401(k): Type of retirement plan provided by employers. It allows you to set aside a portion of your salary on a regular basis, and your employer may also contribute a certain percentage. The money you contribute grows tax-deferred, therefore, you will not pay taxes on it until you withdraw it.

Annual return: Measure that indicates how well an investment has performed over the course of a year. The annual return takes into account any gains or losses experienced by the investment and provides a clear picture of its overall performance during that time frame.

Annual Percentage Rate (APR): Cost of borrowing money over a year. It helps to understand how much it would cost to borrow money for a whole year, including both the interest and any additional fees associated with the loan.

Ask: Prices at which people are willing to sell a particular investment, like a stock or bond. In other words, the “ask” price represents the amount a seller wants in exchange for their investment.

Asset: Something that holds economic value. It can be any item or property, such as stocks or real estate, that has the potential to generate income or be sold for a profit.

Asset allocation: Process of dividing your investment portfolio into various categories, such as stocks, cash, and bonds.

Automatic or direct debit: Hassle-free payment method that simplifies bill payments. It allows you to establish an arrangement with your merchant or service provider, and instead of manually paying each bill, you authorize them to deduct the required funds directly from your checking account. This automatic deduction occurs on the bill’s due date, which typically repeats monthly.

Bear market: Situation in the stock market where prices are consistently falling. It describes a period of time when investing in stocks can be risky, but it can also offer potential rewards.

Benchmark: Reference point used to compare or measure the performance of investments. It serves as a point of comparison to assess and understand how well something is doing relative to a specific standard.

Bid: Prices at which people are willing to buy a particular investment. In other words, the “bid” price is the amount a buyer is willing to pay for it.

Bond: Form of debt where you act as a lender. When you purchase a bond, you are essentially lending money to the entity issuing the bond, which could be a government, city, or company. In return, the issuer compromises to pay you a predetermined interest rate over the bond’s lifetime and to return the original amount you lent when the bond reaches its specified maturity date.

Bond’s face value or par value: Initial amount of money that an issuer promises to give back to the person who buys the bond when it matures.

Bull market: Situation in the stock market where prices are consistently rising. It is a time when investments are considered less risky but may not offer the potential for significant rewards.

Call Option: The holder has the right, but not the obligation, to buy an underlying asset at a specific price within a certain timeframe.

Cap: Financial tool or contract that establishes a maximum limit on a variable, such as an interest rate or an investment return. It ensures that the variable cannot exceed a specific pre-determined threshold.

Capital gain: Financial gain or positive difference between the purchase price and the selling price of an investment. In simpler terms, it is the profit you make from selling an asset at a higher value than its purchase price.

Capital loss: Financial loss that occurs when you sell an investment for a price lower than what you initially paid for it. In simpler terms, it means that you have made a loss on your investment because you sold it at a lower value than what you originally invested.

Cash equivalents: Highly liquid assets that are easily convertible into cash and have a short maturity period, such as T-bills.

Certificate of deposit (CD): Savings tool provided by banks or credit unions, which offers a fixed maturity date and a predetermined interest rate. Essentially, it is an agreement where you deposit a certain amount of money into the CD for a specified period of time, and in return, the financial institution pays you interest on that deposit. The interest rate remains constant throughout the CD’s duration, providing a predictable return on your investment. Once the CD reaches its maturity date, you can withdraw the initial deposit along with the accumulated interest.

Collateral: Asset that you provide as a guarantee when you borrow money or take a loan. It assures the lender that if you fail to repay the borrowed amount, they can seize the asset. For instance, when you obtain a mortgage to buy a house, the bank considers your house as collateral for the loan. This means that if you default on the loan payments, the bank has the right to take ownership of your house to recover the amount you owe.

Commodity: Raw material or primary agricultural product that can be bought and sold in bulk. These goods are generally uniform in quality and have standardized specifications, allowing them to be traded on various commodity exchanges.

Compound interest: Additional interest earned or paid on a loan or deposit, which is calculated based on both the initial amount of money and the accumulated interest over time. It applies to both saving money and borrowing funds. When saving, compound interest allows your savings to grow faster over time, however, when borrowing, it can lead to higher costs due to the interest being charged on the principal amount as well as any interest that has already been added.

Consumer: Individual who purchases or receives goods and services for their personal use or needs, rather than for the purpose of reselling them.

Consumer price index (CPI): Measurement that tracks the average change in prices paid by urban consumers for a specific selection of goods and services. It provides an indicator of inflation or the rate at which prices are increasing.

Consumer sentiment: Measurement of how optimistic or pessimistic consumers are about the current and future state of the economy.

Contracts: Agreements that create a legally binding relationship between two or more parties. These agreements clearly define the terms and conditions of a financial transaction or arrangement. Within a contract, the rights, responsibilities, and obligations of each party are specified and established.

Cosigner: Individual who agrees to sign a loan, credit account, or promissory note on behalf of another person. They do this to provide additional assurance to the lender that the primary signer will fulfill their financial obligations. By cosigning, the individual becomes legally responsible for repaying the debt if the primary signer fails to do so.

Cost: Financial value associated with acquiring something. In simpler terms, the amount of money that is required in order to purchase or pay for a particular item or service.

Cost-effective: Situation in which the value or benefit gained from something is considered to be favorable in relation to the amount of money that was spent on it. In simple terms, it means getting good value or a desirable outcome for the money you have paid.

Credit: Borrowing money or obtaining permission to borrow money. This commonly involves using a credit card, but it can also involve acquiring a loan from a financial institution. In simple terms, credit allows individuals to access funds they do not currently possess, with the understanding that they will repay the borrowed amount over time, often with added interest.

Credit card: A type of loan that gives you the flexibility to borrow money up to a specific limit and carry over any unpaid balance from one month to the next. Unlike a traditional loan with a fixed repayment period, you have the option to make minimum monthly payments and there is no set timeline to pay off the borrowed amount. However, keep in mind that you will be charged interest on any remaining balance that you carry forward on your credit card.

Credit card statement: Document that provides a summary of your credit card activity for a specific period – typically a month. It shows details of your purchases, payments, and any fees or interest charged.

Credit limit: Maximum amount of money that a credit card company allows you to spend on your credit card. It is the predetermined cap on your card’s usage, indicating the highest amount you can charge to the card without exceeding the limit. You can make purchases with your credit card as long as you stay within this set limit.

Credit Report: Summary of how you have managed your loans and credit accounts in the past, such as your payment history and the current status of your accounts. Lenders use these reports to assess whether they should approve you for a loan and what interest rates they should offer you. Other businesses, like insurance companies, landlords, and utility service providers, may also use your credit reports to make decisions about offering you, their services.

Credit Score: Numerical value generated by a scoring model. It is based on information from your credit history that evaluates information from your credit history. The credit score provides a standardized way to assess your creditworthiness and helps lenders and other businesses gauge the level of risk associated with extending credit or providing services to you.

Credit utilization ratio: Comparison between the amount of credit an individual has available and the amount they have actually used. It helps determine how much of the available credit has been utilized.

Creditworthy: Financially stable and responsible enough to be granted credit, such as a loan or credit card. Lenders and creditors evaluate various factors, such as income, credit history, and overall financial health, to determine if someone is creditworthy. If a person is deemed creditworthy, it means they have a good track record of managing their finances and are likely to repay their debts on time.

Debt: Money that you owe to someone else or a business. When you have debt, you are obligated to repay the borrowed amount, usually with interest added.

Debt consolidation: Process where all your different debts, such as credit card bills or loan payments, are combined into a single loan with one monthly payment. It can be helpful if you have multiple credit card accounts or loans, as it simplifies your payments, however, debt consolidation does not eliminate your debt entirely.

Demand: Term used to describe the level of interest or need for a particular item. It reflects how many people are interested in purchasing or acquiring that item. The higher the demand, the more popular or essential the item is perceived to be by consumers.

Derivative: Type of financial contract or tool that derives its value from an underlying asset or benchmark. The value of a derivative is based on the price movements, performance, or other characteristics of the underlying asset.

Direct deposit: Electronic transfer of money directly into a person’s bank account, credit union account, or prepaid card. Therefore, instead of receiving physical checks or cash, funds are sent electronically and deposited into the specified account.

Diversification: Investment strategy that involves spreading your investments across different types of assets, sectors and industries. By diversifying your portfolio, you aim to minimize the impact of any single investment’s performance on your overall portfolio.

Dividend: Payment made by a company to its shareholders as a distribution of its profits or earnings. The frequency of dividend payments can vary, with some companies choosing to distribute them monthly, quarterly, or annually, depending on the terms and conditions of the specific investment.

Dollar cost averaging (DCA): Strategy in which investors regularly invest a fixed amount of money into a particular stock or investment, regardless of its price per share.

Down payment: Upfront cash payment made when purchasing something on credit, such as a home or a vehicle. It is an initial payment made to reduce the amount of money that needs to be borrowed. Essentially, it is a way for buyers to demonstrate their commitment and financial capacity, as well as reduce the loan amount they will need to repay over time.

Earn: Process of receiving money in return for providing goods or services.

Earnings Per Share (EPS): Net profit earned by a company divided by the total number of shares it has. Used to assess the value and profitability of a company.

Exchanges: Platforms where people can buy and sell different financial assets like stocks, bonds, commodities, or derivatives. They provide a structured and regulated environment for trading activities, ensuring fair practices and transparent transactions.

Exchange-traded fund (ETF): Investment tools that allow you to invest in a specific industry, commodity, or index. They work by tracking the performance of these assets.

Face value: Predetermined value assigned to a financial instrument, such as a bond or a T-bill, at the time of issuance. In simple terms, face value is the amount that will be repaid to the investor when the investment reaches its maturity date.

Federal income tax: System where the government collects money from individuals and businesses based on their earnings.

Federal Reserve: Central banking system of the U.S.

Financial metric: Measurement or calculation used to assess the financial performance or condition of a company, organization, or investment. It provides valuable insights into various aspects of an organization’s financial activities, such as revenue, expenses, profitability, liquidity, and debt levels.

Financial well-being: State of being financially secure, in other words, having enough resources to meet your current financial obligations, as well as being prepared for future expenses.

Fixed expenses: Regular expenses that need to be paid every month, and they usually have a consistent cost. These expenses can include bills for things like utilities (electricity, water, gas) or rent. While some fixed expenses can vary slightly from month to month based on your usage, they are still considered fixed because you can anticipate and plan for them.

Flippers: Investors who aim to generate profits by adding value to undervalued properties by buying the properties, renovating them, and reselling them at a higher price.

Fraud: Illegal activity where individuals attempt to mislead you in order to obtain your personal information or money.

Fund: Pool of money collected from many people or investors. This money is then managed by market professionals, such as financial institutions, which make investment decisions on behalf of the fund.

Future: Derivative contract that consists of an agreement between two parties to buy or sell something (like commodities, stocks, or currencies) at a specific price on a set date in the future. In simple terms, it is like making a promise to trade something later at a fixed price. Futures contracts are priced based on the current market price of the underlying asset.

Gross profit: Amount of money a business or individual has left after deducting the direct costs associated with producing or providing its goods or services. It is calculated by subtracting the cost of goods sold from the total revenue. It does not take into account other expenses such as operating expenses, taxes, or interest.

High consumer sentiment: Measurement that indicates that consumers feel positive about the economy and are likely to spend more, which can stimulate economic growth.

Holder: Individual or entity that owns or holds a particular financial instrument, such as stocks, bonds, or options.

House flipping: Practice of buying a property, with the intention of quickly reselling it for a profit.

Index: Statistical measure that represents the performance or value of a group of securities or assets. It serves as a benchmark or reference point for evaluating the performance of a specific market, sector, or investment portfolio.

Inflation: Sustained increase in the general price level of goods and services in an economy over a period of time.  In simple terms, it means that prices are rising, and the purchasing power of money is decreasing.

Individual Retirement Arrangement (IRA): Type of retirement account which individuals can set up to save for their retirement. Typically opened by individuals on their own, rather than through an employer-sponsored plan. With an IRA, you can make regular contributions and let your money grow over time until you reach the age when you can withdraw it without facing any penalties.

Investment: Act of allocating money, resources, or capital with the expectation of generating future income, profits, or appreciation.

Investor: Individual or entity that allocates capital, resources, or funds with the intention of generating a financial return or achieving specific financial goals.

Initial jobless claims: Measurement that provides information on the number of individuals who have filed for unemployment benefits for the first time during a given week.

Investment portfolio: Collection of all the investments you have, such as stocks, commodities, etc.

Liability: Legal responsibility or obligation that an individual has, often involving financial disadvantages, debts, or obligations.

Liquidity: Term used to describe how easily an asset can be converted into cash. When an asset is highly liquid, it means it can be quickly and effortlessly turned into money.

Low consumer sentiment: Measurement that indicates a lack of confidence in consumers. It can lead to decreased consumer spending, which can have a dampening effect on the economy.

Margin of safety: Concept of leaving room for mistakes or uncertainties when making investment decisions.

Maturity date: Specific date when an investor’s investment reaches its full term and is scheduled to be repaid in accordance with the agreed terms.

Mortgage: Type of loan that is commonly used to purchase a house or obtain funds by using the value of an existing home as collateral.

Mutual Fund: Company that collects money from multiple investors and uses it to invest in various securities like stocks, bonds, etc. Managed by professional fund managers who make investment decisions on behalf of the investors. When you purchase a share in a mutual fund, you own a part of the fund and you are entitled to a portion of the fund’s income.

Net profit: Amount of money a business or individual earns after deducting all expenses, taxes, and other costs from total revenue. In simpler terms, it represents the final profit or income remaining after all financial obligations have been accounted for.  

Opportunity cost: Value or benefit that you give up when you make a decision to purchase or engage in a particular activity instead of choosing an alternative option.

Option: Derivative contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specific timeframe. It provides the holder with the flexibility to choose whether or not to exercise the option.

Payback time: Duration it takes for you to recover the money you invested and start earning a return on your investment.

Payroll tax: Taxes deducted from your earnings, specifically from your paycheck. These taxes typically include contributions to programs like Social Security and Medicare.

Portfolio: Combination of investments held by an individual or an organization. It can include different financial assets such as stocks, bonds, mutual funds, ETFs, etc.

Producer price index (PPI): Measurement that tracks the average changes in prices received by producers of goods and services over time. It tracks the prices of a basket of representative goods and services at various stages of production, including raw materials, intermediate goods, and finished goods.

Profit: Financial gain earned by a business or individual after deducting all expenses and costs from the total revenue or income generated.

Property value appreciation: Increase in the worth or market value of a property over time. When a property appreciates, its value has increased compared to its original purchase price. Factors such as demand, neighborhood improvements, and economic conditions contribute to property value appreciation.

Property tax: Taxes imposed on different types of properties, primarily real estate. However, it can also apply to other assets like boats, vehicles (often paid alongside license fees), recreational vehicles, and inventories owned by businesses.

Put Option: The holder has the right, but not the obligation, to sell an underlying asset at a specific price within a certain timeframe.

Recession: Significant decline in economic activity within a country or region. In simple terms, it occurs when businesses are struggling, people are losing their jobs, and consequently, the economy is shrinking. It is often identified when the total value of goods and services produced in the country decreases for at least six months in a row.

Rate of return: Percentage that represents the profit or loss made on an investment. It is a way to measure the financial performance of an investment, indicating how much money has been gained or lost in relation to the initial investment amount.

Retirement planning: Process of preparing for your future financial needs and ensuring a comfortable retirement. It involves creating a strategic financial plan and making investments specifically aimed at securing your retirement.

Return: Gain or loss generated from an investment over a specific period of time.

Return on Invested Capital (ROIC): Percentage return you earn from the money you have invested in a company or business venture. Calculated by subtracting the dividends paid from the net income (profit) of the company, and dividing the resulting number by the total capital invested.

Real estate: Properties such as houses, apartments, and commercial buildings. It can be a profitable investment opportunity, with short-term investors flipping houses and long-term investors relying on property value appreciation. Investing in real estate typically requires a significant upfront cost, but options like cash-out refinance loans can help cover these expenses.

Real estate investment trust (REIT): Investment option for those interested in real estate but prefer the convenience of a mutual fund. It collects money from multiple investors and uses it to invest in various real estate properties, such as commercial buildings, residential complexes, etc.

Rollover IRA: Type of retirement account that allows you to transfer funds from a previous employer-sponsored plan, such as a 401(k), to an IRA. This transfer enables you to avoid penalties and maintain the tax-deferred status of your retirement savings.

Revenue: Total income or sales generated by a business through its primary activities, such as the sale of goods or services, before deducting any expenses or costs. Often used to compare against expenses and calculate profitability metrics such as gross profit or net profit.

Risk Tolerance: Individuals’ willingness to endure potential fluctuations and uncertainties in their investment portfolio.

Roth IRA: Type of retirement account where you contribute money that has already been taxed. When you withdraw the money in retirement from a Roth IRA account, it is not subject to further taxation like it would be with a traditional IRA.

Security: Investment that represents ownership in a company (as in the case of stocks) or a creditor relationship with an entity (as in the case of bonds). In simple terms, when you own a security, you either have a stake in the company’s ownership or have provided a loan to the issuer and are entitled to receive a repayment with interest. Securities can take various forms, including stocks, bonds, mutual funds, ETFs, options, and derivatives. Each type of security has its own characteristics and purpose.

Short selling: Strategy used in investments in which individuals make a bet that a particular security, such as a stock or bond, will decrease in value. The process involves borrowing the security and selling it on the market with the expectation that its price will decline. By doing so, the short seller aims to buy back the security at a lower price later on and return it to the lender, thereby profiting from the difference.

Share: Unit of ownership that individuals can acquire in a company’s stock or a mutual fund. When someone holds a share, it means they own a portion of the company or fund.

Spread: The difference between ask and bid prices. It can indicate how easily an investment can be bought or sold. A smaller spread suggests high liquidity, meaning there are many buyers and sellers in the market, while a larger spread may indicate lower liquidity.

Stagnation: State of little or no economic growth or development over a period of time.

Stock: Type of investment that allows individuals to become partial owners of a company. By purchasing stocks, people acquire a share of ownership in the company and can potentially benefit from its success.

Stock exchange: Marketplace where individuals and entities, such as traders can participate in buying and selling various types of investments, including stocks, bonds, etc. Each stock exchange has its own set of criteria that determine which stocks can be listed and traded on that particular exchange. These criteria may vary from one exchange to another, leading to differences in the types of stocks available for trading.

Stock market: Exchanges where trading occurs, in other words, where people buy and sell stocks.  Also, the term “stock market” is used to describe the overall condition of stock prices at a given time.

Stockholder/Shareholder: Individual or entity that owns shares of a company’s stock, which makes them a partial owner of the company. They have financial stakes, voting rights, and may receive dividends.

Strike price: Specific price at which the holder of an options contract can buy or sell the underlying asset.

Tailored investment: Process of creating customized investment strategies and portfolios based on the unique needs, goals, and risk tolerance of individual investors.

Tax: Mandatory financial charge imposed by governments to fund public expenditures and services. When individuals or entities earn income, make purchases, own property, or engage in certain activities, they are generally required to pay taxes based on applicable tax laws and regulations.

Tax-deferred: Investment or account where taxes on the earnings or gains are postponed until a later date, usually when the funds are withdrawn.

Threshold: Specific level or point that serves as a boundary or limit. It is a predetermined value that determines when a certain condition or action is triggered.

Treasury bills (T-bills): Short-term debt securities issued by the government, specifically the U.S. Treasury Department. When you invest in a T-bill, you are lending money to the government for a specified period, and once it matures, the government repays you the full amount borrowed. T-bills do not pay periodic interest or coupon payments, instead, they are issued at a discount to their face value, and the difference between the discounted purchase price and the face value represents the investor’s return.

Underlying asset: Financial tool (such as a stock), commodity (such as gold), index (such as the S&P 500), or other tangible or intangible asset that determines the value of a derivative or investment.

Volatility: Term used to describe the stability of an investment. When an investment is volatile, it means that its value can fluctuate significantly and unpredictably, which makes it harder to determine how it will perform in the future.

Yield: Return or profit generated from an investment or asset. It represents the income or earnings an investor receives in relation to the amount they have invested. It can be expressed as a percentage and is often used to measure the profitability or performance of different types of investments. It takes into account factors such as dividends, interest payments, or rental income received from the investment, relative to the initial cost or current market value.