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Activist Investor

An individual or group which purchases a large amount of a company’s shares and or tries to obtain seats on the company’s board with the goal of effecting major change in the company. A company can become a target for an activist investor if it is mismanaged, has excessive cost or another problems an activist investor thinks they can fix to make the company more profitable.

Asset Allocation

An investment strategy that aims to balance risk and reward in your portfolio among the four asset classes: stocks, bonds, alternative investments, and cash.

Bad Bank:

A separate bank which is set up to buy the bad loans of the bank. By transferring the bad assets of an institution to the bad bank, the banks clears their balance sheet of the toxic assets. Shareholders and bondholders stand to lose money from this solution, but not depositors. Banks which become insolvent as a result of the process can be recapitalized, nationalized or liquidated.

Beige Book

An actual book released by the Federal Reserve eight times a year. The book has 13 section in total; 12 regional reports from each of the member Fed districts bank and one national summary drawn from the individual reports. The book gives a holistic view of just how the US overall economic is doing since it uses actual data from all 12 regions.

Blue Chip Stock:

A nationally recognized, well-established, and financially sound company. Blue Chip companies generally sell high-quality, widely accepted products and services. They are known to weather downturns and operate profitably in the face of adverse economic conditions, which help to contribute to their long record of stable and reliable growth.

Bond Default

A Bond default occurs anytime a debtor is unable to meet the legal obligation of repayment.


A debt instrument whereby an investor loans money to an entity (either corporate or government) at a fixed rate of interest and for a fixed duration. The entity can then use the money to finance various projects or activities. Also known as fixed-income securities.

BRIC Nations (Brazil, Russia, India, China)

An acronym for the economies of Brazil, Russia, India, and China combined. The term was first used in a Goldman Sachs report in 2003, which speculated that by 2050 these four economies would be wealthier than most of the current economic powers.


The direction in which the market is going. If the market is going higher, then it is referred to as bullish. If the market is declining, it is called bearish. An easy way to remember is this: a bull charges up the hill and a bears goes down the hill.

Closed End Funds

Very different from their kissing cousins, mutual funds. Also known as open-end funds. These funds are actively managed and traded on an exchange, where their prices fluctuate according to supply and demand. Unlike an actual stock, when you purchase shares, you purchase an interest in a specialized portfolio of securities that typically concentrates on a specific industry or geographic market or sector and is actively manage by an investment advisor. Not to be confused with ETF (Exchange Traded Funds). 

Consumer Confidence Index

A survey released by the Conference Board which measures how optimistic or pessimistic consumers are with respect to the economy in the near future. The consumer confidence index is thought of as an indicators on what the future may bring to stocks. If consumers are optimistic, they tend to buy more goods and services which inevitably stimulates the overall economy.

Consumer Price Index (CPI)

A measure which examines the weighted average of the prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; goods are weighted according to their importance. Changes in index are used to assess price changes associated with the cost of living.


A taxable distribution of a portion of company’s earnings that are declared by a company’s board of directors and distributed to its shareholders at the declared date.

Dollar Index (USDX):

A value measure of the U.S. dollar relative to the majority of its most significant trading partners. The Dollar index is similar to other trade-weighted indexes, who also use the exchange rates from the same major currencies. Why is it important? Higher dollar makes goods and services produced in the U.S. more expensive for foreign buyers.

Due Diligence

An investigation or audit of a purchase or sale of a potential investment which servers to confirm all the facts.


EAFE Index

An index created by Morgan Stanley Capital International made up of 21 major European indexes. The index serves as a benchmark of performance for major international equity markets. As the S&P 500 is used as the benchmark to gauge American stocks, EAFE is used to gauge International stocks.

Earning Price Per Share (EPS)

The portion of a company’s profit which is allocated to each outstanding share of common stock. EPS can serve as an indicator of a company’s profitability.

European Central Bank (ECB)

The ECB is one of the world’s most important central banks as it administers the monetary policy for the Euro and the 28 EU member states. The bank was established by the Treaty of Amsterdam in 1998 and its headquarters is in Frankfurt Germany. The current ECB President Is Mario Draghi, former governor of the Bank of Italy.

Exchange Traded Funds (ETF)

A security that tracks an index, a commodity or a basket of assets like an index fund, however it trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold just like their bff stocks.

Federal Reserve Bank (aka the FED)

The central bank of the United States, which sets monetary policy for the country. Created in 1913 by Congress to provide the nation with a safe, flexible, and stable monetary and financial system. The Fed is comprised of a central governmental agency (the Board of Governors) located in Washington, DC and 12 regional Federal Reserve Banks, which are responsible for specific geographic areas of the United States.

Foreign Exchange Markets (FX)

The market where global currencies are traded. The forex markets is the largest and most liquid market in the world with an average traded value of over $1.9 trillion per day.

GDP (Gross Domestic Product)

The monetary value of all the finished goods and services produced by a country within its borders in a specific time period, usually annually. Or put another way it’s like a countries price tag. The number includes both private and public consumptions, government productions, investments and exports minus imports. It is commonly used as an indicator of countries economic health aka is the economy growing (good) or is it declining (bad).


The illegal practice where two or more market makers collectively attempt to influence and change the price of a stock. Ghosting has been used by corrupt companies to inflate stock prices so they can profit from the price movement.


The rate which the general level of prices for goods, and services is rising while consumer purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep excessive price growth to a minimum.

Initial Public Offering (IPO)

The first offering of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, however, the process can also be done by large privately owned companies looking to become publicly traded.

International Monetary Fund (IMF):

The IMF was established post WWII with 29 member countries.   Its initial goal was to assist in reconstructing the post World War II payment system; their plan was for countries to contribute money to a pool via a quota system from which member countries in need could borrow money temporarily.   Today the IMF still uses a variation of their quota system and described itself as ‘as organization with 188 member countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Joint Venture (JV)

A business arrangement involving two or more parties who agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the parties is responsible for profits, losses and costs associated with it. However, the venture itself is its own entity, separate and apart from the participants’ other business interests

Last In, First Out (LIFO):

An asset-management and valuation method which assumes assets produced or acquired last are the ones that are used sold or disposed of first.

Leading Indicator:

A measurable economic factor that can indicate a change in the economy before it starts to follow a particular pattern or trend. For example, bond yields are thought of as leading indicators because bond traders anticipate and speculate trends in the economy. Leading indicators are used to help predict changes in the economy however, they are not always 100% accurate.

Level 2:

A trading service which consists of real-time access to the quotations of individual market makers registered in every NASDAQ listed security and market makers’ quotes in OTC Bulletin Board securities.

Limit On Open Order (LOO)

A type of trading limit order which buys or sells shares at the market open if the market price meets the limits conditions. The order is good only for the market opening and does not last the trading day.


The practice of using borrowed money to purchase securities. Often referred to as “buying on margin.”

Market Capitalization

Market capitalization is calculated by multiplying a company’s outstanding shares by the current market price of one share. Market Capitalization is used to determine whether a company is categorized as a small cap, mid cap, small/mid cap, or large cap.

Market Share

The percentage of an industries total sales, which is earned by a particular company within that industry over a specific time period. Market share is calculated by taking the company’s total sales over a specific time period and dividing it by the total sales of the industry over the same period. Market share gives a general idea of the size of a company in relation to its overall market and competitors.

Marketable Security

Any equity or debt instrument which can be converted into cash, or exchanged with ease. Stocks, bonds, short-term commercial paper and certificates of deposits are all considered marketable securities because there is both public demand and can be converted into cash.

Monetary Policy

The actions of a central bank, currency board, or other regulatory committees which determine what the size and growth rate of a countries money supply, in turn affecting that countries interest rates. Monetary policy is maintained by increasing or decreasing interest rates or changing the amount of money banks need to keep in their vaults (aka bank reserves).

Moving Average (MA)

An indicator which shows the average value of a security’s price over a specific time period. Moving Average (MA) is frequently used in technical analysis of the markets.


A global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks. Unlike its cousin, the NYSE, the NASDAQ is completely electronic. Meaning there is no “floor” where traders yell out their bids instead traders are spread out across the country using their computers to buy and sell stocks. The NASDAQ was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971. The term “Nasdaq” can also refer to the Nasdaq Composite, an index of more than 3,000 stocks listed on the NASDAQ exchange that includes the world’s foremost technology and biotech giants such as Apple, Google, Microsoft, Oracle, Amazon, Intel and Amgen.

Negative Carry

A situation in which the cost of holding a security exceeds the money earned from the security. Typically an undesirable situation since it means the investor is losing money

Net Asset Value (NAV)

The price per share of mutual fund’s or some exchange-traded fund’s (ETF). In both cases, the per-share dollar amount is calculated by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.

New York Stock Exchange (NYSE)

A place where company stocks are exchanged (bought or sold). Located in New York, which for years relied on floor trading only using the open outcry method for trading the stock of public companies. Today, more than half of all the trades on the NYSE are conducted electronically. The other half, which are mainly high volume institutional trading, are executed on the “floor” of the exchange by traders who still use the outcry (i.e. the auction method) for setting the pricing. Also known as the “Big Board.”

NFP (Non-Farm Payroll)

The NFP is a monthly report released by the United States Department of Labor which calculates the number of jobs goods, constructions, and manufacturing companies add during the month. It does not include farm workers, private household employees, or non-profit organizations employees.


The nick name for Japan’s Nikkei 225 Stock Average. The Nikkei is the most respected and leading index of Japanese stocks. The index is price-weighted and comprised of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange. Its equivalent in the US: The Dow Jones Industrial Average Index (DJIA).

October Effect:

The theory stocks tend to decline during the month of October. Considered mainly to be a psychological expectation rather than an actual fact based phenomenon.

Penny Stock

A stock which trades at a relatively low price (aka pennies) and usually outside of the major market exchanges. Considered to be highly speculative in nature and high risk because of their lack of liquidity, small capitalization and limited following. They are often traded on the OTC (Over The Counter) market and pink sheets.

Pink Sheets

A daily publication literally published on pink paper, which is compiled by the National Quotation Bureau with bid and ask prices of over the-counter (OTC) stocks, including the market makers who trade them. The companies quoted on the pink sheets, unlike those on a stock exchange, do not need to meet minimum requirements or file with the SEC.

PMI (Purchasing Managers Index)

An economic indicator of a country’s manufacturing private sector health from one month to the next. The index compiled by the Insititue of  Supply Management is  based on five major indicators:

  1.  New Orders
  2. Inventory Levels
  3. Production
  4. Supplier Delivers
  5. Employment Environment

A reading of 50 represents expansion in the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.


PMI (Purchasing Managers Index)

An economic indicator of a country’s manufacturing private sector health from one month to the next. The index compiled by the Institute of Supply Management is based on five major indicators:

  •  New Orders
  • Inventory Levels
  • Production
  • Supplier Delivers
  • Employment Environment

A reading of 50 represents expansion in the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.

Pro Forma

In the world of investing, pro forma describes a method of calculating financial results in order to emphasize either current or projected figures.


A legal document, required by and filled with the Securities and Exchange Commission that provides details about an investment offering for sale to the public. A prospectus contains the facts that an investor needs to make an inform investment decision. Also known as an “offer document”.


A significant decline in economic activity across a country. The decline is visible in industrial productions, employment, real income, and wholesale-retail trade. The technical indicator of recession is two consecutive quarters of negative economic growth as measure by a country’s gross domestic product (GDP).


The practice of returning to older shale oil and gas wells that been fracked in the recent past to capitalize on newer, more effective extraction technology. Refracking is most effective on tight deposits-where the shale produces low yields- to expand productivity and extend the life of the well.

REIT (Real Estate Investment Trust)

A type of security which can sell like a stock on the major exchanges and invests in real estate directly. REIT’s receive special tax considers and typically offer investors higher yields.

Repurchase aka Repo

Very different then from getting your car taken away. Repo is a form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors such as banks, usually on an overnight basis, and buys them back the following day. Repo is a way banks or other investors pay for their day to day financial needs.

Roth Ira

An individual retirement plan that is very similar to a traditional IRA, but contributions are not tax deductible and qualified distributions are tax free. As with other retirement plan accounts, non-qualified distributions from a Roth IRA may be subject to a penalty upon withdrawal.

Russell 2000 Index

An index which measures the performance of approximately 2,000 small-cap companies of the Russell 3000 Index (an index made up of 3,000 biggest U.S stocks). The Russell 2000 serves as a benchmark for small-cap stocks in the United States.

Shanghai Exchange

The Shanghai Exchange is the largest stock exchange in mainland China. Stocks, funds, and bonds are all traded on the exchange and have listing requirements that include a company must be in business and be earning a profit for at least three years.



Shawdow Banking System:

Financial intermediaries involved in facilitating the creation of credit across the global financial system.  Members are not subject to regulatory oversight. Shadow banking system can also refer to unregulated activities by regulated institutions.

Short Selling

The sale of a security which is not owned by the seller, or that the seller has borrowed. Short selling is usually motivated by the speculative belief the security’s price will decline. This decline potentially enables the seller to buy the security back at a lower price and make a profit. The risk of losses on a short sales are endless therefore, it can be extremely risky.


Small Cap

Stocks with a realitivy small market capitilations. The definition can vary however, generally it is a company with a market capitalization of #300 Million to $2 Billion. One of the biggest advantages of  small-cap stocks is the Stocks with a relativity small market capitalization.


Standard & Poor’s 500 Index aka S&P 500

An index of 500 stocks chosen by a committee for factors such as market size, liquidity and industry groupings. The S&P 500 index is market weighted meaning each stock’s weighting in the index is proportionate to its market value. The index is designed to be a leading indicator of all things in large cap universe.

Treasury Inflation Protected Securities aka TIPS’

A treasury security that is tied to inflation in order to protect investors from the negative effects of inflation. Considered an extremely low-risk investment because they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed. Interest on TIPS is paid semiannually and they can be purchased directly from the government through the Treasury Direct system in $100 increments with a minimum investment of $100 and are available with 5-, 10-, and 30-year maturities.


The process of determining the current worth of a company or asset.


The ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index. The index shows the market’s expectation of 30-day volatility and constructed using the implied volatilities of a wide range of S&P 500 index options. Widely used as a measure of market risk and is often referred to as the “investor fear gauge.”

Window Dressing

No outfits here… A strategy used by mutual fund and portfolio managers near quarter or year end to improve the appearance of performance. To window dress, a fund manager will sell stocks with large losses and purchase high flying stocks therefore, improving the performance of the fund.

Witching Hour:

The last hour of stock trading between 2 pm and 3pm. This hour of trading is typically controlled by large professional traders, program traders, and large institutional traders and can be characterized by higher than normal volatility.

Yield Burning

The illegal practice of underwriters marking up the prices of bonds for the purpose of reducing the yield. Yield burning occurs after the bond is placed in escrow for an investor who is awaiting repayment.

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