokers has been declining, recently, the SIE Exam was introduced as a pre-Series 7 exam. It is less expensive and rigorous and if you pass the SIE Exam, the industry will know that you will eventually pass the Series 7 Exam.
Series EE bond	Short-term obligations of the United States Treasury available at TreasuryDirect.gov.
Series I bond	Similar to Series EE bonds but with added inflation protection.
share buyback	The purchase of shares of outstanding shares of stock by the issuing corporation. The shares are taken out of circulation which reduces the number of outstanding shares. There is subsequently less supply of outstanding stock and existing shareholders have a larger percentage ownership of the corporation. Also known as a stock repurchase.
Sharpe ratio	A measure of the past risk versus reward performance of an investment.
short interest	The number of stock shares that have been sold short of a particular security or market. Can be used as a contrarian indicator for future price increases.
short position	A transaction in which investors sell borrowed securities in the hope that the price will decrease in value and the shares can then be bought later date for a profit. Sell high, buy low.
short sale	The sale of borrowed securities, their eventual repurchase by the short seller, and their return to the lender. Instead of, “Buy low, sell high,” a short-term trader attempts to, “Sell high, buy low.” (Don’t do it. It’s dangerous! Peter Lynch says, “Never short a stock,” and who is going to argue with a man who racked up a 29% annual return.)
short-term	In the investment industry, a short-term time frame for retail investors is generally considered up to one year.
short-term investment	Instruments designed to preserve capital for monies that will be needed in the short-term. Often guaranteed and typically carry very low rates of return. “A place to park your money.” Examples include savings accounts, money market mutual funds, and Treasury bills.
sinking fund	A fund designed to accumulate monies in anticipation of a needed payment or payments in the future. An example includes accumulating the sufficient capital to make the principal payments when a series of bonds mature.
small-cap stock	Any company with a market valuation below US$1 billion or $2 billion. Recently, some in the industry are using any company below US$5 billion or US$6 billion million as the threshold.
sophisticated investor	Sophisticated investors are similar to accredited investors but have fewer restricted investment opportunities. Like accredited investors, sophisticated investors are expected to have a high degree of knowledge and experience with risky investments and therefore are able to invest in restricted investments not available to the general public.
specialist	Specialists were the market makers/dealers that populated the floor of the New York Stock Exchange and bought and sold from their own inventories of securities to provide a continuous, fair, and orderly market. Technology has made the job of the specialist on the exchange floor obsolete.
speculation	The investment industry’s euphemism for gambling. Speculation, also called trading, is not investing. (Don’t do it. Don’t speculate. You’ll be sorry!)
speculative stock	Companies with a high degree of risk. They typically are losing money or have very low earnings relative to their valuation. Offer the possibility of substantial capital gains or, more likely, substantial capital losses.
speculator	An individual whose strategy is to profit from the short-term price movements of an asset. Not recommended for prudent, long-term investors. Also known as a trader.
spread	In the world of investments, the spread typically refers to the difference between two prices, yields, or other investment measurements. See bid-ask spread and yield spread.
Standard & Poor’s	The largest of the credit rating agencies and one of the most influential investment research organizations in the world. Now called S&P Global Ratings although most investors simply refer to them as S&P.
Standard & Poor’s 500 Index	One of the most popular stock market indexes. It consists of 500 of the largest United States stocks chosen for market size, liquidity, and industry group representation.
standard deviation	A measure of the risk of an investment computed using the past returns of an investment and the deviation from the average annual return. See variance.
statement of cash flows	A financial summary of a firm’s cash flow and other events that caused changes in the company’s cash position, typically quarterly and annually. Also known as the cash flow statement.
stock	The very unfortunate name for an investment in a for-profit business organization known as a corporation. A better term would be business.
stock dividend	Optional distribution of earnings from a corporation to the shareholders. Typically paid quarterly in the United States and all countries that were associated with the British Empire at one time. Corporations in other countries typically pay dividends semiannually or annually.
stock exchange	Traditionally, a centralized institution in which transactions were made in outstanding securities using a face-to-face “double auction” on the floor of the exchange. Technology has reduced the centralized physical locations to places for business news outlets to harvest video clips.
stock index	A benchmark standard used to measure the general behavior of securities prices of representative groups of stocks at a given point in time.
stock option	A security that gives the holder the right to buy or sell a certain amount of shares of an underlying stock at a specified price for a specified period of time. (If you enjoy gambling, you might enjoy trading stock options. Otherwise, stay far away from these odious stains on our investment industry.)
stock repurchase	The purchase of shares of outstanding shares of stock by the issuing corporation. The shares are taken out of circulation which reduces the number of outstanding shares. There is subsequently less supply of outstanding stock and existing shareholders have a larger percentage ownership of the corporation. Also known as a share buyback.
stock split	An accounting maneuver in which a company increases the number of shares outstanding by exchanging a specified number of new shares of stock for each outstanding share. There is no increased value from a stock split. The market capitalization of the company remains the same.
stockbroker	Licensed professional that advises clients on securities investments and may manage their investment portfolios. Also known a broker, registered representative and registered investment advisor.
stop order	A security transaction that will be triggered when a set price point is achieved in the market. When the price point is achieved, the order becomes a market order and is executed almost instantaneously. Often used to protect against losses. Also known as a stop-loss order.
stop-limit order	Similar to a stop order, except the order becomes a limit order when the price point is achieved. This results in the possibility that the order will not be executed if the limit price is unavailable.
strike price	The agreed upon contract price between the buyer of an option and the seller of the option. Also known as the exercise price.
systematic investment plan	A system of buying an investment at regular intervals with a fixed dollar amount. Also known as dollar cost averaging and an automatic investment plan.
target date mutual fund	A mutual fund designed to allocate automatically the proper mixture of investments, given an individual’s expected year of retirement. As the year of retirement approaches, the mutual fund will become more conservative. Also known as lifestyle fund and retirement fund.
tax shelter	A investment with legal tax reduction provisions. Examples include retirement accounts, municipal bonds, low-income housing projects, and oil and gas exploration projects.
taxable account	A type of investment account that for which all capital gains and income are taxable in the year the proceeds from the capital gains or income are received. Also known as non-qualified account and regular account.
taxable-equivalent yield	The return that a tax-exempt bond is paying relative to a fully taxable bond.
tax-deferred annuity	A type of investment account that allows investors to earned tax-deferred income. Income is taxed upon withdrawal, typically in retirement. Annuities in general have bad reputations for high fees and mediocre returns. Most come with provisions for significant penalties for withdrawing funds prematurely.
tax-exempt bond	A bond that is exempt from either Federal taxes or state and local taxes or both. Examples include municipal bonds which are exempt from Federal taxes and Treasury bonds which are exempt from state and local taxes.
technical analysis	The study of the various forces at work in the marketplace and their effect on stock prices. Typically involves reading squiggles on a computer screen and is not usually much better than practicing voodoo or interpreting the entrails of chickens for predicting the short-term behavior of securities.
term bond	The typical bond issue where all the bonds mature at the same time.
third market	An over-the-counter system used by large institutional investors to reduce transaction costs when initiating large block trades of securities.
time premium	The amount by which an options contract price exceeds the option’s “in-the-money” value. If it would not be feasible to exercise the contract, the entire value of the contract is due to its time premium. (Haven’t we already told you not to gamble with options?)
times interest earned (TIE)	Measures the ability of a company to meet its fixed interest payments. Specifically, the computation of how many times in a year a company has earned their required interest payments.
total asset turnover	A measure of a company’s efficiency at using assets to support sales and revenue. The higher, the better.
total debt to total capitalization	A measure of the total amount of outstanding company debt as a percentage of the firm’s total capitalization.
total debt-to-total assets ratio	A measure of how much of the company’s total assets have been financed by debt.
total return	The return of an investment from both its capital gains and income.
trader	An individual whose strategy is to profit from the short-term price movements of an asset. Not recommended for prudent, long-term investors. Also known as a speculator.
tranche	A portion of an investment that can be sold separately, typically fixed-income instruments such as mortgage bonds.
Treasury bill	Short-term obligation of the United States Treasury with maturities less than one year, generally regarded as the safest of all investments. The current rate of Treasury bills is often used as the risk-free rate of return. Interest earned is exempt from state and local taxes. Often referred to as a T-bill.
Treasury bond	Long-term obligation of the United States Treasury with maturities between 10 and 30 years. Interest earned is exempt from state and local taxes. Often referred to as a T-bond, government bond, or simply government.
Treasury Inflation-Indexed Obligations (TIPs)	A type of Treasury security that provides protection against inflation by adjusting investor returns for the annual rate of inflation.
Treasury note	Actual name for a Treasury bond that matures between 2 and 10 years. Most investors don’t know there is a difference in the name and if you use Treasury bond instead of Treasury note, as I do, no one will come down on you except maybe a person with a compulsive disorder. Interest earned is exempt from state and local taxes.
Treasury stock	Shares of stock of that have been repurchased by the corporation in a share buyback. There is subsequently less supply of outstanding stock and existing shareholders have a larger percentage ownership of the corporation.
TreasuryDirect.gov	The Federal government website where individual investors can purchase government securities at the same prices as big Wall Street firms.
Treynor ratio	A measure of the past risk versus reward performance of an investment. Guaranteed to impress individuals at a cocktail party when you mention the enviable Treynor ratio of your successful investments.
trustee	An individual or organization given authority over the administration of property or care of another and is legally required to act in their best interests.
turnaround stock	A company that has fallen on hard times. A potential investor must investigate thoroughly the potential for a rebound.
uncovered option	An option contract that is written on securities not owned or sold short by the writer. Also known as a naked option. (Don’t do it! Don’t gamble with options!)
undeveloped land	Land that is without any utility services such as electricity, water, or sewer and often without street access. Can provide tremendous investment returns but carries significantly more risk than developed land. Also known as raw land and unimproved land.
upside capture ratio	A statistical measure of the past performance of a money manager when asset prices are rising.
valuation	The process by which the underlying value of an investment is established on the basis of its forecasted risk and return performance.
value investing	The investment strategy that emphasizes the use of fundamental analysis to identify high-quality companies with good growth prospects and potential for dividends at reasonable prices and holding them for the long-term. Often referred to as “buy 'n' hold” investing.
variance	A measure of the risk of an investment computed using the past returns of an investment and the variance from the average annual return. See standard deviation.
volatility	The investment industry’s euphemism for, “Aye! I lost a whole lotta’ money!” (Keep a long-term perspective, Dear Readers.)
voting rights	The rights of shareholders to vote for various aspects of the corporation such as the members of the Board of Directors. Typically, an investor gets one vote for each share of stock owned.
warrant	A long-lived option that gives the holder the right to buy stock in a company at a price specified on the warrant.
Wilshire 4500 Index	A much easier name to remember for the Dow Jones U.S. Completion Total Stock Market Index.
Wilshire 5000 Index	A much easier name to remember for the Dow Jones U.S. Total Stock Market Index.
yield curve	A graph that represents the relationship between a bond’s maturity and its yield at a given point in time, also used to make comparisons among types of bonds.
yield spreads	The differences in interest rates that exist among various sectors of the bond market.
yield to call (YTC)	The yield to call is the interest rate that an investor will receive if a premium bond is called away when the call protection period ends.
yield to maturity (YTM)	The yield to maturity is the interest rate that an investor will receive from a bond if held until maturity.
zero coupon bond	A bond that is sold a deep discount to its par value and does not offer periodic interest payments. Instead of paying interest in cash, the bonds accrue in value until maturity when the investor receives the par value.