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Money Talk: Financial Investment Terms You Should Know

Interested in investing, constantly hearing financial investment jargon, or simply like to guess which companies AFQ, MER-D, and TWTR stand for as they pop up in the stock market updates while watching the evening news?

Financial Investment Terms Glossary | Image source: / Artist: Melpomene

Whether you're totally unfamiliar and brand new to investing or you've become an expert over the years, here's an ultimate glossary of investment-related terms you should know to better understand the industry.


Accrued: The interest on a bond that has accrued since the last interest payment date. The buyer of the bond pays the market price plus accrued interest.

Amortization (ADR): A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. currency and markets. 

Annual Report: The formal financial statement issued yearly by a corporation. The annual report shows the balance sheet at yearend, as well as an earnings (profit and Loss) statement, cash flow statement, etc. It also generally includes a narrative of the company’s activities and performance for the year, and various other data and information that aids in analyzing the company’s value and outlook.

Assets: All that a company owns, or is owed to it: cash, investments, money due it, materials and inventories, which are called current assets; buildings and machinery, mineral deposits, etc., which are known as fixed assets; and patents and goodwill, called intangible assets.

Auditor's Report: The statement of the accounting firm's analysis and its opinion of the accuracy of a company’s financial statements, particularly if they conform to generally accepted rules and practices of accountancy.


Bear: Someone who believes the market will decline.\

Bear Market: A declining market.

Block: A large holding or transaction (Block Trade) of stock.

Blue Chip: A company known nationally, or even globally, for the quality and wide acceptance of its products or services, and for its ability to earn profits and pay dividends, i.e. to prosper and grow.

Bond: Basically an IOU or promissory note of a company that issues (sells) bonds to raise debt capital. The bond is evidence of a debt on which the issuer promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the bond’s expiration date.

Bull: One who believes the market will rise.

Bull Market: An advancing market.


Capital Gain or Capital Loss: Profit or loss realized when a stock or other capital asset is sold.

Capital Stock: Consists of all shares (preferred and common) representing equity (ownership) of a business.

Cash Flow: Total funds available to a company, i.e. net income plus amounts deducted for depreciation, depletion, amortization, and extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents. 

Common Stock: Securities that represent an ownership interest in a corporation. Common stockholders assume somewhat greater risk than preferred shareholders, but generally exercise the greater control and may gain the greater award in the form of capital appreciation plus dividends.

Current Assets: Those assets of a company that are reasonably expected to be realized in cash, sold or consumed during one year. These include cash, U.S. Government bonds, money market instruments, inventories, receivables and money due within one year.

Current Liabilities: Money owed and payable by a company within one year.


Debit Balance: In a margin account, that portion of the purchase price of stock or other investment type that is covered by credit extended by the broker to the margin customer.

Delayed Opening: The postponement of trading of a stock beyond the normal opening of a day's trading session because of an abnormal influx of either buy or sell orders, or pending corporate news that requires extra time for deemed dissemination.

Depository Trust Company (DTC): A securities certificate depository through which members affect security deliveries between each other via computerized bookkeeping entries instead of each company having to deliver and receive physical stock certificates.

Discretionary Account: Is an account in which the customer gives the broker or someone else authority to buy and sell securities in the account, at their own discretion. Dividend– Is a payment designated by the board of directors to be distributed on a per share basis to stockholders, and paid for out of surplus (profits.)


Earnings Report: One of the key financial statements, also called an income statement, issued by a company showing its revenues, expenses, earnings or losses over a given period.

Equity: The ownership interest of preferred and common shareholders in a company.

Exchange Rate: The price of converting one country's currency to the currency of another country. A "floating" exchange rate is normally determined by market conditions while a "fixed" rate is one that is held at one level regardless of the market.

Extra: The short form of "extra dividend." A dividend in the form of stock or cash in addition to the regular or usual dividend the company has been paying.


Face Value: The value of a bond that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value.

Fiscal Year: The financial or accounting year of a corporation. A Fiscal Year is normally a 12 month period that may or may not follow the calendar year. At the end of a fiscal year, companies usually calculate their year-end profits and losses.

Fixed Charges: A company's fixed expenses, such as bond interest, which it has agreed to pay whether or not earned, and which are deducted from income before earnings on equity capital are computed.

Funded Debt: Usually interest-bearing bonds or debentures of a company. Could include long-term bank loans. Does not include short-term loans, preferred or common stock.


General Mortgage Bond: A bond that is secured by a blanket mortgage on the company's property but may be outranked by one or more other mortgages.

Gold Fix: The setting of the price of gold by dealers (especially in a twice-daily London meeting at the central bank); the fix is the fundamental worldwide price for setting prices of gold bullion and gold-related contracts and products.


Hedge: An investment strategy used to limit risk and protect against market volatility by making transactions that oppose existing positions or by taking an offsetting position in a related security.

Holding Company: A corporation that owns the securities of another, in most cases with voting control.


Index: A statistical yardstick against which the performance of the stock market or groups of securities is compared. For example, the S&P 500 is a common stock market index that measures the performance of 500 large U.S. firms in various market sectors and is considered an indicator of the U.S. market as a whole. Economic indexes, such as the Consumer Price Index, are also used to track the rise and fall in value of goods and services and are an indicator of inflation.

Inflation: Occurs when purchasing power declines due to increase in the prices of goods and services based on a percentage change in the Consumer Price Index.

Interest: Money charged to a borrower by a lender for a loan or investment. Also refers to the return earned on funds that have been loaned or invested. The interest rate is normally a percentage of the debt over a period of time.

Investment: The purchase of items of value in order to earn income and/or increase capital, i.e. putting money to work to make more money. Investments can include income-producing vehicles such as bonds, equity vehicles such as common and preferred stocks (which may or may not provide income) and other assets such as real estate.

Issue: Any of a company's securities, or the act of distributing such securities.


Large Cap Stock: Stocks of companies that are among the largest capitalization in their market.

Liabilities: The debts and financial obligations of a company either current (payable within one year) or long-term (payable after one year) such as salaries, taxes and money owed. The concept also applies to pension plans and reflects the benefit promises of the plan (i.e. future pension payments).

Liquidity: The ease with which investors can convert securities into cash. Also refers to a corporation's cash position, i.e. its assets relative to its liabilities.


Market Price: The last reported price at which the stock or bond sold, or the current quote.

Mid Cap Stock: Stocks of companies that are in the middle range capitalization in their market.

Mortgage Bond: A bond secured by a mortgage on a property. The value of the property may or may not equal the value of the bonds issued against it. (See: Bond, Debenture)

Mutual Fund: A company or trust that uses its capital to invest in other companies. There are two principal types: the closed-end and the open-end or mutual fund. Shares in closed-end investment companies, some of which are listed on the New York Stock Exchange, are readily transferable in the open market and are bought and sold like other shares. Capitalization of these companies remains the same unless action is taken to alter it, which is seldom. Open-end funds sell their own shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them.


Nasdaq: An automated network (electronic stock market) used for trading Over the Counter stock, with an emphasis on high tech and developing companies. Originally referred to as NASDAQ (an acronym for the National Association of Securities Dealers Automated Quotations System), it also refers to several indices, e.g. the NASDAQ-100 Index and the NASDAQ Composite Index.

New York Stock Exchange (NYSE): The largest organized securities market in the United States, founded in 1792. The Exchange itself does not buy, sell, own or set the prices of securities traded there. The prices are determined by public supply and demand. The Exchange is a non-profit corporation of 1,366 individual members, governed by a board of directors consisting of 10 public representatives, 10 Exchange members or allied members and a full-time chairman, executive vice chairman and president.


Option: The right to buy or sell a specified amount of securities at a certain price within or at the end of a stipulated time period. A "put option" gives the holder selling rights while a "call option" gives buying rights.

Over the Counter (OTC): Principal market for bonds and some stocks that are not traded on a recognized exchange. Normally brokers and dealers trade directly by phone or electronically. Also known as an Unlisted Market.


Preferred Stock or Shares: Securities that entitle the holder to a specified rate of dividend that is paid before dividends to common shareholders are paid. Preferred shareholders normally have a priority claim on assets in the event of the liquidation of a company.

Principal: The original investment amount or capital (not including earned interest) or the face amount of a bond.

Private Equity: Equity capital invested in a private company or made available to companies or investors outside of the stock market.

Proxy: Authorization given by shareholders delegating another person, or a company manager, the rights and responsibilities to represent the holder and vote the holder's shares at shareholders meetings.


Quote: The highest bid to buy and the lowest offer to sell a security in a given market at a given time. If you ask your financial advisor for a "quote" on a stock, he or she may come back with something like "45 1/4 to 45 1/2." This means that $45.25 is the highest price any buyer wanted to pay at the time the quote was given on the floor of the exchange and that $45.50 was the lowest price that any seller would take at the same time. (See: Bid and asked)


Registered Bond: A bond that is registered on the books of the issuing company in the name of the owner. It can be transferred only when endorsed by the registered owner.

Return on Investment (ROI): A measurement of the profitability of a company based on income in the fiscal year divided by stock equity and debt.

Risk Tolerance: The amount of risk that an investor is prepared to accept, given the potential return. The Risk Tolerance of each investor is affected by such influences as Time Horizon, Investment Objectives and Individual Temperament.


Securities: Transferable investment products represented by certificates or documents of ownership or claim on income payments. Stocks, bonds, mortgages, derivatives, certificates of deposit and options are all examples of securities.

Short Selling: The sale of a borrowed security in anticipation that the price of the security will decline and that a profit can be made by buying back the security at a lower cost (and returning it to the lender) in the future.

Small Cap Stock: Stock of companies that are in the lower market capitalization range in the market, i.e. the birthplace of all blue chip or Large Cap stocks.


Technical Research: Analysis of the market and stocks based on supply and demand. The technician studies price movements, volume, trends and patterns, which are revealed by charting these factors, and attempts to assess the possible effect of current market action on future supply and demand for securities and individual issues.

Top Down: An investment strategy that builds portfolios of securities based on the country, region, sector or industry in which they operate as well as on economic and other factors. This approach delays research and analysis of individual companies until after it has determined that a candidate company is in a preferred “space”.

Treasury Bill (T-Bill): Short-term security offered by a government for terms of up to one year.


Unlisted Stock: A security not listed on a stock exchange.


Volatility: A measure of the rate or degree that the price of a security or investment fluctuates over time, normally used as an indicator of risk.


Warrants: Certificates giving the holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with securities as an inducement to buy.


Yield: Also referred to as return. The dividends or interest paid by a company expressed as a percentage of the current price. A stock with a current market value of $40 a share paying dividends at the rate of $3.20 is said to return 8% ($3.20÷$40.00). The current yield on a bond is figured the same way.

Yield to Maturity: The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.


Investing 101: An IntroductionList of Symbols for the New York Stock Exchange | Commonly Used Stock Exchange Abbreviations

All credit for the above definitions goes to original source, Newport International Group.

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