Glossary of Essential Industry Terms

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12b-1 Fee

A mutual fund fee, named for the SEC rule, used to pay for broker-dealer compensation and other distribution costs. If a fund has a 12b-1 fee, it will be disclosed in the fee table of the fund’s prospectus.

13-F Filing

A 13-F filing is a quarterly report submitted by institutional investment managers that exercise investment discretion over $100 million or more in Section 13(f) securities.

401(k) Plan

A 401(k) plan is a popular employer-sponsored retirement savings plan that allows employees to contribute a portion of their salary on a pre-tax basis, with potential employer matching contributions.

403(b) Plan

A 403(b) plan is a tax-advantaged retirement savings plan available to employees of certain nonprofit organizations and government entities, allowing them to save for retirement on a tax-deferred basis.


A 501(c)(3) organization is a nonprofit entity recognized by the Internal Revenue Service (IRS) as tax-exempt, often established for charitable, educational, religious, or scientific purposes.

529 Plan

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs, offering various investment options and potential tax benefits for qualified educational expenses.

60/40 Portfolio

A 60/40 portfolio refers to an often-used asset allocation that balances 60% equity and 40% fixed income. An example would be an investment portfolio split between the S&P 500 Index of stocks (60%) and 10-year U.S. Treasury bonds (40%).



Investment alpha represents the excess return on an investment beyond what would be expected based on its risk level, indicating the skill or strategy’s effectiveness in generating positive performance.


An annuity is a financial product that provides a series of regular payments over a specified period, often used as a tool for retirement income planning.


An asset is a resource with economic value that an individual, corporation, or country owns or controls, expecting future benefit such as income, appreciation, or use.

Asset Allocation

Asset allocation is the strategic distribution of a portfolio among various asset classes, such as stocks, bonds, and cash, aiming to achieve the investor’s financial objectives while managing risk.

Assets Under Management

Assets Under Management (AUM) represent the total market value of the assets that an investment firm manages on behalf of its clients, reflecting the scale and scope of its investment activities.


Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time, offering insights into its financial health and net worth.

Basket Trade

A basket trade is a type of order used by investment firms and big institutional traders to buy or sell a group of securities simultaneously.

Bear Market

A bear market is a financial market characterized by declining prices over an extended period, typically accompanied by widespread pessimism among investors and an economic downturn.

Behavioral Finance

Behavioral finance is a field of study that combines insights from psychology and economics to understand how psychological factors influence individuals’ financial decisions and market behavior. It explores the impact of cognitive biases, emotions, and social influences on investment choices.


A benchmark is a standard or reference point used to assess the performance of a financial instrument, investment portfolio, or market index, providing a basis for comparison and evaluation.


Investment beta measures the volatility or risk of a particular investment relative to the overall market, helping investors assess how the investment is likely to perform in different market conditions.

Blue Chip Stock

Blue chip stocks refer to shares of large, well-established companies with a history of stable performance, often considered reliable and less volatile investment options.

Bull Market

A bull market is a financial market where prices are rising or expected to rise, characterized by optimism, investor confidence, and a generally positive economic outlook.


Callan Chart

A Callan Chart is a visual representation of the historical performance of various asset classes or investment sectors over time, often displayed in a grid format, allowing investors to compare and analyze the relative performance and volatility of different investment options. Learn more at


A commodity is a raw material or primary agricultural product that is traded on an exchange, such as gold, oil, or wheat, and serves as the basis for futures contracts, providing a standardized unit for buying and selling in financial markets.

Concentration Risk

Concentration risk is the level of exposure an investment portfolio has to a particular asset, sector, or region, with the potential for increased volatility and losses if that area experiences adverse conditions.


Correlation measures the statistical relationship between two or more variables, indicating how changes in one variable may correspond with changes in another, either positively, negatively, or not at all.

Correlation Coefficient

The correlation coefficient is a numerical measure that quantifies the degree of correlation between two variables, with values ranging from -1 to 1. A coefficient close to 1 signifies a strong positive correlation, -1 indicates a strong negative correlation, and 0 suggests no correlation.


Bond coupon refers to the fixed interest rate that a bond pays to its bondholders periodically, usually expressed as an annual percentage of the bond’s face value. Bond coupons represent the interest income earned by bond investors.


Cryptocurrency is a digital or virtual form of currency that uses cryptography for security, and operates on decentralized networks based on blockchain technology. Ex: Bitcoin, Etherium.


Deferred Contribution

A deferred contribution refers to an amount set aside for future use, often related to retirement savings or other long-term financial goals, with the contribution delayed until a later date.


A derivative is a financial contract whose value is derived from the performance of an underlying asset, index, or rate, commonly used for risk management or speculation. Ex: futures, options, credit default swaps.


Diversification is an investment strategy that involves spreading assets across different classes (equities, fixed income, etc.) or types of investments to reduce risk and improve the overall risk-return profile of a portfolio.


A dividend is a distribution of a portion of a company’s earnings to its shareholders, usually in the form of cash or additional shares, as a reward for holding the company’s stock.

Due Diligence

Due diligence is the comprehensive research and analysis undertaken by investors or financial professionals before making significant financial decisions, ensuring that all relevant information is considered to mitigate risks.


Efficient Frontier

The efficient frontier is a concept in portfolio theory that represents the optimal balance between risk and return for a given set of investments, helping investors identify the portfolio that offers the maximum return for a given level of risk.


Environmental, Social, and Governance (ESG) criteria are a set of ethical and sustainability factors that investors consider when making investment decisions. ESG factors assess a company’s impact on the environment, its social practices, and its governance structure.


An Exchange-Traded Fund (ETF) is a type of investment fund and exchange-traded product, representing a basket of assets such as stocks, bonds, or commodities, and traded on stock exchanges like individual stocks. ETFs come in all flavors and offer multiple benefits.


Equity refers to ownership in a company in the form of shares or stocks. Equity represents a claim on the company’s assets and earnings, and shareholders are considered partial owners of the company.

Expense Ratio

The expense ratio is a measure of the costs associated with managing an investment fund, expressed as a percentage of the fund’s average net assets. It includes management fees, administrative expenses, and other operational costs.



“FAANG” is an acronym that refers to the stocks of five prominent American technology companies: Meta (META) (formerly known as Facebook), Amazon (AMZN), Apple (AAPL), Netflix (NFLX); and Alphabet (GOOG) (formerly known as Google).

Family Office

A family office is a private wealth management advisory firm that serves high-net-worth individuals or families, providing comprehensive financial services, including investment management, estate planning, and philanthropy.


A fiduciary is an individual or entity entrusted with the responsibility to act in the best interest of another party, often in a financial or legal capacity, with a duty to prioritize the client’s well-being over their own.


A Fill-Or-Kill order is an order to buy or sell a stock that must be executed immediately in its entirety; otherwise, the entire order will be cancelled (i.e., no partial execution of the order is allowed).

Fixed Income

Fixed income investments provide a fixed periodic return on the principal amount invested. Common examples include bonds and certificates of deposit (CDs), offering predictable interest payments.

Fund of Funds

Also known as a multi-manager investment, a fund of funds (FOF) is a pooled fund that invests in other funds, usually hedge funds or mutual funds.


A future is a standardized contract between two parties to buy or sell a specific asset at a predetermined future date and price. Futures contracts are commonly used for hedging and speculative purposes in financial markets.



GIPS (Global Investment Performance Standards) reporting is a set of ethical standards and guidelines designed to ensure the fair representation and disclosure of investment performance by investment firms, promoting transparency and comparability. Learn more at

Growth Stock

A growth stock is a type of equity security that is expected to grow at an above-average rate compared to other companies, often reinvesting earnings into expansion rather than paying dividends.


A Generation Skipping Trust (GST) is an estate planning tool that allows individuals to transfer assets to their grandchildren or subsequent generations, skipping a generation to potentially reduce estate taxes.



A hedge is an investment strategy or position taken to offset potential losses in another investment, reducing the overall risk in a portfolio.

Hedge Fund

A hedge fund is a pooled investment fund managed by professional fund managers, employing various strategies to generate returns for accredited investors, often with greater flexibility compared to traditional investment funds.

Held-Away Account

Held-away accounts refer to financial accounts or assets held by a client at an institution other than the primary wealth management firm, requiring consolidated reporting for a comprehensive view of the client’s financial portfolio.

Home Office

A home office is the central or main office of a financial advisory firm where administrative, management, and strategic functions are conducted to support client services and operations.


A High-Net-Worth Individual (HNWI) is an individual with a high level of financial wealth, typically exceeding a certain threshold, making them eligible for specialized financial services and investment opportunities.


A Health Savings Account (HSA) is a tax-advantaged savings account that individuals can use to cover qualified medical expenses, offering a triple tax benefit with tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses.



An Investment Advisor Representative (IAR) is an individual employed by an investment advisory firm who is authorized to provide financial advice and services to clients on behalf of the firm.

Inverted Yield Curve

An inverted yield curve occurs when short-term interest rates are higher than long-term rates, often considered a potential indicator of an economic recession.

Investment Proposal

An investment proposal is a document that outlines the details of a potential investment opportunity, including the investment’s objectives, risks, expected returns, and other relevant information.


An Initial Public Offering (IPO) is the first sale of a company’s stock to the public, marking the transition from private to public ownership and allowing investors to purchase shares in the company.


An Investment Policy Statement (IPS) is a document that outlines an investor’s financial goals, risk tolerance, investment strategy, and constraints, serving as a guide for investment decisions.

IRA Account

An Individual Retirement Account (IRA) is a tax-advantaged savings account designed to help individuals save for retirement, offering various investment options such as stocks, bonds, and mutual funds.


The Internal Rate of Return (IRR) is a metric used to assess the profitability of an investment by calculating the discount rate that makes the net present value of its cash flows equal to zero.

Irrevocable Trust

An irrevocable trust is a type of trust that cannot be altered or revoked by the grantor once it is established, providing certain tax benefits and asset protection.



The J-Curve in finance illustrates the initial negative impact of an investment, followed by a gradual upward trajectory as the investment matures and starts generating positive returns, forming a shape resembling the letter “J.”

Jumbo Loan

A jumbo loan is a type of mortgage that exceeds the loan limits set by government-sponsored enterprises like Fannie Mae and Freddie Mac, typically used for high-value real estate transactions.

Junk Bond

A junk bond, also known as a high-yield bond, is a fixed-income security with a lower credit rating, indicating a higher risk of default. These bonds offer higher yields to compensate for the increased risk.



A Schedule K-1 is a tax form used in the United States to report the income, deductions, and credits allocated to each partner or shareholder in a partnership, S corporation, estate, or trust, enabling them to report this information on their individual tax returns.



Leverage refers to the use of borrowed capital to increase the potential return on an investment. It amplifies both gains and losses.


A liability is a financial obligation or debt, representing what a company or individual owes to others. It includes loans, mortgages, and other financial responsibilities.


Liquidity describes the ease with which an asset or security can be quickly bought or sold in the market without significantly affecting its price. Highly liquid assets can be easily converted to cash.

Long Position

A long position is the ownership of a security, such as a stock or bond, with the expectation that its value will increase over time, allowing the holder to sell it at a profit.


The Loan-to-Value Ratio is a financial metric that assesses the risk of a loan by comparing the amount of the loan to the appraised value of the asset securing the loan, commonly used in real estate financing.


Market Cap

Market capitalization, or market cap, is the total value of a company’s outstanding shares of stock, calculated by multiplying the current stock price by the total number of shares.


Margin is the amount of money that an investor borrows from a broker to purchase securities, using their existing investments as collateral. Trading on margin involves both potential for higher returns and higher risks.


Maturity refers to the date when a financial instrument, such as a bond or certificate of deposit (CD), becomes due for repayment, and the principal is returned to the investor.

Monetary Policy

Monetary Policy is the central bank’s management of money supply and interest rates to achieve economic goals, such as controlling inflation and promoting economic growth.


Negative Equity

Negative equity occurs when the market value of an asset falls below the outstanding balance on the loan secured by that asset, resulting in a deficit or loss for the owner.

Net Income

Net income, also known as profit or net profit, is the total revenue of a company minus its expenses and taxes, representing the company’s overall profitability.

Nominal Interest Rate

The Nominal interest rate is the stated interest rate on a financial product or loan without adjusting for inflation, providing the lender’s or investor’s expected return.


The New York Stock Exchange is one of the largest and most well-known stock exchanges globally, where stocks of many large corporations are bought and sold.



Outsourced Chief Investment Officer (OCIO) is a financial service model where an investment management firm is hired to take on the responsibilities of a Chief Investment Officer, providing comprehensive investment advice, strategy implementation, and ongoing portfolio management.


Options are financial instruments that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before or at the expiration date.

Order Flow

Order flow refers to the buying and selling activity in the financial markets, indicating the direction and volume of trades and providing insights into market sentiment and potential price movements.


Over-the-Counter (OTC) refers to the trading of financial instruments directly between two parties, outside of a centralized exchange, often involving custom or non-standardized contracts.


P/E Ratio

Price-to-earnings (P/E) Ratio is equal to a stock’s price divided by its earnings per share, which indicates how much investors are paying for a company’s earning power.

PEG Ratio

The Price-Earnings to Growth (PEG) Ratio is a valuation metric that compares a stock’s price-earnings ratio to its expected earnings growth rate, helping investors assess the stock’s relative value.

Private Equity

Private equity involves investments in private companies or assets that are not publicly traded, typically through private funds, venture capital, or buyout firms.

Put Option

A put option is a financial contract that gives the holder the right, but not the obligation, to sell an underlying asset at a specified price within a predetermined time frame, used as a risk management strategy or for speculation.


Quantitative Easing

Quantitative Easing (QE) is a monetary policy tool used by central banks to stimulate the economy by purchasing financial assets, typically government bonds, to increase money supply and lower interest rates.

Quiet Period

The Quiet Period is a specific timeframe, usually before and after an Initial Public Offering (IPO), during which company insiders are restricted from making public statements to avoid influencing the stock price.



Rebalancing refers to the process of returning the values of a portfolio’s asset allocations to the levels initially defined by an investment plan and seek to match an investor’s risk tolerance.

Revocable Trust

A revocable trust is a type of trust that the grantor can modify or dissolve during their lifetime, providing flexibility in managing assets and estate planning while maintaining control over the trust.


A Registered Investment Advisor (RIA) is a financial professional or firm that is registered with the Securities and Exchange Commission (SEC) or state securities authorities, providing investment advice and managing portfolios for clients.


Risk/Return is a fundamental concept in finance that reflects the trade-off between the potential for higher returns and the level of risk associated with an investment. Generally, higher potential returns are correlated with higher levels of risk.

Roth RIA

A Roth IRA is an Individual Retirement Account that allows individuals to make after-tax contributions, and qualified withdrawals, including earnings, are typically tax-free. It offers tax advantages for retirement savings.



The Securities and Exchange Commission (SEC) is a regulatory agency that oversees and enforces securities laws, ensuring fair and transparent financial markets in the United States.

Sharpe Ratio

The Sharpe Ratio is a risk-adjusted measure that evaluates the return of an investment or portfolio in relation to its risk, calculated by dividing the excess return (return above the risk-free rate) by the standard deviation of the investment’s returns.

Short Selling

Short selling is a trading strategy where an investor borrows shares of a security and sells them with the expectation that the price will decline, allowing them to buy back the shares at a lower price and profit from the difference


A separately managed account (SMA) is an investment account managed by a professional investment manager, allowing individual investors to own and control a personalized portfolio of securities.


Solvency is a financial condition indicating a company’s ability to meet its long-term obligations and debts, demonstrating its overall financial health and viability.

Stock Options

Stock options are financial contracts that grant the holder the right to buy or sell a specific amount of a company’s stock at a predetermined price within a specified time frame, often used as employee incentives.

Structured Note

A structured note is a complex financial instrument with a debt component linked to derivative instruments, offering customized risk and return profiles, often created by financial institutions to meet specific investor needs or market views.



 A Turnkey Asset Management Platform, or TAMP for short, is a tech-based platform allowing investment advisors to monitor, manage, and provide back-office support for their clients’ investments and asset allocations. Click here to take a deep dive on TAMPs.

Tax-Loss Harvesting

Tax-Loss Harvesting is a strategy where investors sell securities that have experienced capital losses to offset gains and reduce taxable income, often used to optimize tax efficiency in investment portfolios.


A tearsheet is a concise, one-page document that provides key information about a financial instrument, such as a stock or ETF, including relevant financial metrics, performance data, and other critical details for quick reference or analysis.


Treasury Inflation-Protected Securities, shortened to TIPS, are U.S. Treasury bonds designed to protect investors from inflation by adjusting their principal value based on changes in the Consumer Price Index, providing a hedge against rising prices.

Total Return

Total return is the overall gain or loss on an investment, considering both capital appreciation (or depreciation) and income generated, expressed as a percentage of the initial investment.

Tracking Error

Tracking error is a measure that quantifies the divergence in performance between an investment portfolio and its benchmark, reflecting the degree to which the portfolio deviates from the benchmark’s returns over time.

Turnover Ratio

Turnover ratio measures the frequency with which a portfolio’s assets are bought or sold within a specific period, indicating the level of portfolio activity and potential transaction costs.



The Uniform Gift to Minors Act (UGMA) is a legal framework that allows minors to receive gifts, such as cash, securities, or real estate, without the need for a trust or guardianship.

Underlying Asset

The underlying asset is the financial instrument or asset upon which a derivative’s value is based, such as stocks, bonds, commodities, or indices.


Underwriting is the process by which financial institutions assess and assume the risk of insuring or issuing securities, such as stocks or bonds, ensuring the financial viability of the issuing entity.


A Unified Managed Account (UMA) is an investment account that combines various investment vehicles, such as stocks, bonds, and mutual funds, into a single, comprehensive portfolio, often with a single fee structure. Click here to take a deep dive on UMAs.

Unit Trust

A Unit Trust is a collective investment scheme where investors pool their money to form a trust, and the trust issues units representing proportional ownership in the underlying assets, providing diversification and professional management.

Unsystemic Risk

Unsystematic risk, also known as specific or diversifiable risk, is the risk associated with individual assets or sectors, which can be mitigated through diversification, unlike systematic risks that affect the entire market.


Variable Annuity

A variable annuity is a type of annuity contract where the payout amount varies based on the performance of underlying investments, typically consisting of mutual funds.

Venture Capital

Venture capital is a form of private equity funding provided to startups and small businesses by investors in exchange for equity ownership, often with the aim of supporting early-stage companies with high growth potential.


Volatility measures the degree of variation of a trading price series over time, indicating the level of risk or uncertainty in the value of a financial instrument, commonly used in assessing investment risk.



A warrant is a derivative instrument giving the holder the right, but not the obligation, to buy or sell a specific bond at a specific price either on a particular day or within a specified time period.

Wealth Management

Wealth management is a comprehensive financial advisory service that combines investment planning, financial planning, and other specialized services to help high-net-worth individuals or families achieve their financial goals and manage their wealth effectively.

Weighted Average

Weighted average is a calculation that takes into account the different weights or importance of various components, providing a more accurate average, often used in financial metrics such as the weighted average cost of capital (WACC) or weighted average coupon rate.

Working Capital

Working capital represents a company’s short-term financial health and operational liquidity, calculated by subtracting current liabilities from current assets, indicating its ability to cover short-term obligations.



Xenocurrency refers to any currency that is traded in markets outside of its domestic borders. Its name derives from the Greek prefix “xeno,” meaning “foreign.”



Yield is the income generated by an investment, typically expressed as a percentage of the investment’s market price or face value, and it can refer to dividends from stocks, interest from bonds, or other forms of investment income.

Yield Curve

The yield curve is a graphical representation of the relationship between the interest rates and the maturity of debt securities, such as bonds or Treasury bills, showing how yields change over time and providing insights into economic conditions and market expectations.

Young Accumulator

The term young accumulator emphasizes the stage of wealth accumulation and the early investment journey of individuals, often younger, who are in the initial phases of building their financial portfolios.


Zombie ETF

A zombie ETF is an ETF that is generating little new interest from investors and may have to be shut down by the issuer.

This communication is for informational purposes only. This is not intended as nor is it an offer, or solicitation of any offer to buy or sell any security, investment or product. You should not construe any of this information to be legal, tax, investment, financial, or other advice.


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