Life After College :: Money

Money > Definitions

Jump to section:
» Tax-Advantaged Savings Accounts | » Types of Investments | » Quotes
» Fees | » Types of Funds | » Other

Roth IRA: → A Roth IRA is a type of retirement account where your money is taxed before you put it in, then tax-free when you take it out (after the age of 59 1/2 without penalty.
401(k): → Type of retirement plan where contributions are tax free, then withdrawals (after the minimum age requirement) are taxed.
529 Plan: → Tax-advantaged investment vehicle designed to encourage saving for future higher education expenses; similar to a Roth IRA.

High-Yield Savings Accounts: While there's no tax benefit (aka tax advantage) to opening a high-yield savings account, they can often help you save at a higher interest rate than the average bank account, without the confusion of what to invest in (as often comes up with investment accounts when considering stokcs and mutual funds). Read more about high-yield savings accounts at Money.com.

Stocks: → A stock is a certificate of ownership in a corporation. Also known as a share.
Bonds: → An IOU for money you lend to the issuer of the bond. The issuer promises to pay you (the holder) a specified amount of interest over a specific time period, with principal (original amount) to be repaid on the maturity (due) date.
CDs (Certificates of Deposit): → Money you deposit in a bank or savings and loan for a fixed period of time that (normally) pays a fixed rate of interest.
Market Index: → A value of a collection of stocks traded on a given market, such as the Nasdaq or the S&P 500.
Index Funds: → A mutual fund that matches its portfolio to that of a specific financial market index (such as the S&P 500), with the goal of duplicating the general performance of the market in which it invests.
ETFs (Exchange Traded Funds): → A basket of stocks that is bought and sold on a stock exchange as if it were a single stock.
Mutual Funds: → A fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. These funds offer investors the advantages of diversification and professional management.
REIT (Real Estate Investment Trust): → A company, usually traded publicly, that manages a portfolio of real estate to earn profits for shareholders.

Dividend: → Payments made by a corporation to its shareholders. The amount you'll receive is based on the number of shares you own.
Last Trade: → The price at which the last trade was executed; after market close, this is the closing price.
Change: → Change in market value of a stock since the prior day's closing price.
Day's Range: → Range of a stock or fund's activity on any given day of market trading.
52-Week Range: → Range of a stock or fund's activity over a 52-week period of market trading
Market Cap: → This is the company's market capitalization. If a company has 1 million shares and the company shares are selling for $10, the market cap is $10 million.
P/E Ratio (Price to Earnings Ratio): → Ratio or multiple calculated by dividing the price per share (p) by the earnings per share (e). A way to comparing the relative valuations of different companies.

Transaction Fee: → A charge assessed by a broker for assisting in the trade of a stock or other security.
Sales Load: → # The normal costs a mutual fund incurs in conducting business, such as the expenses associated with maintaining offices, staff, and equipment. There are also expenses related to maintaining the fund's portfolio of securities. These expenses are paid from the fund's assets before any earnings are paid to the shareholder.
12-b-1 Fee: → The fees mutual funds pay for marketing the fund. Critics say the 12b-1 fee can be used as a hidden load.
Load: → Covers sales commissions and all other costs of distribution. The load is usually incurred only on purchase, so in most cases there is no charge when the shares are sold.
Short Term Redemption Fee: → This fee is charged when shares are sold within a short period of time. Fund prospectus will have details about the length of the designated holding period.
Investment Minimums: → This is the minimum amount required to purchase shares of a mutual fund. For example, some funds require a minimum $2,000 investment.

Small-Cap: → Companies with relatively small market capitalization; usually between $300 million and $2 billion is considered a small cap company, although this number changes with the market.
Mid-Cap: → Companies with middle range capitalization; usually between $2 billion and $10 billion are considered a mid cap company.
Large-Cap: → Companies with larger capitalization usually; between $10 billion and $200 billion is considered a large cap company.
Growth: → A stock of a company that is generally growing faster than the economy or the norm in the market; tend to be higher risk.
Value: → Stocks of companies that have been out of favor and are relatively cheap compared to the value of their assets.
Blend: → Mutual fund with a combination of various types of companies (mentioned above).
International: → Investments in the stocks of companies outside of the United States.
Taxable Bond: → A bond where the interest is not exempt from Federal Income Tax.
Tax-Free Bond: → A bond where the interest is exempt from Federal Income Tax.

Bear Market: → A falling or declining market.
Bull Market: → A rising market.
Diversification: → The act of investing in various types of assets to spread risk against adverse market conditions.
Compound Interest (Try out the » Compound Interest Calculator): → Interest earned on the original principal investment as well as the accrued earnings of that investment.