Financial Dictionary

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Account – The holding of a client’s financial assets by an organization or company on behalf of the client.

After the Bell – A phrase that refers to any market activity that occurs after the stock market has closed for the day.

Alternative Investing – Investing in asset classes that are not stocks, bonds, or cash. Some examples of alternative investments are real estate, commodities, hedge funds, art, antiques, or coins.

Analysis Paralysis – A common psychological phenomenon that occurs among investors, during which an investor becomes so obsessed with examining data that he or she cannot make a decision.

Anchoring – Using irrelevant information to evaluate unknown information.

Annuity – A series of fixed payments that occur at regular intervals, such as mortgage payments, regular deposits into a savings account, or pension payments. In terms of investing, an annuity is a contractual financial agreement designed to grow an individual’s funds and then pay out a stream of payments to that individual at a later point.

Asset – A resource or item with economic value.

Australian Securities Exchange (ASX) – An Australian public company that is headquartered in Sydney, Australia that operates Australia’s securities exchange. Outside of Australia, it is sometimes called the Sydney Stock Exchange.

AUD (Australian Dollar) – The abbreviation for the Australian dollar, the official currency of the Commonwealth of Australia.


Bad Debt – An amount owed to a creditor that cannot be recovered, or which the creditor is not willing to take action to collect.

Back-End Load – A fee that investors pay when selling (redeeming) mutual fund shares, typically ranging from 4% to 6%.

Bankruptcy – The legal status of a person or business that is unable to pay outstanding debts. Bankruptcy is often initiated by the debtor, and is usually imposed by a court order.

Barrier to entry – Barriers that intrude upon a person’s ability to enter the market, such as high taxes, governmental issues, or high start up costs.

Bearish (Bear) Market – Declining values in the trade market, which produce a negative projection for the future of an asset.

Beta A measure of an asset’s risk or volatility in relation to the market as a whole.

Big Board – A nickname for the New York Stock Exchange.

Blue Chip – Stock in a nationally-recognized, financially sound, well-established company.

Bollinger Band – One of the most popular technical indicators that is used to measure market volatility and trends. A more volatile market has a wider band and a less volatile market has a narrower one. Technical analysts consider a tight band the best time to trade.

Bonds – Certificates that collect interest, much like loans. Investors provide corporations, government agencies, and other large entities with the option to take out bonds with fixed interest rates.

Book Value – A company’s total assets, minus liabilities and intangible assets (patents, goodwill).

Borrow To obtain capital on loan with the promise that it will be repaid.

Brent Crude – The most well-known global benchmark for sweet light crude oil.

Broker – An individual that arranges transactions, or executes an investors buy and sell orders, for a commission fee.

Bullish (Bull) Market – A market climate during which assets incline and foster optimistic projections.


CAC 40 Index – A benchmark French stock market index, representing the 40 most important values among the 100 highest market caps on the Euronext Paris.

CAD (Canadian Dollar) – The currency abbreviation for the Canadian dollar, the official currency of Canada.

Cash Advance – A short-term loan from a bank, credit card company, or alternative lender. This term also applies to a service provided by most credit card issuers, wherein the cardholder is allowed to withdraw cash, up to a certain limit.

Cash Flow – The amount of funds flowing in and out of a business. Positive cash flow means that a company’s liquid assets are increasing, while negative cash flow means that a company’s liquid assets are decreasing.

Cash In Hand The amount of money that a company has after it has paid all costs. Alternatively, cash in hand may refer to cash that someone is paid off the record.

Central Bank – A central bank manages the money and interest rates of a country.

Check – A paper document representing a draft on a bank from deposited funds that pays a particular sum of money to a person or party.

CHF (Swiss Franc) The currency abbreviation for the Swiss Franc, the official currency of Switzerland and Liechtenstein.

Closing Bell – A traditional bell that is rung to signify the end of a trading session.

CNY (Chinese Yuan/Renminbi) – The currency abbreviation for the Chinese yuan (renminbi), the official currency of the People’s Republic of China.

Cost of Goods Sold (COGS) – The costs that can be directly attributed to the production of goods sold by a company.

Controlling Interest – A 50% plus one ownership of  stock in a publicly-traded company, which gives the shareholder influence and control when it comes to the company’s operations.

Consumer Price Index (CPI) – An index that measures the prices of consumer goods and services. It is used to measure the pace of inflation in the USA.

Contrarian Investing Investing in a way that goes against prevailing market trends. “Buy low, sell high” is a contrarian sentiment.

Commodities – Precious natural resources that hold monetary value, such as agricultural goods, energy, and metals (e.g., gold, oil, wheat).

Compound Interest Interest on interest, that results from reinvesting interest instead of paying it out.

Consolidation – In finance, consolidation is an indecisive period in the market when an asset hovers between the barriers of inclination and declination.

Core Retail Sales – A monthly report that quotes sales figures within the retail industry.

Corporation – A company or group that has the legal right to act as a single entity. Corporations can borrow and loan money, sue, hire employees, enter into contracts, pay taxes, and own assets.

Credit Bureau – A collection agency that collects individual credit information and sells it to creditors, who use it assess credit worthiness.  

Credit Card – A payment card that is issued by a bank or financial company. The cardholder is allowed the option to borrow funds on interest. Borrowing limits are set based on the cardholder’s credit rating.

Credit Rating – A numeric assessment of a borrower’s creditworthiness and credit risk. This rating is determined by a credit rating agency, and is based on qualitative and quantitative information.

Credit Union – A member-owned financial cooperative, that provides credit to its members at competitive rates, as well as other financial services. Credit unions are democratically controlled by their members.

Currencies – Circulating money such as USD, EUR, JPY.

Currency Pairs -The value of a currency relevant to another currency. The base currency is listed first and its competitor is listed second (e.g., USD/GBP 1.334 signifies that 1 USD is equal to 1.334 GBP).

Current Assets – Assets that can be purchased, consumed, sold, or distributed, such as currency or retail items. For this reason, a current asset can only be calculated based on a current balance or possession.


DAX 30 Index – A stock market index of 30 major German companies on the Frankfurt Stock Exchange.

Debt Money that one party lends to another party. Typically, the borrowing party must pay the lender back with interest.

Derivative – Asset value that is derived from a competitor. Derivatives are generally contracts that hedge financial risks by fixing exchange rates.

Demand – In economics, demand refers to consumer willingness to buy a particular good or service at a given price.

Divestment – Selling assets due to social pressure, government policy, or corporate strategies. A divestment is usually a social statement that one does not want to be associated with a company, asset, or individual.

Dividend – A payment made by a publicly-traded company to its shareholders. This is usually a distribution of the company’s profits.

Dividend Reinvestment Plan (DRIP) – A plan wherein shareholders reinvest their dividends into the company by using them to purchase more shares, rather than receiving cash.

Double Crossover – A method that technical traders use to generate trend signals by using a short moving average and a long moving average. When the two averages cross, it is supposed to signify a coming trend.

Dow Jones Industrial Average (DIJA) A price-weighted average of 30 significant stocks traded on the NASDAQ and the New York Stock Exchange, founded by Charles Dow in 1896.


Equities – Assets that are owned by individuals.

Exchange-Traded Funds (ETFs) – A marketable security that tracks an asset or an index and is traded on a stock exchange.

Efficient Market Hypothesis (EMH) –  The theory that existing share prices reflect and incorporate all relevant information, rendering it impossible to “beat the market”.

Employee Stock Ownership Plan (ESOP) – An employee benefit that grants an employee shares in the publicly-traded company that he or she works for after a certain set amount of time. An ESOP may also be granted as a performance bonus.  

EUR (Euro) – The currency abbreviation for the Euro, the official currency for more than half of the European Union.



Fibonacci Retracement – A method that technical investors use to determine resistance and support levels, based on the mathematical works of Leonardo Fibonacci.

Finance –  A discipline that deals with studying investments.

Financial Market – A real-time or virtual market in which assets can be bought and sold.

Financial Securities – Proof of asset ownership.

Fiscal Policy -The government’s decisions regarding taxes and government spending that is based on the current state of the economy.

Fixed assets – A long-term investment in property that cannot easily be converted into cash.

Foreign Exchange Market – The financial market where currencies are traded.

Free Cash Flow (FCF) – In corporate finance, free cash flow refers to cash flow that is available for distribution among all of a corporate entity’s securities holders.

Front-End Load – A fee that an investor pays when buying shares in a mutual fund.

The Financial Times Stock Exchange 100 Index (FTSE 100) A benchmark share index of 100 companies on the London Stock Exchange.

Fundamental Analysis – A method of measuring a business or security’s intrinsic value by conducting an in-depth investigation of various qualitative, quantitative, economic, and financial factors.

Futures – A contract that allows traders to fix asset rates for a date in the future in order to lock in the price regardless of deflation or inflation.


Gap Analysis – An analysis in which a company compares its true performance to its expected performance.

GBP (British Pound)  The currency abbreviation for the British pound sterling, the official currency for the United Kingdom, as well as various British territories overseas.

Gross National Product – The total market value of all the services and products produced in a country in one year.

Gross Profit – A company’s total sales, minus the cost of production.


Hang Seng Index (HSI) – Hong Kong’s benchmark index, which tracks the 40 largest companies on the Hong Kong Exchange.

Hawk – A policymaker or advisor who favors high interest rates in order to keep inflation in check.

Hedging – The reduction of price fluctuation risk through investment decisions. Hedging and futures are usually synonymous.

Hedge Fund –  A hedge fund is an investment partnership which aims to eliminate risk and maximize investor returns. A hedge fund is only available to qualified investors, and has a wider-than-average investment latitude. Hedge funds often employ leverage, using borrowed money to amplify their returns, which also increases their risk. In addition to simply charging an expense ratio, hedge funds also charge a performance fee.  

HKD (Hong Kong Dollar) – The currency abbreviation for the Hong Kong dollar, the official currency of Hong Kong.

Holding Company – A company that owns enough of another company’s stock to control its management and policies. It is a parent corporation that exists for the sole purpose of controlling another company.


Income Tax – A tax that is imposed on individuals or entities according to the size of their income or profits.

Index – A list of statistical measurements that represent market changes such as economic growth or descent. The Nasdaq, The Dow Jones, and the Nikkei are common examples.

Index Fund – A mutual fund with a portfolio that tracks or matches the components of a market index.

INR (Indian Rupee) The currency abbreviation for the Indian rupee, the official currency of India.

Insurance – Financial protection or reimbursement against losses, provided by an insurance company.

Intellectual Property – Products of intellect, such as literary or artistic works, patents, or business methods, that have commercial value and are legally owned and protected by a company.

Invest – To purchase an asset or item with the expectation that it will generate a financial return in the future.

Investment – An asset or security that is purchased with the expectation that it will appreciate in value, yield a profit, or generate income in the future.


J-Curve Effect – A graph where the curve initially falls and then rises higher than the starting point, forming a J shape. In economics, a J-curve occurs when an investment or policy begins with a loss, followed by a significant gain.

January Barometer – The theory that the movement of the S&P 500 during the month of January sets the tone for the stock market for the year.

January Effect – A tendency for stock prices to rise during the month of January, which is attributed to an increase in buying.

JPY (Japanese Yen) The currency abbreviation for the Japanese yen, the official currency of Japan.


Keynesian Economics – An economic theory, developed by British economist John Maynard Keynes, that states that optimal economic performance can be achieved by influencing aggregate demand through activist stabilization and  governmental economic intervention policies.

Key Performance Indicators (KPI) – Quantifiable metrics that a business uses to measure its performance over time.  

Korea Composite Stock Price Index (KOSPI) – The benchmark index that measures all common stocks traded on the Korea Exchange.  

KRW (South Korean Won) – The currency abbreviation for the South Korean Won, the official currency of South Korea.


Leading Index – The leading index calculates economic growth by housing, unemployment rates, and other signs of economic stability.

Leverage – The use of borrowed capital or various financial instruments in order to multiply gains and losses.

Liability – A financial obligation, or cash outlay, that an entity is obligated to pay as a result of past transactions.

Limited Liability – A fixed-sum liability that does not exceed the amount of the original investment.

Line of Credit (LOC) – An arrangement between a financial institution and a customer, wherein the customer is borrow a predetermined amount of capital.

Liquidate – To convert assets into funds.

Liquidity – An asset’s ability to quickly be converted into cash.

Loan – The lending of money, property, or material goods from one party to another. This debt must be paid back, usually with interest.


Macroeconomics – A branch of economics that examines the aggregate economy as a whole. It is focused on inflation, rate of growth, national income, changes in unemployment, gross domestic product, and price levels.

Margin – Money that an investor borrows from a broker in order to purchase securities.

Margin Account – A leverageable brokerage account that can be used to purchase stocks for a combination of loan and cash.

Microeconomics – A branch of economics that analyzes market behavior and individual consumers in an attempt to understand how consumers make decisions. It is primarily focused on the interaction between buyers and sellers.

Market – A medium in which securities are traded, either  in person or online.

Market Share –  – The percentage of an industry or market’s total sales that a company controls.

Maturity – The point in time by which a borrower must fully repay a loan.

Monetary Policy – A policy created by a country’s central bank, which determines the size and growth rate of the money supply.

Money – Legal tender that is comprised of currency and coin.

Moving Average – An indicator that technical analysts use to predict coming trends in the market by averaging past data.

Mutual Fund – A pool of funds collected from many different investors and managed by an investment company. It exists for the purpose of investing in securities such as stocks and bonds.


National Association of Securities Dealers Automatic Quotation System (NASDAQ) – The world’s largest electronic stock market, based in the United States.

Nasdaq Composite Index – A market capitalization-weighted index that tracks all common stock that trade on the NASDAQ.

Net Profit – A company’s total revenue, minus its taxes, depreciation, interest paid, and operating expenses.

Nikkei 225 A price-weighted, benchmark stock market index for the Tokyo Stock Exchange.

Noise – Any stock market activity that does not reflect overall market sentiment.

Non-controlling Interest – Also called minority interest, this refers to any ownership stake in a corporation that holds less than 50% of the outstanding voting shares. Investors who have a non-controlling interest do not influence how a company is managed.

Nonfarm Payroll (NFP) – A monthly research report issued by the U.S. Bureau of Labor Statistics that statistically represents the amount of employed U.S. workers in most industries. Farmers, non-profit employees, people employed in private households, and general government workers are not included in this report. The NFP also documents the average work week and the average weekly earnings of non-farm workers.

NZD (New Zealand Dollar) – The currency abbreviation for the New Zealand dollar, the official currency of New Zealand.


October Effect – The theory that stocks usually decline during October. Many consider this effect to be purely pyschological.

Operating Profit – A company’s gross profit, minus operating expenses.

Option – A financial contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a fixed price on a certain date, or during a certain period of time.


Panic Selling – Wide-scale selling of a security, causing a sudden, dramatic decline in price.

Performance-Based Index – A stock index that includes all cash events and dividends that are paid out to shareholders.

Peter Lynch – Peter Lynch is considered one of the greatest investors of all-time. During his 13 years as the head of Fidelity Magellan, he took the firm from $20 million to $14 billion. Lynch is known as a “chameleon” because he adapted to whatever investment style was in vogue at the time.

Pip – The smallest possible price fluctuation that a given asset can experience based on market convention.

Price-to-Earnings Ratio (P/E Ratio) – A stock’s current price, divided by trailing annual earnings per share or expected annual earnings per share.


Qualitative Analysis – A method of analyzing securities that relies on subjective judgement based on information that cannot be numerically quantified, such as management expertise, strength of research and development, industry cycles, and brand strength.

Quantitative Analysis – A method of analyzing securities that relies on complex mathematical and statistical modeling, research, and measurement.

Quantitative Easing – A monetary policy in which a central bank purchases securities from the financial market in order to lower interest rates and increase the money supply.

Quarterly Earnings  Report – A performance report that is published by  publicly-traded corporations every fiscal quarter. The report includes earnings per share, net sales, net income, etc.


Real Estate – Property that can be bought, which is comprised of land and the buildings on it.

Refinancing – A replacement of one debt obligation with another debt obligation under different terms.

Resistance – The inability of an asset to increase its market value beyond a specific range.

Retracement – Reversal of the direction that asset values are moving.

Revenue – Money that a company earns through sales.

RUB (Russian Ruble) – The currency abbreviation for the Russian Ruble, the official currency of Russia.


Safe Haven – An asset that is expected to retain or even increase its value in a volatile market.

SG&A – Selling, General and Administrative Expenses. Essentially, SG&A refers to a business’ overhead.

Shanghai Composite – A benchmark stock market index of all of the A-shares and B-shares traded on the Shanghai Stock Exchange.

Shenzhen Composite – An index of 40 stocks on the Shenzhen Stock Exchange.

Share A unit of ownership interest in a financial asset or corporation.

Shareholders’ Equity – A company’s total assets minus the cost of its total liabilities.

Standard & Poor 500 Index  (S&P 500) – A benchmark American stock market index of 500 stocks chosen for liquidity, industry grouping, and market size. It is a leading indicator of U.S. equities.

Stock – A type of security that signifies partial ownership in a publicly-traded corporation.

STOXX 600 Index A pan-European index that serves as a benchmark for European markets.

Supply – In economics, supply refers to the total amount of a good or service that is available for purchase during a given period of time.

Support – The inability of an asset’s value to fall below a certain point.


Technical Analysis – A method of analyzing the financial market that relies on statistics generated by past market activity.

Ticker Symbol – An abbreviation that is used to identify a stock or security listed on an exchange.

Top-Down Analysis – A method of financial analysis during which a trader examines the “big picture” before studying the details.

Trend – The general direction of a market or the price of an asset.

Trade Balance -The difference in a country’s import vs. export values.


Unweighted Index – An index that is affected equally by all of its securities.

USD (US Dollar) – The currency abbreviation for the U.S. dollar, the official currency of the United States of America.

Uptrend – A market trend during which a security price is moving mostly upward.


Value – The worth of a service, good, or asset.

Volatility – Market uncertainty, which is based on the standard deviation of returns. High values indicate riskier market trends.



Wall Street – A street in lower Manhattan that houses a large portion of the financial industry in the United States. Wall Street is also the colloquial term for U.S. financial markets.

Warren Buffett Referred to as the “Oracle of Omaha”, Warren Buffett is considered the greatest investor of all time by many. Buffett is a major proponent of fundamental analysis.

Warranty – A legal guarantee from a seller to a buyer. This contract ensures that if the buyer’s purchase breaks or requires repair, it will be fixed or replaced within a certain time period after the product’s purchase, free of charge.

Wire Transfer – An electronic transfer of money between bank accounts.


Xenocurrency – A currency that is traded in foreign markets.


Yield – Profit earned from an investment.

Yield to Maturity (YTM) – The total return earned by an investor who holds a bond until maturity.

Yo-Yo – A colloquialism referring to a very volatile market.


ZAR (South African Rand) – The currency abbreviation for the South African Rand, the official currency of South Africa.

Zero Cost Strategy – A business strategy that does not cost anything to execute.

Zig Zag Indicator – An indicator that predicts the moment that the momentum of a given security will reverse.

Zone of Resistance – The point at which a security’s price begins to encounter resistance and starts to trade downward.

Zone of Support – The point at which a security’s price begins to encounter support and starts to trade upward.

*Featured image courtesy of isak55/Shutterstock.