Streetwise Glossary of Terms

Glossary

123

1099-B – tax form that reports your gains and losses from selling stocks or other investments in your brokerage account
1099-DIV – tax form that reports dividends or distributions you've earned on stocks or mutual funds
12b-1 Fee – Annual marketing or distribution fee charged by some mutual funds deducted from assets.
401 (k) – A defined contribution plan in which an employer takes money directly from an employee's salary and places it into a tax-deferred retirement account which means that the employee doesn't pay taxes on this money until they withdraw it. There are limits on when money can be withdrawn and there are penalties for early withdrawals. The decision about how and where the money is invested is usually the employee's. Employers often match a percentage of employee contributions sometimes as much as 50 cents on the dollar.
529 Plan – state-sponsored tax-advantaged education investment plan. A 529 plan is a U.S. state-sponsored tax-advantaged way to invest assets toward the cost of education. Withdrawals from a 529 account can be used to pay for qualified educational expenses at any eligible U.S. college university trade school or apprenticeship program. Withdrawals can also be used for K-12 tuition expenses.

a

Active Management – Investment approach where managers select securities to try to outperform a benchmark.
Adenosine Triphosphate (ATP) – a nucleotide that supplies large amounts of energy to cells for various biochemical processes including muscle contraction and sugar metabolism
Adjuvant – Post-primary treatment for cancer; e.g. chemotherapy
ADR (American Depositary Receipt) – Security representing shares in a foreign company traded on U.S. exchanges.
After-tax (dollars/contributions) – Money that has already been taxed.
Allosteric – An effect that occurs outside the active site
Alpha – Measure of an investment's performance relative to a benchmark on a risk-adjusted basis positive alpha indicates outperformance.
Alternative Minimum Tax (AMT) – The AMT applies to U.S. taxpayers who have certain types of income such as the spread reported from an exercise and hold of incentive stock options that receive favorable tax treatment. The AMT sets a limit i.e. a floor on the amount these benefits can be used to reduce total tax.
Alzheimer's Disease – A form of dementia affecting memory thinking and behavior. The disease is progressive; there is no cure
Annual Contribution Limits – IRS rules that determine how much you can contribute to retirement accounts for the year.
Annualized Return – A measure of how much value an investment has gained or lost on average each year over a specific number of years or other time period. It takes compound growth compounding into account. Also called annual return.
Antisense Drugs – A genetic therapy; an on-off switch for genes
Arbitrage – Purchasing an asset from one market and selling it to another market where the selling price is higher resulting in profit.
Arrhythmia – An irregular heartbeat cardiac dysrhythmia caused by abnormal electrical activity in the heart; may be harmless or signal a more serious heart condition
Artificial Surfactant – A substance that increases lung function
Ask – The selling price that a trader offers for their shares.
Asset Allocation – An investment strategy that involves balancing asset classes like stocks bonds and cash in your portfolio based on your goals risk tolerance timeline and other factors. Also referred to as an asset mix.
Asset Class – One of the three major types of investments: stocks bonds and cash equivalents.
Asset Classes – Categories of assets such as stocks bonds real estate or cash.
Asset Turnover – Ratio measuring how efficiently a company uses assets to generate sales.
Atherectomy – A procedure to remove atherosclerosis from arteries
Atherosclerosis – Thickening of the arteries due to inflammation or the accumulation of cholesterol
Atrial Ablation – A technique involving cauterization of pulmonary veins to treat dangerous arrhythmias
Atrial Fibrillation (AT) – Abnormal heart rhythms caused by chaotic electrical activity in the upper chambers of the heart atria
Autologous – Tissue or blood provided by the patient
Averaging Down – Buying additional shares of an asset after its price has fallen resulting in a lower average purchase price.
Award Agreement – A document issued by a company that details the number of shares award price vesting schedule and any other terms and conditions related to a stock grant. Also referred to as a grant agreement.
Award Price – The price you pay per share when you exercise your options. The award price is set by your company. Also referred to as an exercise price grant price option price or strike price.

b

Backtesting – Evaluating a trading strategy using historical data to see how it would have performed.
Balance Sheet – Financial statement showing a company's assets liabilities and equity at a specific point in time.
Basis Point – One hundredth of one percent 0.01% used to describe changes in interest rates yields or spreads.
Bear Market – A market in which share prices have declined more than 20% from a recent high.
Benchmark – A standard index or average against which an investment's performance is measured e.g. S&P 500 for stocks.
Beneficiary – A person or entity like a charity who is designated to receive or inherit benefits or other assets.
Beta – Measure of an asset’s risk in relation to the market. A beta of 1.5 means the stock typically moves 50% more than the market.
Bid – The price a trader is willing to pay for shares of a stock or other asset.
Bid-Ask Spread – The difference between what buyers are willing to pay and the price sellers are asking for a stock.
Binary Event – financial betting with 1-100 odds
Biologics – Drugs produced from living organisms
Biopharmaceuticals – Drugs developed using biotechnology encompassing the use of proteins viruses bacteria and genetic materials such as DNA
Bioprosthetic – A prosthesis including heart valves and abdominal walls using human or animal tissue
Biotechnology – biotech: The study and use of biological processes and living organisms plants bacteria animals in medicine
Blockchain – A record-keeping database in which transactions are recorded across multiple computers in a distributed network.
Blue-chip Stock – Widely held large market capitalization companies that are considered financially sound and are leaders in their respective industry or local stock market.
Blue-Chip Stocks – Common stocks of well-known companies known for quality and history of growth.
Bollinger Bands – Technical indicator using moving average and standard deviations to show volatility and potential overbought/oversold levels.
Bond – A bond represents a loan you make to a government municipality or corporation issuer. In return that issuer promises to pay you a specified rate of interest to be received on a predetermined schedule generally annually semiannually or quarterly.
Bond Ladder – A bond ladder is a portfolio of individual bonds that mature on different dates. This strategy is designed to provide current income while minimizing exposure to interest rate fluctuations.
Book Value – The net asset value of a company calculated as total assets minus total liabilities often per share.
Breakout – A price movement above a resistance level or below support typically signaling the start of a new trend.
Broker – A person who acts as an intermediary between a buyer and seller of securities sometimes charging a commission.
Brokerage Account – A taxable account that you open with a brokerage firm. The account allows you to invest in stocks bonds cash ETFs mutual funds and other investments.
Bull Market – A market in which share prices have risen 20% or more from recent lows.
Buyback – When a company repurchases its own outstanding shares to reduce shares on the market and return value to investors.

c

Call Option – Right to buy underlying stock at strike price before expiration.
Capital Gain – Capital gain occurs when you sell a stock at a higher price than when you purchased it. For example if you purchased a stock for $10 and sold it after the value increased to $15 you could be taxed on the $5 capital gain.
Capital Gains – Profit earned after selling an asset for a higher price than paid.
Capital Gains Tax – Tax on gains profits you make from the sale of capital assets like stocks and other investments. Under U.S. tax laws if you hold an investment for more than a year before you sell it for a gain you may qualify for a long-term capital gains tax rate. Gains from investments held for less than a year are usually considered short-term capital gains and are taxed as ordinary income which is usually a higher tax rate than long-term capital gains.
Capital Loss – Capital loss occurs when you sell a stock at a lower price than when you purchased it.
Capitalization Market Cap – Total market value of a company’s outstanding shares calculated by multiplying share price by number of shares.
Cardiomyopathy – Heart muscle disease
Cash Flow – The net amount of cash moving in and out of a company used to assess financial health.
Certificate Of Deposit (CD) – CDs are bank deposits that pay a stated amount of interest for a specified period of time and promise to return your money on a specific date. They are federally insured and issued by banks and savings-and-loans institutions.
CERTIFIED FINANCIAL PLANNER (CFP) – A professional planner who has met the Certified Financial Planner Board of Standards requirements in education experience and ethical conduct; passed a 10-hour comprehensive examination in investment tax estate retirement and insurance planning; and agreed to follow a code of ethics.
Chromatography – A technique used to identify and separate components by following movement such as using a liquid as in liquid chromatography for example
Cliff – The date when the restrictions end the vesting of restricted stock or options. This can also be referred to as a lapse.
Colloid – A substance that evenly distributes throughout another substance
Common Stock – Common stock is partial ownership of a company. An owner of a company's common stock is considered to have an equity position in the corporate structure of that company which gives them voting rights on different issues. Additionally common stockholders can collect dividends if the company distributes some of its earnings to stockholders. Common stock can also be referred to as an equity security a share or simply a stock.
Compound Growth – An investment concept that involves reinvesting earnings from your original investment to increase your total investment and help your money grow faster over time. Also called compounding.
Consensus Estimate – Average of analysts' forecasts for earnings revenue or other metrics for a company.
Convertible Bond – Bond that can be converted into a predetermined number of common stock shares.
Correction – A decline of 10% or more in a stock index or security from a recent peak usually temporary.
Cost Basis – What was initially paid for an investment as opposed to its current fair market value.
Cryptocurrency – Cryptocurrency is a virtual currency secured through one-way cryptography. It appears on a distributed ledger called a blockchain that's transparent and shared among all users in a permanent and verifiable way that's nearly impossible to fake or hack into. It is not reliant on any central authority such as government or bank to uphold or maintain it. Cryptocurrency's value stems from a combination of scarcity and the perception that it is a store of value an anonymous means of payment or a hedge against inflation.
Current Ratio – Measure of a company’s ability to pay short-term debt dividing current assets by current liabilities.
Cyclical Stock – Stock sensitive to economic cycles performing well in expansions and poorly in recessions.
Cytosol – The liquid inside the cell membrane cytosolic

d

Day Trading – Buying and selling shares of stock within a single day.
Dead Cat Bounce – A temporary recovery in price after a sharp decline followed by further falls.
Debt-to-Equity Ratio – Company’s debt relative to its equity dividing total liabilities by total shareholder equity.
Defensive Stock – Stock of companies providing essential goods/services stable performance in downturns.
Derivative – A financial contract whose value is derived from an underlying asset such as stocks bonds commodities or currencies.
Dilution – Reduction in earnings per share or ownership percentage due to issuing new shares.
Diversification – An investment strategy that involves building a portfolio from a mix of asset classes like stocks bonds and cash that tend to behave differently. A diversified portfolio also includes a broad range of investments within each asset class. For example with stocks you might want a mix of international and domestic stocks; stocks from various industries; and stocks from small midsize and large companies.
Dividend – Portion of a company’s earnings paid out to shareholders.
Dividend Aristocrat – Company that has increased dividends for at least 25 consecutive years.
Dividend Yield – Dividend expressed as a percentage of the stock price.
Dividends – Portions of a company's earnings that can be distributed to shareholders usually in cash. Some companies pay stock dividends additional shares instead of cash. Not all companies pay dividends and the dividend amount can change.
Dollar-cost Averaging – Dollar-cost averaging is the practice of investing a fixed dollar amount on a regular basis regardless of the share price.
Dow Jones Industrial Average (DJIA or the Dow) – The Dow Jones Industrial Average Dow Jones or simply the Dow is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes.

e

Earned Income – Taxable pay from employment or self-employment including wages salaries tips union strike benefits and certain disability payments. Does not include investment retirement Social Security alimony or child support income.
Earnings Per Share EPS – Company’s profit divided by number of outstanding shares used to measure profitability.
Earnings Report – Quarterly or annual financial statements released by public companies.
Earnings Season – Refers to the period at the beginning of each quarter when corporations report their earnings from the previous quarter.
EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) – Measure of operating performance excluding non-operating expenses.
Economic Bubble – Situation where asset prices surge far above fundamental value.
Employee Stock Option Exercise And Equity Award Agreement – The document that gives your brokerage firm the authority to act as your broker as part of an equity award transaction.
Employee Stock Purchase Plan (ESPP) – An ESPP allows you to buy shares of your employer's stock at a discounted price typically through after-tax payroll deductions.
Employer-sponsored Retirement Account – A retirement plan provided by your employer such as a 401k 403b 457b or Thrift Savings Plan TSP. Most employer plans offer a choice of investments and have tax benefits. Many employers will also match a portion of the money you contribute to your account.
EPS Growth – The percentage change in a company's earnings per share over a period often used to assess growth potential.
Equity Compensation – A form of compensation based on the value of your company stock given to you by your employer. Equity compensation can include employee stock purchase plans ESPPs stock options restricted stock awards RSAs restricted stock units RSUs performance stock awards PSAs and performance stock units PSUs. These can also be referred to as equity awards.
Equity Security – An equity security is partial ownership of a company. An owner of a company's common stock is considered to have an equity position in the corporate structure of that company which gives them voting rights on different issues. Additionally common stockholders can collect dividends if the company distributes some of its earnings to stockholders. An equity security can also be referred to as a stock common stock or share.
ETF Expense Ratio – Annual fee as percentage of assets for managing an exchange-traded fund.
Ex-Dividend Date – The date on which a stock begins trading without the value of its next dividend new buyers won't receive the upcoming dividend.
Exchange Commission – An exchange commission typically refers to the Securities and Exchange Commission SEC an independent U.S. federal agency that protects investors maintains fair markets and facilitates capital formation by enforcing securities laws against fraud and manipulation overseeing exchanges brokers and investment advisors. Its mission is to ensure transparency and fair dealing in financial markets especially after the 1929 market crash.
Exchange-traded Fund (ETF) – An ETF is an investment fund or portfolio of securities that holds assets like stocks bonds or commodities. Like stocks ETFs trade on an exchange and experience price fluctuations throughout the day.
Exercise – To act on the right to purchase company stock at the grant price set by the option grant.
Exercise And Hold – The transaction in which you purchase your company's stock at the grant price and keep the shares in your brokerage account for sale at a future date. Also referred to as cash purchase and hold the shares.
Exercise And Sell – The transaction in which you buy and then immediately sell shares.
Exercise Date – The date on which investors exercise their options.
Exercise Price – The price you pay per share when you exercise your options. Also referred to as an award price grant price option price or strike price.

f

Fair Market Value (FMV) – The amount that a willing buyer would pay a willing seller for a share of company stock. The fair market value on the day stock options are granted typically determines the award price.
Fed Funds Rate – Interest rate at which banks lend reserves to each other overnight set by the Federal Reserve.
Fibonacci Retracement – Technical analysis tool using ratios like 38.2% 50% 61.8% to predict potential support/resistance levels.
Float – Number of shares available for public trading excluding restricted or insider-held shares.
Forward P/E – Price-to-earnings ratio using forecasted future earnings instead of past earnings.
Fractional Share – Fractional shares allow you to invest in stocks based on a dollar amount so you may end up with a fraction of a share a whole share or more than one share. Fractional shares pay dividends proportionate to the percentage of the share you own.
Free Cash Flow – Cash generated after capital expenditures available for dividends buybacks or debt reduction.
Fundamental Analysis – Method of evaluating a security by measuring intrinsic value through financial statements and economic factors.
Futures – Futures are a type of derivative contract agreement to buy or sell a specific commodity asset or security at a set future date for a set price.

g

Gap – A discontinuity in a stock's price chart where trading skips a range usually due to news or events.
Golden Cross – Technical signal when short-term moving average crosses above long-term moving average bullish.
Grant – An award of stock options restricted stock units RSUs or performance stock units PSUs.
Grant Agreement – A document issued by a company that details the number of shares award price vesting schedule and any other terms and conditions related to a stock grant. Also referred to as an award agreement.
Grant Date – The date your stock options restricted stock units RSUs or performance stock unit PSUs were granted to you.
Grant ID – The unique identifier for each equity award.
Grant Price – The price of the award at the time it was granted. Also referred to as an award price strike price option price or exercise price.
Growth Investing – Strategy focusing on companies with above-average earnings growth potential.

h

Hedge – Investment to reduce risk of adverse price movements in another asset.
High-Frequency Trading (HFT) – Use of algorithms to execute large numbers of orders at very high speeds.

i

Income Statement – Financial statement showing revenue expenses and profit over a period of time.
Index Funds – Investment funds that track a benchmark index like the S&P 500 by holding all or most of its components.
Inflation – Rate of increase in prices for goods and services in the economy.
Initial Margin – Percentage of purchase price an investor must pay with their own money when buying on margin.
Initial Public Offering (IPO) – The first sale of shares upon a company's authorization by an exchange authority to offer stock to the public.
Insider Trading – Buying or selling securities based on material non-public information illegal when non-disclosed.
Intrinsic Value – The perceived or calculated true worth of a stock based on fundamentals independent of market price.

j

Junk Bond – High-yield bond with lower credit rating higher risk and higher interest rates.

l

Large-Cap – Companies with market capitalization typically over $10 billion considered stable and less volatile.
Leverage – Using borrowed capital to increase potential return of an investment.
Limit Order – Order to buy or sell a stock at or better than a specific price.
Liquidity – How quickly and easily an asset can be bought or sold without affecting its price.
Liquidity Ratio – Measure of a company's ability to pay short-term obligations e.g. current ratio or quick ratio.
Load Fund – Mutual fund that charges a sales commission or load fee when buying or selling shares.

m

MACD (Moving Average Convergence Divergence) – Technical indicator showing relationship between two moving averages used to identify momentum changes.
Margin – Borrowing money from a broker to purchase stock.
Market Breadth – Measure of how many stocks are advancing versus declining often using advance-decline line.
Market Capitalization (Market Cap) – Total value of a company's outstanding shares share price times shares outstanding.
Market Order – Order to buy or sell immediately at the current market price.
Mid-Cap – Companies with market capitalization between roughly $2 billion and $10 billion balancing growth and stability.
Momentum – The rate at which a stock's price is changing often used to identify trends that may continue.
Moving Average – Average price of a stock over a specific period used in technical analysis.
Mutual Funds – Pooled investments from many investors used to buy a diversified portfolio of securities.

n

Nasdaq – Electronic stock exchange and also refers to the Nasdaq Composite Index of over 3000 stocks.
No-Load Fund – Mutual fund sold without a commission or sales charge.
Non-Fungible Token NFT – Unique blockchain-based digital asset that cannot be replicated.

o

Options – Contracts giving right but not obligation to buy call or sell put an asset at set price.
Overbought – Condition where a stock has risen too far too fast and may be due for a pullback often measured by RSI above 70.
Oversold – Condition where a stock has fallen too far too fast and may rebound often measured by RSI below 30.

p

P/E Ratio – Price-to-earnings ratio of a company’s share price to its earnings per share used for valuation.
Passive Investing – Strategy of tracking a market index rather than trying to outperform it e.g. index funds.
PEG Ratio – Price/earnings to growth ratio valuation metric adjusting P/E for expected earnings growth.
Penny Stock – Low-priced shares usually under $5 often from small companies with high risk and volatility.
Portfolio – Collection of investments owned by an individual or institution.
Preferred Stock – Type of stock with priority over common stock for dividends and assets in liquidation but usually no voting rights.
Price-to-Earnings Ratio (P/E) – Ratio of share price to earnings per share key for valuing stocks.
Primary Market – Market where new securities are issued and sold for the first time e.g. IPOs.
Put Option – Right to sell underlying stock at strike price before expiration.

q

Quantitative Analysis – Use of mathematical and statistical models to evaluate investments.
Quantitative Easing (QE) – Central bank policy of purchasing securities to inject money into the economy lowering interest rates.

r

Real Yield – Nominal yield adjusted for inflation reflecting true return.
Rebalancing – Adjusting portfolio asset weights to maintain desired allocation.
Resistance – A price level where selling pressure is expected to prevent further rise in a stock's price.
RSI (Relative Strength Index) – Momentum oscillator measuring speed and change of price movements on a scale of 0-100.
Russell 2000 – Index measuring performance of 2000 small-cap U.S. companies.

s

S&P 500 – Index tracking 500 large U.S. companies widely used as market benchmark.
SEC (Securities and Exchange Commission) – U.S. federal agency regulating securities markets protecting investors.
Secondary Market – Market where previously issued securities are traded among investors e.g. stock exchanges.
Sector – Group of companies in similar business areas e.g. technology healthcare.
Sharpe Ratio – Measure of risk-adjusted return calculated as excess return divided by standard deviation.
Short Interest – Number of shares sold short but not yet repurchased percentage of float often indicates sentiment.
Short Selling – Borrowing and selling shares expecting price to fall then buying back cheaper.
Slippage – Difference between expected price of a trade and actual executed price due to market movement.
Small-Cap – Companies with market capitalization under $2 billion often higher growth potential but more risk.
Sovereign Debt – Bonds issued by national governments also called treasuries in the U.S.
Standard Deviation – Measure of investment volatility or dispersion of returns around the mean.
Stop-Limit Order – Order to buy or sell once a stop price is reached but only at the limit price or better.
Stop-Loss Order – Order to sell a security when it reaches a certain price to limit losses.
Support – A price level where buying interest is expected to prevent further decline in a stock's price.

t

Technical Analysis – Method of evaluating securities by analyzing statistics from trading activity like price and volume.
Trailing P/E – Price-to-earnings ratio using the last 12 months' actual earnings.
Trailing Stop – A stop-loss order that moves with the market price to lock in gains as the price rises.
Treasury Yield – Interest rate on U.S. government debt securities benchmark for risk-free rates.

v

Value Investing – Strategy of buying stocks trading below intrinsic value based on fundamentals.
Value Stock – Stock trading below its perceived intrinsic value often with low P/E or P/B ratios.
Volatility – Degree of variation in trading price over time higher means riskier.
Volume – The number of shares traded in a stock or market during a given period indicating interest and liquidity.

y

Yield – Income return on investment as percentage of cost or current value.

z

Zero-Coupon Bond – Bond sold at discount paying no periodic interest redeemed at face value at maturity.