Reference

Glossary Terms

Browse our comprehensive glossary of terms. Search, filter by topic, or navigate alphabetically.

463 Total Terms
18 Topics

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8 terms
50/30/20 rule The 50/30/20 rule is a simple and popular budgeting framework that helps individuals manage their after-tax income by… Personal Finance & Money Management 457 plan A 457 plan is a type of tax-advantaged retirement savings account offered to employees of state and local… Retirement Planning 10-K The 10-K is an annual report that publicly traded companies must file with the U.S. Securities and Exchange… Financial Statements & Accounting

A

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Appraisal An appraisal is a professional estimate of the market value of a property, such as a home, land,… Real Estate & Mortgage Finance Accredited investor An accredited investor is an individual or entity that meets specific financial criteria established by the Securities and… Financial Regulation Adjustable-rate mortgage (ARM) An Adjustable-Rate Mortgage (ARM) is a type of home loan where the interest rate is not fixed for… Real Estate & Mortgage Finance

B

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Bank statement A bank statement is a document issued by a bank or credit union that summarizes all financial transactions… Banking & Depository Institutions Bull market A bull market is a prolonged period in financial markets when prices of assets, most commonly stocks, rise… Stocks & Equity Markets Blue chip Blue chip stocks are shares of large, well-established, and financially sound companies that have a long history of… Stocks & Equity Markets

C

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Cost of living The cost of living is the amount of money needed to sustain a certain level of expenses, including… Personal Finance & Money Management Cost basis Cost basis is the original value of an asset for tax purposes, usually the purchase price plus any… Taxation Creation/redemption mechanism The creation/redemption mechanism is the unique process by which exchange-traded fund (ETF) shares are created and redeemed, ensuring… Mutual Funds, ETFs & Pooled Vehicles

D

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Dual mandate The Dual Mandate is the primary policy directive given to the Federal Reserve System (the Fed), the central… Monetary & Fiscal Policy Debt-to-income (DTI) ratio The Debt-to-Income (DTI) ratio is a personal finance metric that compares your total monthly debt payments to your… Credit, Debt & Lending Dot plot The dot plot is a visual chart published by the Federal Open Market Committee (FOMC) that shows individual… Monetary & Fiscal Policy

E

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ERISA ERISA, the Employee Retirement Income Security Act of 1974, is a landmark federal law that sets minimum standards… Retirement Planning Ex-dividend date The ex-dividend date is a critical milestone in the dividend payment process for stocks. It is the date… Stocks & Equity Markets Estimated tax Estimated tax is a method of paying taxes on income that is not subject to withholding. Instead of… Taxation

F

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Foreclosure Foreclosure is the legal process that occurs when a homeowner fails to make their mortgage payments, leading the… Real Estate & Mortgage Finance Fixed annuity A fixed annuity is a type of insurance contract designed to provide a guaranteed, steady stream of income,… Retirement Planning Forward guidance Forward guidance is a communication tool used by central banks, such as the Federal Reserve, to inform the… Monetary & Fiscal Policy

G

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Gift tax The gift tax is a federal tax in the United States imposed on the transfer of property or… Taxation Gross profit Gross profit is the profit a company makes after deducting the costs directly tied to producing and selling… Financial Statements & Accounting Glass-Steagall Act The Glass-Steagall Act (officially the Banking Act of 1933) was a landmark piece of U.S. legislation that created… Financial Regulation

H

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Hawkish vs. dovish In the world of central banking and monetary policy, the terms hawkish and dovish describe the general attitude… Monetary & Fiscal Policy Hurdle rate The hurdle rate is the minimum acceptable rate of return on an investment or project that a company… Corporate Finance Homeowners insurance Homeowners insurance is a type of property insurance that protects an individual’s home and personal belongings against damage,… Insurance & Risk Protection

I

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Internal rate of return (IRR) The Internal Rate of Return (IRR) is a powerful financial metric used to evaluate the profitability of potential… Corporate Finance Investment horizon An investment horizon is the total length of time an investor expects to hold a security or a… Investing Fundamentals Interest rate An interest rate is the cost of borrowing money or the return earned on savings, expressed as a…

J

2 terms
JOBS Act The JOBS Act, officially the Jumpstart Our Business Startups Act, is a landmark piece of U.S. legislation signed… Financial Regulation Jumbo loan A jumbo loan is a type of mortgage used to finance properties that are too expensive for a… Real Estate & Mortgage Finance

L

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Liquidity Liquidity is a financial concept that describes how quickly and easily an asset can be bought or sold… Financial Markets & Market Mechanics Loan origination fee A loan origination fee is an upfront charge imposed by a lender to process, underwrite, and fund a… Credit, Debt & Lending Leverage Leverage is the strategic use of borrowed capital (debt) to increase the potential return on an investment. In… Corporate Finance

M

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Market capitalization Market capitalization (or “market cap”) is the total dollar value of a publicly traded company’s outstanding shares of… Stocks & Equity Markets Monetary policy Monetary policy is the set of actions a central bank, like the Federal Reserve System in the United… Mutual fund A mutual fund is a type of investment vehicle that pools money from many investors to purchase a… Mutual Funds, ETFs & Pooled Vehicles

N

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Non-discretionary spending Non-discretionary spending, also called essential or mandatory spending, refers to expenses that are necessary for basic living and… Personal Finance & Money Management Net income Net income is the bottom line of a company’s income statement. It represents the total profit a business… Financial Statements & Accounting Nominal return Nominal return is the percentage gain or loss on an investment before adjusting for the effects of inflation.… Investing Fundamentals

O

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Over-the-counter (OTC) Over-the-counter (OTC) trading refers to a decentralized market where financial instruments are traded directly between two parties, without… Financial Markets & Market Mechanics Opportunity cost Opportunity cost is the value of the next best alternative that you give up when you make a… Economics for Finance Operating income Operating income, also known as operating profit or operating earnings, measures the profit a company makes from its… Financial Statements & Accounting

P

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Passive investing Passive investing is a long-term investment strategy that aims to match the performance of a broad market index,… Investing Fundamentals Pecking order theory The pecking order theory is a corporate finance concept that explains how companies prioritize their sources of financing.… Corporate Finance Principal Principal is the original sum of money borrowed in a loan or the original amount invested, before any… Credit, Debt & Lending

Q

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Qualified dividend A qualified dividend is a type of dividend payment that meets specific criteria set by the Internal Revenue… Taxation Qualified plan A qualified plan is a retirement savings plan that meets the requirements of the Internal Revenue Code (IRC)… Retirement Planning Quick (acid-test) ratio The quick ratio, also known as the acid-test ratio, is a stringent measure of a company’s short-term liquidity.… Financial Ratios & Analysis

R

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Real return Real return is a measure of investment performance that accounts for the eroding effects of inflation. While a… Investing Fundamentals REIT (Real Estate Investment Trust) A Real Estate Investment Trust, commonly known as a REIT (pronounced “reet”), is a company that owns, operates,… Real Estate & Mortgage Finance Renters insurance Renters insurance is a type of policy designed specifically for people who rent their home or apartment. It… Insurance & Risk Protection

S

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Security A security is a tradable financial instrument that holds monetary value and represents ownership, a creditor relationship, or… Investing Fundamentals Social Security Social Security is a federal program in the United States that provides financial support to retired workers, people… Retirement Planning Step-up in basis A step-up in basis is a tax rule that adjusts the cost basis of an inherited asset —… Taxation

T

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Treasury bonds Treasury bonds (often called T-bonds) are long-term debt securities issued by the U.S. Department of the Treasury to… Bonds & Fixed Income Traditional IRA A Traditional IRA (Individual Retirement Account) is a tax-advantaged retirement savings account that allows individuals to contribute pre-tax… Retirement Planning Tax-loss harvesting Tax-loss harvesting is a strategy used by investors to reduce their taxable income by selling investments that have… Taxation

U

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Underwater mortgage An underwater mortgage, also known as being in a state of negative equity, occurs when the outstanding balance… Real Estate & Mortgage Finance Unemployment rate The unemployment rate is a key economic indicator that measures the percentage of the labor force that is… Economics for Finance Umbrella policy An umbrella policy, also known as personal umbrella insurance, is an extra layer of liability insurance that goes… Insurance & Risk Protection

V

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Volatility Volatility is a statistical measure of the dispersion of returns for a given security or market index. In… Investing Fundamentals Vesting Vesting is a legal and financial term that refers to the process by which an employee earns the… Retirement Planning Value stock A value stock is a share of a company that trades at a lower price relative to its… Stocks & Equity Markets

W

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W-2 A W-2 form, officially called the “Wage and Tax Statement,” is a crucial tax document that employers in… Personal Finance & Money Management Wash-sale rule The wash-sale rule is a regulation by the Internal Revenue Service (IRS) that prevents investors from claiming a… Taxation Wire transfer A wire transfer is an electronic method of transferring funds from one person or entity to another, directly… Banking & Depository Institutions

Y

3 terms
Yield to maturity (YTM) Yield to Maturity (YTM) is the total return anticipated on a bond if it is held until it… Bonds & Fixed Income Yield curve The yield curve is a graphical representation that shows the relationship between interest rates (yields) and the time… Bonds & Fixed Income Yield Yield is a financial term that measures the income generated by an investment, typically expressed as a percentage… Investing Fundamentals

Z

2 terms
Zero-coupon bond A zero-coupon bond is a type of bond that does not pay periodic interest payments (coupons) to its… Bonds & Fixed Income Zero-based budgeting Zero-based budgeting (ZBB) is a method of budgeting where every expense must be justified for each new period,… Personal Finance & Money Management