Investment Terms

An inheritance tax is a tax imposed by some states on the recipients of inherited assets. In contrast to an estate tax, an inheritance tax is paid by the recipient of a bequest rather than the estate of the deceased. The tax is not common in the U.S., and whether or not it applies in one of six states with an inheritance tax as of 2022 depends on the state in which the deceased lived or owned prop...

A negative interest rate refers to interest paid to borrowers rather than to lenders. Central banks typically charge commercial banks on their reserves as a form of non-traditional expansionary monetary policy, rather than crediting them. This is a very unusual scenario that generally occurs during a deep economic recession when monetary efforts and market forces have already pushed interest rates...

The eurozone, officially known as the euro area, is a geographic and economic region that consists of all the European Union countries that have fully incorporated the euro as their national currency. As of 2022, the eurozone consists of 19 countries in the European Union (EU): Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta...

The York Antwerp Rules are a set of maritime regulations concerning protocols surrounding jettisoned cargo. The York Antwerp Rules are a set of maritime rules that were established in 1890. Amended several times since their inception, this set of maritime rules outlines the rights and obligations of both ship and cargo owners in the case that cargo must be jettisoned in order to save a ship. The Y...

Upside refers to the potential increase in value, measured in monetary or percentage terms, of an investment. Analysts use either technical analysis or fundamental analysis techniques to predict the future price of an investment, particularly stock prices. A higher upside means that the stock has more value than is currently reflected in the stock price. The upside is the potential for an investme...

White-collar crime is a nonviolent crime committed for financial gain. According to the FBI, a key agency that investigates these offences. These crimes are characterized by deceit, concealment, or violation of trust. The motivation for these crimes is to obtain or avoid losing money, property, or services or to secure a personal or business advantage. Examples of white-collar crimes include secur...

Tight monetary policy is a course of action undertaken by a central bank such as the Federal Reserve to slow down overheated economic growth, constrict spending in an economy that is seen to be accelerating too quickly, or to curb inflation when it is rising too fast. The central bank tightens policy or makes money tight by raising short-term interest rates through policy changes to the discount r...

A public limited company is a public company in the United Kingdom. PLC is the equivalent of a U.S. publicly-traded company that carries the Inc. or corporation designation. The use of the PLC abbreviation after the name of a company is mandatory and communicates to investors and to anyone dealing with the company that it is a publicly-traded corporation. A PLC designates a company that has offere...

Term life insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate. These policies have no value other than...

A tariff is a tax imposed by one country on the goods and services imported from another country. Tariffs are used to restrict imports. tariff imposed affects the exporting country indirectly as the domestic consumer might shy away from their product due to the increase in price. If the domestic consumer still chooses the imported product, then the tariff has essentially raised the cost for the do...

The term quadruple witching refers to the date when four different types of futures and options expire on the same day. This happens with four different types of contracts, including stock index futures, stock index options, stock options, and single stock futures. Quadruple witching dates occur four times a year on the third Friday of March, June, September, and December. Market activity on these...

A unilateral contract is a contract agreement in which an offeror promises to pay after the occurrence of a specified act. In general, unilateral contracts are most often used when an offeror has an open request in which they are willing to pay for a specified act. An example of a unilateral contract is an insurance policy contract, which is usually partially unilateral. In a unilateral contract,...

The velocity of money is a measurement of the rate at which money is exchanged in an economy. It also refers to the rate at which consumers and businesses in an economy collectively spend money. The velocity of money is usually measured as a ratio of gross domestic product to a country's M1 or M2 money supply. The velocity of money is important for measuring the rate at which money in circulation...

A zero-coupon swap is an exchange of cash flows in which the stream of floating interest-rate payments is made periodically. A zero-coupon swap is a derivative contract entered into by two parties. One party makes floating payments which change according to the future publication of the interest rate index upon which the rate is benchmarked. The other party makes payments to the other based on an...

The London Metal Exchange is a commodities exchange that deals in metals futures and options. It is the largest exchange for options and futures contracts for base metals, which include aluminium, zinc, lead, copper, and nickel. The exchange also facilitates the trading of precious metals like gold and silver. The LME is located in London, England, but has been owned by Hong Kong Exchanges and Cle...

Earnings before interest, taxes, depreciation, and amortisation measure a company’s overall financial performance and are used as an alternative to the net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plants, and equipment. This metric also excludes expenses associated with debt by adding back interest expense...

A war bond is a debt security issued by a government to finance military operations during times of war or conflict. War bonds offered a rate of return below the market rate therefore investment is achieved by making emotional appeals to patriotic citizens to lend the government money. A war bond is a debt instrument issued by a government as a means of borrowing money to finance its defense initi...

An individual retirement account is a savings account with tax advantages that individuals can open to save and invest in the long term. An IRA is designed to encourage people to save for retirement. Anyone who has earned income can open an IRA and enjoy the tax benefits these accounts offer. You can open an IRA through a bank, an investment company, an online brokerage, or a personal broker. IRAs...

A waiver of subrogation is a contractual provision whereby an insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party. Insurers charge an additional fee for a waiver of subrogation endorsement. Many construction contracts and leases include a waiver of the subrogation clause. Such provisions prevent one party’s insurance carr...

An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. An investment fund provides a broader selection of investment opportunities, greater management expertise, and lower investment fees than investors might be able to obtain on their own. Types of investment funds incl...

Equity referred to as shareholders' equity or owners' equity for privately held companies represents the amount of money that would be returned to a company's shareholders if all of the assets were liquidated and all of the company's debt was paid off in the case of liquidation. Shareholder equity can represent the book value of a company. Equity can sometimes be offered as payment-in-kind. It als...

Economic growth is an increase in the production of economic goods and services, compared from one period of time to another. It can be measured in nominal or real terms. Aggregate economic growth is measured in terms of gross national product or gross domestic product although alternative metrics are sometimes used. Aggregate gains in production correlate with increased average marginal productiv...

Opportunity costs represent the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another. opportunity costs are unseen by definition, they can be easily overlooked. Understanding the potential missed opportunities when a business or individual chooses one investment over another allows for better decision-making. Opportunity cost is the...

A hard landing refers to a marked Economic_slowdown or downturn following a period of rapid growth. The term hard landing comes from aviation, where it refers to the kind of high-speed landing that—while not an actual crash—is a source of stress as well as potential damage and injury. The metaphor is used for high-flying economies that run into a sudden, sharp check on their growth, such as a mone...

A soft landing, in economics, is a cyclical downturn that avoids recession. It describes attempts by the central banks to raise interest rates just enough to stop an economy from overheating and experiencing high inflation, without causing a significant increase in unemployment, or a hard landing. It may also refer to a sector of the economy that is expected to slow down without crashing. Governme...