glossary

 Asset Allocation: 

The distribution of investments across different asset classes (stocks, bonds, cash, etc.) to achieve a balance between risk and return.

Basis Point:

A unit of measure for interest rates and other percentages, equivalent to one hundredth of a percentage point (0.01%).

Bear Market:

A market condition characterized by a prolonged decline in investment prices, typically associated with pessimism and economic downturns.

Blue Chip Stocks: 

Shares of large, well-established companies with a history of stable performance, often considered reliable and less risky.

Bull Market: 

A market condition marked by a sustained rise in investment prices, typically accompanied by optimism and economic growth.

Compound Interest: 

Interest earned on both the initial principal and the accumulated interest from previous periods.

Diversification: 

Spreading investments across different assets to reduce risk by avoiding over-reliance on a single investment.

ETF (Exchange-Traded Fund): 

An investment fund traded on stock exchanges, comprising a basket of assets (stocks, bonds, commodities) that tracks an index.

FICO Score: 

A credit score developed by the Fair Isaac Corporation, commonly used by lenders to assess an individual's creditworthiness.

Hedge Fund: 

An investment fund that employs various strategies, often more complex than traditional funds, to generate returns for its investors.

Index Fund: 

A mutual fund or ETF that aims to replicate the performance of a specific market index.

Liquidity: 

The ease with which an asset can be bought or sold in the market without affecting its price.

Market Capitalization (Market Cap): 

The total value of a company's outstanding shares of stock, calculated by multiplying the share price by the number of shares.

Options: 

Financial derivatives that give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified period.

P/E Ratio (Price-to-Earnings Ratio): 

A valuation metric calculated by dividing a company's stock price by its earnings per share, indicating the market's expectations for future earnings growth.

Rollover IRA: 

A retirement account that allows an individual to transfer funds from a qualified retirement plan, like a 401(k), without incurring tax penalties.

Stock Split: 

A corporate action that increases the number of a company's outstanding shares while proportionally reducing the share price.

Tax-Deferred: 

Investment growth that is not taxed until funds are withdrawn, often associated with retirement accounts like 401(k)s and IRAs.

Underwriting: 

The process by which an insurance company evaluates, accepts, or rejects risks and determines the appropriate premium for coverage.

Yield: 

The income generated by an investment, often expressed as a percentage of the investment's current value