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 401(k) A 401(k) is a tax-advantaged retirement savings plan sponsored by an employer. It allows employees to save and… Retirement Planning 12b-1 fee A 12b-1 fee is an annual fee charged by some mutual funds to cover the costs of marketing,… Mutual Funds, ETFs & Pooled Vehicles

A

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Authorized participant An Authorized Participant (AP) is a large financial institution, such as a market maker, broker-dealer, or bank, that… Mutual Funds, ETFs & Pooled Vehicles APR APR stands for Annual Percentage Rate. It is the total yearly cost of borrowing money, expressed as a… Banking & Depository Institutions Credit, Debt & Lending Active investing Active investing is a hands-on approach to building and managing an investment portfolio. Instead of simply tracking a… Investing Fundamentals

B

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Blue chip Blue chip stocks are shares of large, well-established, and financially sound companies that have a long history of… Stocks & Equity Markets Beneficiary A beneficiary is a person, organization, trust, or estate that is legally designated to receive assets or benefits… Insurance & Risk Protection Bull market A bull market is a prolonged period in financial markets when prices of assets, most commonly stocks, rise… Stocks & Equity Markets

C

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Cash value Cash value is a feature of permanent life insurance policies, such as whole life insurance and universal life… Insurance & Risk Protection Comparative advantage Comparative advantage is a fundamental economic theory that explains how countries, businesses, or individuals can benefit from trade,… Economics for Finance Coinsurance Coinsurance is a cost-sharing mechanism commonly found in health insurance policies, where the insured individual and the insurance… Insurance & Risk Protection

D

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Dividend policy Dividend policy refers to the set of guidelines and strategies that a company’s management uses to decide how… Corporate Finance Debit card A debit card is a payment card issued by a bank or credit union that allows you to… Banking & Depository Institutions Deferred annuity A deferred annuity is a type of retirement savings contract offered by insurance companies. With a deferred annuity,… Retirement Planning

E

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Equifax Equifax is one of the three major credit bureaus (along with Experian and TransUnion) that collect and maintain… Credit, Debt & Lending Experian Experian is one of the three major credit reporting agencies (along with Equifax and TransUnion) that collect and… Credit, Debt & Lending Early withdrawal penalty An early withdrawal penalty is a fee imposed by the Internal Revenue Service (IRS) when you take money… Retirement Planning

F

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Fixed-rate mortgage A fixed-rate mortgage is a type of home loan where the interest rate remains constant for the entire… Real Estate & Mortgage Finance Face / par value Face value, also known as par value, is the stated value of a bond as printed on the… Bonds & Fixed Income Form ADV Form ADV is the uniform registration form that investment advisers must file with the Securities and Exchange Commission… Financial Regulation

G

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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 Growth stock A growth stock is a share in a company that is expected to grow at an above-average rate… Stocks & Equity Markets Gross margin Gross margin is a key financial metric that shows how efficiently a company produces and sells its products.… Financial Ratios & Analysis

H

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High-yield (junk) bond A high-yield bond, commonly known as a junk bond, is a type of bond that offers a higher… Bonds & Fixed Income Homeowners insurance Homeowners insurance is a type of property insurance that protects an individual’s home and personal belongings against damage,… Insurance & Risk Protection Household cash flow Household cash flow is the total amount of money moving into and out of a household over a… Personal Finance & Money Management

I

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Installment debt Installment debt is a type of loan that is repaid over time with a set number of scheduled… Credit, Debt & Lending Investment horizon An investment horizon is the total length of time an investor expects to hold a security or a… Investing Fundamentals Inflation Inflation is the rate at which the general level of prices for goods and services rises over a… Economics for Finance

J

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

L

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Long-term capital gains Long-term capital gains are the profits you earn from selling an asset that you have held for more… Taxation Loan origination fee A loan origination fee is an upfront charge imposed by a lender to process, underwrite, and fund a… Credit, Debt & Lending Liabilities Liabilities are financial obligations or debts that a company or individual owes to others. They represent claims against… Financial Statements & Accounting

M

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Mortgage-backed security (MBS) A mortgage-backed security (MBS) is a type of investment product that represents a claim on the cash flows… Real Estate & Mortgage Finance Money market account A money market account (MMA) is a type of deposit account offered by banks and credit unions that… Banking & Depository Institutions Money market fund A money market fund is a type of mutual fund that invests in short-term, high-quality, low-risk debt securities.… Mutual Funds, ETFs & Pooled Vehicles

N

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Nominal return Nominal return is the percentage gain or loss on an investment before adjusting for the effects of inflation.… Investing Fundamentals Net asset value (NAV) Net asset value (NAV) represents the per-share market value of a mutual fund, exchange-traded fund (ETF), or other… Mutual Funds, ETFs & Pooled Vehicles NCUA The NCUA, or National Credit Union Administration, is an independent federal agency created by the United States Congress… Financial Regulation

O

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Opportunity cost Opportunity cost is the value of the next best alternative that you give up when you make a… Economics for Finance Online bank An online bank is a financial institution that operates entirely or primarily through digital channels, such as a… Banking & Depository Institutions Overdraft An overdraft occurs when you spend more money than you have available in your checking account. In simple… Banking & Depository Institutions

P

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P/E ratio The price-to-earnings (P/E) ratio is one of the most widely used tools for valuing a stock. It compares… Stocks & Equity Markets Profitability index The profitability index (PI) is a financial metric used in capital budgeting to evaluate the attractiveness of an… Corporate Finance Payback period The payback period is a fundamental capital budgeting tool used to evaluate the profitability and risk of a… Corporate Finance

Q

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Qualified plan A qualified plan is a retirement savings plan that meets the requirements of the Internal Revenue Code (IRC)… Retirement Planning Quantitative easing (QE) Quantitative easing (QE) is an unconventional monetary policy tool used by a central bank — like the U.S.… Monetary & Fiscal Policy Qualified dividend A qualified dividend is a type of dividend payment that meets specific criteria set by the Internal Revenue… Taxation

R

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Required minimum distribution (RMD) A Required Minimum Distribution (RMD) is the minimum amount you must withdraw from certain retirement accounts each year… Retirement Planning Rider A rider is an amendment or attachment to an insurance policy that modifies the standard terms, coverage, or… Insurance & Risk Protection Rebalancing Rebalancing is the process of realigning the weightings of a portfolio of assets by periodically buying or selling… Investing Fundamentals

S

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Share repurchase A share repurchase, also known as a stock buyback, is a corporate action in which a company buys… Corporate Finance Share class B Share class B is a type of mutual fund share class that typically does not charge an upfront… Mutual Funds, ETFs & Pooled Vehicles Securities Act of 1933 The Securities Act of 1933 is a landmark piece of federal legislation enacted in the United States in… Financial Regulation

T

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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-deferred Tax-deferred refers to a type of investment or savings account where you do not pay taxes on the… Taxation Trade deficit A trade deficit occurs when a country imports more goods and services than it exports over a given… Economics for Finance

U

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Unsecured debt Unsecured debt is a type of loan or credit that is not backed by any form of collateral.… Credit, Debt & Lending Underwriting Underwriting is the process by which a lender, insurer, or investment bank evaluates the risk involved in a… Insurance & Risk Protection Underwater mortgage An underwater mortgage, also known as being in a state of negative equity, occurs when the outstanding balance… Real Estate & Mortgage Finance

V

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Variable annuity A variable annuity is a type of insurance contract that offers a way to save for retirement by… Retirement Planning VantageScore VantageScore is a credit scoring model developed by the three major credit bureaus: Equifax, Experian, and TransUnion. It… Credit, Debt & Lending 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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Weighted average cost of capital (WACC) The Weighted Average Cost of Capital (WACC) is a financial metric that represents the average rate of return… Corporate Finance Working capital Working capital is a financial metric that represents the difference between a company’s current assets and current liabilities.… Corporate Finance 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 curve The yield curve is a graphical representation that shows the relationship between interest rates (yields) and the time… Bonds & Fixed Income 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 Yield is a financial term that measures the income generated by an investment, typically expressed as a percentage… Investing Fundamentals

Z

2 terms
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 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