- 401(k)
- A qualified retirement plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.
- 501c3
- A subsection under the United States Internal Revenue Code for non-profit organizations, which are exempt from paying federal income tax. 501c3 entities operate for religious, charitable, scientific, literary, or educational purposes.
- APR
- The annual percentage rate is usually used for the purpose of showing what interest rate is going to be associated with a transaction (loan) in order to determine the annual cost of the loan as well as how long it would take to pay back the loan based on a fixed payment.
- Agency Bonds
- A debt issue that is guaranteed and backed by a government agency. These bonds are not fully guaranteed in the same way as U.S. Treasury and municipal bonds.
They include such agencies as Fannie Mae, Freddie Mac, Sallie Mae and the Federal Home Loan Banks.
- Bankruptcy
- The legal process of declaring insolvency and financial ruin. This process allows the creditors to share the assets that are still left in order to alleviate part or all of the money owed to the creditors by the party which has declared bankruptcy. the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.
- Bond index fund
- A type of fund that invests in the same bonds that make up a specific index.
- CPI
- (CPI – Consumer Price Index)A statistical measure that examines the average cost of goods and services, such as transportation, food and medical care to a typical consumer. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. Sometimes referred to as “headline inflation”.
- Carried Interest
- A share of the profits generated from an investment partnership (hedge funds, private equity) that is paid to the managers of the funds as a form of compensation in return for successful performance of the investment. This method of compensation seeks to motivate the general partner (fund manager) to work toward improving the fund’s performance. It is also called “performance fee” and “incentive allocation.”
- Certificate of Deposit
- A financial product that allows investors to have a higher rate of return by committing their money to a financial institution for a set period of time while still remaining conservative.
- Collateral
- This is the security or any other type of asset that is pledged in order to mitigate the lender’s risk in the process of lending the borrower money for a specific situation.
- Consolidation
- In the investment world, consolidation can be a few things:
1. A process of mergers and acquisitions between companies in similar or the same sector with the eventual goal of making fewer bigger companies instead of many smaller companies.
2. The process of combining many smaller accounts and/ assets into fewer or even a single account.
3. The process of combining debt from multiple account into one account in order to alleviate administration and potentially get a lower interest rate on a larger balance.
- Consumer Sentiment/Confidence
- A numerical value established through specified research of 5,000 household and the optimism these consumers feel about the overall state of the economy and their personal financial situation. This is reported monthly.
- Corporate bonds
- debt issues that are guaranteed and backed by a private businesses with a predetermined rate of interest along with a length of term.
- Credit Rating Agencies
- Independent agencies that provide individual and institutional investors with information and analysis of companies and countries that issue securities. These agencies are expected to provide independent and unbiased assessments of these entities in order to truly assist investors in their investment decisions. The most popular and widely used credit rating agencies are Moody’s, Standard & Poor’s, and Fitch Ratings.
- Dark pools
- Private trading venues that allow major institutions to trade large number of shares in public companies, away from the central markets, in order to avoid showing the information to the public. Many believe (myself included) that these dark pools should be disallowed and the information made public in order to ensure that trading is a fair for all parties involved. It is hard for me to understand why dark pools are allowed while insider information trading is a major crime. Although the information is different between the two, it is information not available to the public, nonetheless.
- Debit card
- A card with access to money in your bank account that allows you to make purchases with money in your account without the need to carry checks or borrow money from a credit card company. It’s a card that allows you to combine the benefits of a credit card and an ATM card.
- Defaulting
- The failure to pay interest and/or principal of a loan when due.
- Deferment
- The act of delaying or deferring something, such as debt payments, for a future date.
- Deficit
- A financial state where the outgoing value of goods exceeds the incoming value. This can be relevant to the expenses versus income, imports versus exports, liabilities versus assets or losses versus income.
- Dividend
- A step a company takes in order to distribute a part of the earnings generated by the business to shareholders.
- Dot-com bubble
- A time period in the 1990″s until March of 2000, where a speculative economic bubble was created after the founding of several new internet based companies referred to as dot-coms. During this time, stock markets around the world saw the value of their equities rise more rapidly than any other time in recent history. The combination of speculation, rapid increase in stock prices and easy money created an environment where traditional fundamental metrics were passed on in favor of technological advancements.
- Down payment
- Down payments are partial payments that are made in order to execute a purchase, with the intention of paying the remaining balance at a future date.
- EBITDA
- An acronym for “earnings before interest, taxes, depreciation and amortization.” used internally by the company to have a good understanding of their growth as well as used by some investors to gauge a possible investment.
- ETF
- A security that tracks an index, a commodity or a basket of assets like an index mutual fund, but has the same trading characteristics of a stock on an exchange. ETFs experience price fluctuation throughout the trading day as they are bought and sold.
- EU/Eurozone
- A geographic and economic region that consists of all the European Union countries that fully incorporated the Euro as their national currency.
- Equities
- A security that represents ownership interest in an entity
- Equity
- This is the difference between the market value of an asset and the loans that are directly associated with that asset. In so many words, it’s the true ownership interest one has in a specific asset.
- Escrow
- A type of account where money or other equivalents are held on behalf of 2 or more parties until the transaction is completed, where one of the parties receives the funds in the escrow account.
- Exit
- In business, this is the stage where the investors’ goal is to sell the company or business venture in order to liquidate (cash out) or monetize their equity interest in the company.
- Exports
- Goods and services that were produced locally and sold abroad.
- “Flipping”
- A speculative real estate investment strategy where the owner of the property is assuming that he will be able to sell his property for a profit after the value increases over a short period of time because of the renovations and improvements he/she has done to the property as well as the hot real estate market that is “supposed” to go up in value.
- FHA
- the Federal Housing Administration (FHA) and its loans are designed for low to moderate income borrowers.
The Federal Housing Administration is also associated with reverse mortgages, which can help homeowners who are at least 62 years old convert the equity in their primary residence into cash while retaining the titles to their homes.
- FICO Credit score
- FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score. In so many words, a FICO score is a mathematical equation that determines your credit &payment history, debt levels and other factors that are used by banks in order to determine their risk in issuing you credit (loan)
- FOREX
- This is the Currency market, where investors and institutions trade currencies for multiple purposes including investment and speculation. It is said to be the largest market in the world, recently quoted to trade over $4 Trillion per day by the Wall Street Journal. This is more than 20 times larger than the stock market.
- Fannie Mae/Freddie Mac
- These are both government-sponsored enterprises that were created to facilitate the purchasing of homes in the United States by creating a secondary mortgage market, where they would be able to purchase and guarantee mortgages issues by qualified financial institutions.
- Forbearance
- A postponement of loan payments granted by a lender or creditor, for a temporary period of time without enforcing the default provisions of the loan agreement. This is done to give the borrower time to make up for overdue payments.
- Foreclosure
- This is the outcome of losing the musical chair game in the real estate market. The legal proceeding that takes place in order for the lender to take ownership of the collateral property after the borrower has defaulted on the loan.
- Form D
- A filing with the Securities and Exchange Commission (SEC) required for companies that are selling securities in reliance on a Regulation D exemption or Section 4(6) exemption provisions.
Form D is a brief notice of a company’s executive officers and stock promoters, in lieu of the regular reports required when no exemption under Regulation D exists. Privately held companies that raise capital are required to file a Form D with the SEC to declare exempt offering of securities. Many of these filings are for small companies through venture capital and angel investors, as well as certain pooled investment funds.
- Futures/Fair Value
A Future is a type of derivative, which is a contract to purchase or sell a financial instrument based on a specific date and price.
Fair Value refers to the relationship between the futures contract of a specific market index and the actual value of the index by taking into account (and adding) the borrowing cost of purchasing the equities in the index, and then subtracting the dividends (since the futures contract does not actually own the equities and does not receive any dividends) .
- G20
- A group of finance ministers and central bank governors from 19 of the world’s largest economies, and the European Union. The G-20 was formed in 1999 as a forum for member nations to discuss key issues related to the global economy. The mandate of the G-20 is to promote growth and economic development across the globe.
The Group of Twenty consists of the members of the G-7, 12 other nations (including China, India, Brazil and Saudi Arabia), and rotating council presidency from the European Union. The commitee’s inaugural meeting took place in Berlin in December of 1999.
- GDP (Gross Domestic Product)
- A statistical measure of the economy by establishing the value of goods and services produced by workers and capital within a specific country during a 12 month period
- Gold
- A chemical element with the symbol AU and an atomic number of 79. Throughout history, Gold has been considered a precious metal because of its rarity and is used as a form of currency as well as coinage, jewelry, and other arts. Approximately 12% of all gold is actually used by consumers while the rest of the gold is stored in vaults such as the Federal Reserve and others like it around the globe.
- Government bonds
- Debt issues that are guaranteed and backed by the federal government with a predetermined rate of interest along with length of term.
- Hedge Fund
- A Partnership that is comprised of pooled capital investments made by 1 to 499 investors (High Net Worth Individuals, Institutions, etc.) with the purpose of using this pooled capital in order to execute complex investment strategies and expertise that may not be possible or available to these investors without using such a vehicle. Although Hedge Fund have been around for at least 60 years, their popularity and complexity mainly took off during the 1990′s.
- Home Equity Lines of Credit (HELOC)
- A type of loan that is issued to a borrower that have exhausted their traditional mortgage on a property they own, using the property as collateral and usually becoming the secondary creditor to the traditional mortgage in the case of a default. Interest is charged to this loan, as it does to any other loan, but is usually associated with prime and is lower but more volatile than the fixed rates on mortgage loans.
- Housing Data
- A combination of multiple statistical reports about the housing market which provide details about new home building permits, foreclosures, and inventory of houses on the market in order to give the public better guidance about the current economic and real estate market condition.
- IMF
- International Monetary Fund. An international organization created for the purpose of:
1. Promoting global monetary and exchange stability.
2. Facilitating the expansion and balanced growth of international trade.
3. Assisting in the establishment of a multilateral system of payments for current transactions.
- IPO
- Initial Public Offering is the a corporations’ first offer to sell its stock to the public. The company’s goal is to raise capital in order to facilitate future growth or provide liquidity to existing investors.
- Imports
- Goods and services that were produced abroad and sold locally.
- Interest Rates
- This is the rate of interest on any type of loan (credit card, mortgage, personal, HELOC, etc.) that the lender would charge the borrower in return for providing the borrower with the capital being used.
- Jobs Data
- A combination of multiple statistical reports about the US labor market providing details about unemployment, payroll numbers, average earnings, etc. This report is provided by the US department of labor in order to determine the current economic condition in the United States.
- “Long”/ “Short”
- Owing a position in a public company or other asset/having to borrow a position in a public company or other asset at a set price with the with the purpose of giving the asset back once it is worth less than the value it was at the time the loan took place.
- LLC
- A corporate structure whereby the shareholders of the company have a limited liability to the company’s actions. A hybrid between a partnership and a Corporation.
- Leverage
- The process of borrowing money by using an existing asset as collateral in order to increase the potential risk and return of the investment.
- Limited Partnership
- Two or more partners united to conduct a business jointly, and in which the partners are liable only to the extent of their original investment. This is how most hedge and private equity funds are structured.
- Liquidity
- In business or investment, this refers to how easily an asset can be bought or sold in the market with much change in value or time needed in order to find a buyer. The most liquid asset is currency/money.
- Loan serialization
- This is typically is associated with student loans, where a lender would purchase the multiple student loans owed by a person and allow them to pay the loans back one at a time. These loans remain separate, but it since only one payment is due at a time the payment is lower, and the repayment period is longer.
- M&A
- The abbreviated phrase for Mergers & Acquisitions, which is a corporate strategy dealing with the buying, selling and combining (merging) of different companies in order to facilitate the rapid growth of a single main entity.
- Manufacturing Data
- Reported by the Institute of Supply Management (ISM), this is a statistical analysis of the amount of manufacturing that is taking place as a result of the demand [by 400+ non manufacturing firms] in the market and compare this to the amount of supply already produced by these firms.
- Money market fund
- An investment mutual fund that which has the objective to earn interest for shareholders while maintaining a net asset value (NAV) of $1 per share. These fund portfolios are comprised of short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments.
- Mutual fund
- A single investment vehicle that is managed to invest the pool of capital that came from many investors into multiple stocks and bonds for the purpose of providing investors with diversification.
- NASDAQ Composite
- Is a market cap weighted index of over 5000 stocks traded only over the counter and not on an exchange.
- OECD (Organization for Economic Cooperation and Development)
- A group of 30 member countries that discuss and develop economic and social policy. OECD countries are democratic countries that support free market economies. This think tank deals with issues such as raising the standard of living in member countries, contributing to the expansion of world trade, and promoting economic stability.
- OPEC (Organization of Petroleum Exporting Countries)
- Is an organization that consists of the world”s leading exporters of oil, and is charged with the coordination of petroleum policies to its members as well as technical and economic aid. One of the primary OPEC goals is mitigate the volatility in the price of oil in the world market.
- Option Arm
- This is a mortgage where the borrower will be given several payment options for the first several years of the loan. The terms on this type of mortgage are usually much shorter than a traditional fixed mortgage, and also has interest rates that vary from month to month.
- P&L Statement
- Profit & Loss statement – A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time – usually a fiscal quarter or year. These records provide information that can be used as a guide to help grow the profits of a company. The P&L statement is also known as a “statement of profit and loss”, an “income statement” or an “income and expense statement”.
- Private Equity Crash of 2000-2003
- After the dot-com bubble came to an abrupt end, many private equity and venture capital firms were shut down or forced to write off massive losses on their losing investments in technology companies.
- Property Tax
- This is a tax charged by the municipalities for owning land or housing in their towns. This tax is based on an estimated value of the property, with the funds usually being used to develop the town.
- Property bubble
- Property/Housing Bubble is a time where the price of real estate increased dramatically as a result of increased speculation, abnormalities in the credit market (whereby getting a loan became too easy), and the assumption that the prices of real estate were not only going to continue going higher, but were actually “supposed” to go higher indefinitely. This flawed psychological state of mind made people believe that they can continue purchasing homes with the money that they don’t have, but could borrow, with the intention to unload the property to someone else (another speculator) at a higher price than was paid over a short period of time, thereby creating a musical chair game out of the real estate market.
- “Roadshow”
- A traveling presentation done by the management of a company that is looking to create investment interest from institutional and individual investors prior to the company doing an IPO or issuing more securities.
- Refinancing
- This is a step a business or individual would take if they wanted to change the terms of an existing loan that they have. The usual changes are to get a longer timeframe to pay back the loan, and a lower interest rate. During the real estate bubble many people/companies continued to refinance their property in order to get a larger loan than the original based on the increase in the value of the property.
- Retail Sales
- This is a monthly measure report of the consumer spending on retail activity. This important indicator of the U.S. GDP is published by the Department of Commerce.
- Roth IRA
- An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible, capital gains are tax deferred, and qualified distributions are tax free.
- S&P 500
- A derivative contract that has a value based on the value of the most widely followed large cap American stocks
- SEC
- The Acronym for the Securities and Exchange Commission, which is a federal agency that was created to regulate and monitor the securities industry.
- Sarbanes Oxley
- An act passed by U.S. Congress in 2002 to help protect investors from the possibility of fraudulent accounting activities by corporations. The Sarbanes-Oxley Act (SOX) mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. SOX was enacted in response to the accounting scandals in the early 2000s. Scandals such as Enron, Tyco, and WorldCom shook investor confidence in financial statements and required an overhaul of regulatory standards.
The rules and enforcement policies outlined by the SOX Act amend or supplement existing legislation dealing with security regulations. The two key provisions of the Sarbanes-Oxley Act are:
1. Section 302: A mandate that requires senior management to certify the accuracy of the reported financial statement
2. Section 404: A requirement that management and auditors establish internal controls and reporting methods on the adequacy of those controls. Section 404 had very costly implications for publicly traded companies as it is expensive to establish and maintain the required internal controls.
- Seed Money
- The money needed in order to start a new business venture.
- Short selling
- In real estate, this is when the borrower sells the property for a price that is lower than the balance of the loan after getting permission from the lender. The lender only agree to this because they believe that this short sale will generate a smaller loss than the one that would be from a foreclosure, where the lender would have to take over all of the administrative and operating tasks and expenses of owning a property.
- Sovereign Debt
- A debt owed by a national government within a given country and denominated in a foreign currency.
- Stimulus
- An economic stimulus plan is a governmental plan that takes multiple measures in order to stimulate a slowed or soft economy. Such measures could be the lowering of interest or tax rates, increased governmental spending, subsidies or grants as well as other measures deemed appropriated by the government.
- Stock index fund
- A type of fund that invests in the same stocks that make up a specific index.
- Subprime Loan
- A type of loan that was specifically designed by financial institutions for high risk borrowers in order to allow the borrowers to purchase homes. Since these borrowers are known to be higher risk (more likely to default) by the banks, the rate of interest charged on these loans are usually much higher than the same loan would be had the borrower been a low risk borrower.
- Sweat Equity
- Equity in a business venture that was (or is being) created directly as a result of time and effort rather than actual capital.
- The Dow
- Is a stock market indices based on the price weighted average of 30 actively traded stocks.
- The Fed
- The Federal Reserve System is the central bank of the United States, which helps steer the US economy by its control over interest rates and money supply.
- The Junk bond scandal
- Usually when this subject comes up, people are referring to the times and actions of the investment firm Drexel, and Misters Michael Milken and Ivan Boesky in the 1980′s. Too long of a story to define in small paragraph.
- “Under water”
- In real estate, this is when the property value is lower than the loans and mortgages owed on the property. A sale a this rate would be considered a short sale.
- VA Loan
- A mortgage loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain home financing. The Department of Veterans Affairs does not directly originate VA loans; instead, they establish the rules for those who may qualify, dictate the terms of the mortgages offered and insure VA loans against default.
- Valuation
- In business, this is the process where certain procedures are followed in order to assess the value of an asset or value of the ownership interest in a business entity.
- Venture capital (VC)
- A type of investment entity looking to invest in start up or early stage business ventures with high risk/high return potential, with an ultimate goal of realizing the investment success through the sale of the business or public offering.
- Yield
- A financial ratio that shows how much an investment holding pays out in interest or dividends each year relative to its value.
- eMortgages
- The process of issuing a mortgage by disseminating, executing and storing the loan documents electronically.
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