Investment Terms

Series 63 is a securities exam and license entitling the holder to solicit orders for any type of security in a particular state. To obtain a Series 63 license, the applicant must pass an exam and possess knowledge of ethical practices and fiduciary obligations. Applicants to the Series 63 license must pass an exam and possess knowledge of ethical practices and fiduciary obligations. Most U.S. sta...

A thrift savings plan is a type of retirement investment program open only to federal employees and members of the uniformed services, including the Ready Reserve. It is a defined-contribution plan that offers federal employees many of the same benefits that are available to workers in the private sector. TSP benefits can include automatic payroll contributions and agency-matching contributions. P...

Life insurance is a contract between an insurer and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime. The life insurance application must accurately disclose the insured’s past and current health conditions and high-risk activities to enforce th...

WorldCom was not just the biggest accounting scandal in the history of the United States—it was also one of the biggest bankruptcies of all time. The revelation that telecommunications giant WorldCom had cooked its books came on the heels of the Enron and Tyco frauds, which had rocked the financial markets. WorldCom has become a byword for accounting fraud and a warning to investors that when thin...

Zero-rated goods, in countries that use value-added tax (VAT), are products that are exempt from that value taxation. Zero-rated goods are products that are exempt from value-added taxation (VAT). Countries designate products as zero-rated because they are leading contributors to other manufactured goods and a significant component of a broader supply chain. Often, goods and services that are zero...

The term securities-based lending refers to the practice of making loans using securities as collateral. Securities-based lending provides ready access to capital that can be used for almost any purpose such as buying real estate, purchasing property like jewelry or a sports car, or investing in a business. The only restrictions to this kind of lending are other securities-based transactions like...

An exchange rate is a rate at which one currency will be exchanged for another currency and affects trade and the movement of money between countries. Exchange rates are impacted by both the domestic currency value and the foreign currency value. The exchange rate between two currencies is commonly determined by the economic activity, market interest rates, gross domestic product, and unemployment...

At its core, Ethereum is a decentralized global software platform powered by blockchain technology. It is most commonly known for its native cryptocurrency, ether. Ethereum can be used by anyone to create any secured digital technology. It has a token designed to pay for work done supporting the blockchain, but participants can also use it to pay for tangible goods and services if accepted. Ethere...

Inventory turnover is a financial ratio showing how many times a company turned over its inventory relative to its cost of goods sold in a given period. A company can then divide the days in the period, typically a fiscal year, by the inventory turnover ratio to calculate how many days it takes to sell its inventory, on average. The inventory turnover ratio can help businesses make better decision...

The kiddie tax is a special tax law created in 1986 to address investment and unearned income tax for individuals 18 years of age or under or dependent full-time students under age 24. The kiddie tax is imposed on individuals under a certain age 18 years old or under and full-time students age 19-24 years old whose investment and unearned income is higher than an annually determined threshold. Thi...

A credit default swap is a financial derivative that allows an investor to swap or offset their credit risk with that of another investor. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse them if the borrower defaults. Most CDS contracts are maintained via an ongoing premium payment similar to the regular premiums due on an insurance policy. A lender...

Bear market rally refers to a sharp, short-term rebound in share prices amid a longer-term bear market decline. Bear market rallies are treacherous for investors who mistakenly come to believe they mark the end of an extended downturn. As the primary bearish trend reasserts itself, the disappointment of those who bought during a bear market rally helps to drive prices to new lows. Bear market rall...

Government bonds in the U.K., India and several other Commonwealth countries are known as gilts. Gilts are the equivalent of U.S. Treasury securities in their respective countries. The term gilt is often used informally to describe any bond that has a very low risk of default and a correspondingly low rate of return. They are called gilts because the original certificates issued by the British gov...

The Reserve Bank of Australia is the central bank of Australia. The bank sets the country's monetary policy and issues and manages the Australian dollar. The RBA is involved in banking and registry services for federal agencies and some international central banks. The bank, entirely owned by the Australian government, was established in 1960. Philip Lowe currently serves as Governor. He succeeded...

A dot plot, also known as a strip plot or dot chart, is a simple form of data visualization that consists of data points plotted as dots on a graph with an x- and y-axis. These types of charts are used to graphically depict certain data trends or groupings. The most famous dot plot is perhaps the Federal Reserve’s projections for interest rates that are published each quarter. A dot plot is simila...

Black Friday was a stock market catastrophe that took place on Sept. 24, 1869. On that day, after a period of rampant speculation, the price of gold plummeted, and the markets crashed. It can also refer to a shopping holiday in the U.S. following Thanksgiving. This stock market crash was the origin of referring to stock market crashes as black days. Other examples include Black Tuesday, Oct. 29, 1...

Payment for order flow is a form of compensation, usually in terms of fractions of a penny per share, that a brokerage firm receives for directing orders for trade execution to a particular market maker or exchange. Payment for order flow is common in options markets and is increasingly found in equity transactions. Equity and options trading has become increasingly complex with the proliferation...

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investors actively ferret out stocks they think the stock market is underestimating. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond to a company's long-term fundamentals. The overreact...

Cryptocurrency custody solutions are independent storage and security systems used to hold large quantities of tokens. Custody solutions are one of the latest innovations to come out of the cryptocurrency ecosystem and have been expected to herald the entry of institutional capital into the industry. The main utility of cryptocurrency custody solutions lies in the safeguarding of cryptocurrency as...

Conflict theory, first developed by Karl Marx, is a theory that society is in a state of perpetual conflict because of competition for limited resources. Conflict theory holds that social order is maintained by domination and power, rather than by consensus and conformity. According to conflict theory, those with wealth and power try to hold on to it by any means possible, chiefly by suppressing t...

Capitalism is an economic system in which private individuals or businesses own capital goods. At the same time, business owners (capitalists) employ workers (labor) who only receive wages; labor does not own the means of production but only uses them on behalf of the owners of capital. The production of goods and services under capitalism is based on supply and demand in the general market—known...

Cryptocurrency difficulty is a measure of how difficult it is to mine a block in a blockchain for a particular cryptocurrency. A high cryptocurrency difficulty means it takes additional computing power to verify transactions entered on a blockchain—a process called mining. Cryptocurrency difficulty is a parameter that bitcoin and other cryptocurrencies use to keep the average time between blocks s...

The term price controls refer to the legal minimum or maximum prices set for specified goods. Price controls are normally mandated by the government in the free market. They are usually implemented as a means of direct economic intervention to manage the affordability of certain goods and services, including rent, gasoline, and food. Although it may make certain goods and services more affordable,...

The term forbearance refers to the temporary postponement of loan payments, typically for a mortgage or student loan. Lenders and other creditors grant forbearance as an alternative to forcing a property into foreclosure or leaving the borrower to default on the loan. The companies that hold loans and their insurers are often willing to negotiate forbearance agreements because the losses caused by...

A generation-skipping trust is a type of legally binding trust agreement in which the contributed assets are passed down to the grantor's grandchildren, thus skipping the next generation, the grantor's children. By passing over the grantor's children, the assets avoid the estate taxes on an individual's property upon his or her death that would apply if the children directly inherited them. Genera...