Financial Terms Glossary

A comprehensive guide to essential financial and investment terminology.

Amortization

The process of spreading loan payments over time, including both principal and interest.

Annual Percentage Rate (APR)

The yearly interest rate charged for borrowing or earned through an investment, including fees.

Asset Allocation

The strategy of dividing investments among different asset categories to balance risk and reward.

Bear Market

A market condition in which prices of securities fall 20% or more from recent highs.

Blue-Chip Stocks

Shares of large, well-established companies with a history of reliable performance.

Bull Market

A market condition marked by rising security prices and optimistic investor sentiment.

Capital Gains

The profit realized from selling an investment for more than its purchase price.

Compound Interest

Interest earned on both the initial principal and previously accumulated interest.

Diversification

Spreading investments across different assets to reduce risk.

Dividend

A portion of company profits distributed to shareholders.

ETF (Exchange-Traded Fund)

A type of investment fund traded on stock exchanges, much like stocks.

Equity

Ownership interest in a company, typically in the form of stock.

FINRA

Financial Industry Regulatory Authority - a private organization that regulates member brokerage firms and exchange markets.

Fixed Income

Investment that provides regular payments at a fixed rate, such as bonds or preferred stocks.

Growth Stock

Shares in companies expected to grow at an above-average rate compared to other companies in the market.

Hedge Fund

An investment fund that pools capital from accredited investors and employs various strategies to earn returns.

Index Fund

A type of mutual fund designed to track a specific market index, such as the S&P 500.

Inflation

The rate at which the general level of prices for goods and services is rising in an economy.

Liquidity

The degree to which an asset can be quickly bought or sold without affecting its price.

Market Capitalization

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