Wealth Dictionary


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401K

401(k) Plan is a defined contribution plan where an employee can make contributions from his or her paycheck either before or after-tax, depending on the options offered in the plan. The contributions go into a 401(k) account, with the employee often choosing the investments based on options provided under the plan.


403B PLANNING

A 403(b) plan is a retirement plan for specific employees of public schools, tax-exempt organizations, and certain ministers. These plans can invest in either annuities or mutual funds. A 403(b) plan is another name for a tax-sheltered annuity (TSA) plan.


529 COLLEGE SAVING PLANS

A tax-advantaged method of saving for future college expenses that is authorized by Section 529 of the Internal Revenue Code.


A


ALTERNATIVE INVESTMENTS

An alternative investment is an asset that is not one of the conventional investment types, such as stocks, bonds, and cash. Alternative investments include private equity, hedge funds, managed futures, real estate, commodities and derivatives contracts.


ANNUITIES

An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time.


B


BONDS

A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Owners of bonds are debt holders, or creditors, of the issuer.


BROKER

A full-service broker is a licensed financial broker-dealer firm that provides a large variety of services to its clients, including research and advice, retirement planning, tax tips, and much more.


C


CASH FLOW

The total amount of money being transferred into and out of a business, especially as affecting liquidity.


CASH MANAGEMENT

Cash management is the corporate process of collecting and managing cash, as well as using it for (short-term) investing. It is a key component of ensuring a company’s financial stability and solvency.


CONTRARIAN INVESTING

Contrarian Investing is an investment strategy that is characterized by purchasing and selling in contrast to the prevailing sentiment of the time. A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets.


DIVERSIFICATION


The process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets.


E


EBITDA

Earnings before interest, tax, depreciation and amortization (EBITDA) is a measure of a company’s operating performance. Essentially, it’s a way to evaluate a company’s performance without having to factor in financing decisions, accounting decisions or tax environments.


EQUITIES

The value of the shares issued by a company.


ESTATE PLANNING

Estate planning is the act of preparing for the transfer of a person’s wealth and assets after his or her death. Assets, life insurance, pensions, real estate, cars, personal belongings, and debts are all part of one’s estate.


EXCHANGE-TRADED FUNDS

A type of investment fund that is traded on a stock exchange.


F


FINANCIAL ADVISOR

A person who is employed to provide financial services or guidance to clients.


FINANCIAL PLANNING

A financial plan is a comprehensive evaluation of an investor’s current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.


FREDDIE MAC

Freddie Mac (FHLMC) is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of home ownership and rental housing for middle income Americans.


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H


HEDGE FUNDS

A limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.


I


INDEPENDENT FINANCIAL ADVISOR

Independent Financial Advisers or IFAs are professionals who offer independent advice on financial matters to their clients and recommend suitable financial products from the whole of the market.


INVESTMENT PORTFOLIO

An investment portfolio is a collection of assets owned by an individual or by an institution. Most investment portfolios, particularly portfolios that are assembled to pay for a retirement, are made up mainly of securities, such as stocks, bonds, mutual funds, money market funds and exchange traded funds.


IRA

A traditional individual retirement account (IRA) allows individuals to direct pretax income towards investments that can grow tax-deferred; no capital gains or dividend income is taxed until it is withdrawn.


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K



L


LIFE INSURANCE

Insurance that pays out a sum of money either on the death of the insured person or after a set period.


LIQUIDITY

Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price. Accounting liquidity measures the ease with which an individual or company can meet their financial obligations with the liquid assets available to them.


LIVING TRUST

A living trust is an agreement where the trustee holds the legal possession of a fund or assets that belong to another person, the beneficiary, and it is created while the person is alive.


M


MUTUAL FUNDS

An investment program funded by shareholders that trades in diversified holdings and is professionally managed.


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P


PRIVATE EQUITY

Private equity is capital that is not noted on a public exchange. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.


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R


RETIREMENT

The action or fact of leaving one’s job and ceasing to work.


RISK

Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. In modern portfolio theory, the variance (or standard deviation) of a portfolio is used as the definition of risk.


S


S & P

Standard & Poor’s (S&P) is the world’s leading index provider and the foremost source of independent credit ratings. Standard & Poor’s has been providing financial market intelligence to decision makers for more than 150 years.


SIPC

The Securities Investor Protection Corporation (SIPC) is a nonprofit corporation created to insure the assets investors have deposited in brokerage firms. All registered brokers, dealers, members of securities exchanges, and the majority of Financial Industry Regulatory Agency (FINRA) members belong to the SIPC.


STOCK

The capital raised by a business or corporation through the issue and subscription of shares.


T


TERM LIFE INSURANCE

Life insurance that pays a benefit in the event of the death of the insured during a specified term.


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