Daba’s Investing Glossary

A type of trust structure used in estate planning to minimize estate taxes.

Shares of a company that are traded on the mainland Chinese stock exchanges (Shanghai and Shenzhen).

Highest credit rating given to a bond or issuer by credit rating agencies, indicating the lowest risk of default.

The difference between an asset’s actual return and its expected return, adjusted for market risk.

The ability of a country, individual, or company to produce a good or service more efficiently than competitors.

When a person or country can produce a good or service more efficiently than others, using fewer resources.

The return that an asset achieves over a period of time, independent of the benchmark.

The amount of money in a financial account.

A unique identifier assigned to each financial account.

A periodic summary of transactions and balances in a financial account.

A professional trained in accounting principles and practices.

The process of recording, summarizing, and analyzing financial transactions of a business.

The sequence of accounting procedures followed in recording, classifying, and summarizing business transactions.

Assets = Liabilities + Equity; fundamental to double-entry bookkeeping.

The fundamental equation of accounting, expressed as Assets = Liabilities + Equity, showing the relationship between a company’s resources and its financial obligations.

The rules and procedures under which transactions are recorded and reported.

The difference between revenues and expenses, calculated based on accounting principles.

A measure of the profitability of an investment, calculated by dividing the average annual profit by the initial investment.

A ratio used to evaluate various aspects of a company’s financial performance.

An individual or entity that meets certain income or net worth requirements, allowing participation in certain investments.

Gradual increase in the value of an asset or liability over time.

Increase in the book value of a bond purchased at a discount.

Increasing earnings per share or other financial metrics.

Accounting method where revenues and expenses are recorded when earned or incurred, regardless of when cash is received or paid.

Revenues or expenses that have been recognized but not yet paid or received.

The accumulation of interest, expenses, or income over time.

Interest that has accumulated on a loan or investment but has not yet been paid or received.

A financial metric that measures a company’s ability to pay its short-term liabilities with its most liquid assets, excluding inventory.

The process of one company purchasing most or all of another company’s shares or assets to gain control of that company.

The cost to acquire an asset or business.

The amount by which the price paid for an acquisition exceeds the fair value of the identifiable net assets acquired.

Investment strategy involving frequent buying and selling in an attempt to outperform a market benchmark.

A shareholder or group of shareholders that seeks to influence the management and strategic decisions of a company.

Interest calculated on the full principal of a loan and added to the total repayment amount.

Interest that is calculated on the full principal amount of a loan and added to the total repayment amount.

The amount of capital raised by a company from shareholders above the par value of its shares.

The amount of capital raised by a company from shareholders, beyond the par value of the shares.

Earnings before interest, taxes, depreciation, and amortization, adjusted for certain items.

Valuation method used to estimate the value of a project or business by considering the impact of financing decisions.

A situation in which one party in a transaction has more information than the other, leading to potentially unfavorable outcomes for the less-informed party.

Companies related to each other through ownership, either wholly or partially.

Companies that are related to each other through ownership, either wholly or partially.

Policies and practices aimed at promoting equal opportunity and addressing past discrimination.

Policies and practices designed to promote equal opportunity and increase diversity by addressing past discrimination.

Buying and selling of securities outside the standard trading hours of stock exchanges.

The buying and selling of securities outside of the standard trading hours of stock exchanges.

The investment return adjusted for taxes and inflation, reflecting the true increase in purchasing power.

The investment return adjusted for taxes and inflation, reflecting the true increase in purchasing power.

An approach that seeks high returns by taking on higher risks, often through investments in volatile assets.

An approach to investing that seeks high returns by taking on higher risks, often through investments in volatile assets.

Provision that reduces accounts receivables to expected collectable amount. Offsets expected losses from non-payment.

A measure of an investment’s performance relative to a benchmark, indicating the excess return generated.

A measure of an investment’s performance relative to a benchmark, indicating the excess return generated.

Any cryptocurrency other than Bitcoin, often created to offer alternatives or improvements to Bitcoin’s features.

Any cryptocurrency other than Bitcoin, often created to improve upon or offer alternatives to Bitcoin’s features.

A financial asset outside traditional categories like stocks, bonds, or cash, such as real estate, commodities, or private equity.

A financial asset that does not fall into traditional categories like stocks, bonds, or cash, such as real estate, commodities, or private equity.

The amount by which the purchase price of a bond exceeds its face value.

The amount paid above the face value of a bond, which is gradually written off over the bond’s remaining life.

The process of gradually paying off a debt over time through scheduled, periodic payments that cover both principal and interest.

Table detailing the periodic breakdown of payments on a loan between interest expense and principal repayment over the loan term.

Loan with scheduled periodic payments of both principal and interest.

A loan where the principal and interest are paid down regularly over the life of the loan, typically in equal installments.

Providing capital for startups in exchange for ownership equity or convertible debt, typically by affluent individuals.

Individual who provides capital for a business start-up, typically in exchange for ownership equity.

An affluent individual who provides capital to startups in exchange for ownership equity or convertible debt.

The interest rate for a savings account that takes into account compounding interest.

The interest rate on a savings account or investment product, expressed as an annual percentage, reflecting the compounding of interest.

Yearly shareholder meeting of a public company to approve accounts and make key decisions.

Annual meeting of shareholders to discuss company performance and vote on important matters.

A yearly meeting where a company’s shareholders discuss the company’s performance and vote on important issues.

The annual cost of borrowing, including interest and certain fees, expressed as a percentage.

The annual rate charged for borrowing or earned through an investment, including fees and other costs.

The yearly cost of borrowing money, including interest and fees, expressed as a percentage to help consumers compare different loan options.

The effective annual rate of return on an investment, accounting for the effect of compounding interest.

The annual rate of return on an investment, taking into account the effect of compounding interest.

Financial report distributed to shareholders summarizing company performance over the past year.

A comprehensive report on a company’s activities and financial performance throughout the preceding year.

Investment return over a specified period, typically one year.

The percentage gain or loss on an investment over a one-year period.

The rate at which a fund replaces its holdings in a given year.

The total value of sales or transactions conducted by a business within a year.

To convert a rate of return or other financial measure from one period to an annual basis.

Projected or actual income over a full year.

Compound annual rate of return over a period.

Total return on an investment over a period, expressed as an annual percentage.

Person who receives payments from an annuity.

Process of converting an investment into a series of periodic payments.

Financial product that provides a series of payments over a period of time.

An annuity where payments are made at the beginning of each period.

Table used to calculate periodic payments based on various factors.

Regulations and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income.

Protection for investors from dilution of their ownership stake.

A tariff imposed on foreign imports priced below fair market value to protect domestic industries.

A party’s declaration or action indicating they will not fulfill their contractual obligations before the performance is due.

The increase in the value of an asset over time due to market conditions.

The allocation of funds or resources for a specific purpose by an organization or government.

A financial statement that shows how a company’s profits are distributed among shareholders, reserves, and dividends.

The simultaneous purchase and sale of an asset to profit from price differences in different markets.

The practice of buying and selling assets in different markets to profit from price differences, ensuring a risk-free gain.

Investor who profits from arbitrage – exploiting temporary price discrepancies between different markets.

The sum of a set of numbers divided by the count of those numbers, commonly known as the average.

A document outlining the rules for a company’s operations and governance, including the rights and responsibilities of directors and shareholders.

A legal document filed with the government to establish a corporation, detailing its structure and purpose.

The simulation of human intelligence processes by machines, especially computer systems, to perform tasks like learning and problem-solving.

The lowest price a seller is willing to accept for a security or asset.

Item of economic value owned by an individual or company. Financial assets like stocks have market values.

Division of investment portfolio across major asset classes based on goals and risk tolerance.

A group of investments with similar characteristics, such as stocks, bonds, or real estate.

Categories of assets with similar characteristics, such as equities, bonds, real estate, and commodities.

A financial metric that measures a company’s ability to cover its debt obligations with its assets.

The use of a company’s assets, like equipment or receivables, as collateral to secure loans or credit.

The professional management of investments on behalf of individuals or institutions to meet specific financial goals.

A firm that manages investments on behalf of clients by investing in various securities and asset classes.

Strategies designed to safeguard an individual’s or business’s assets from creditor claims or lawsuits.

A legal obligation to remove or retire an asset at the end of its useful life, typically seen in industries like oil and gas.

A financial transaction that involves swapping the cash flows of one asset with another, often to manage risk or gain a financial advantage.

A structured financial instrument combining a convertible bond and an asset swap to enhance investment returns.

A financial metric that measures how efficiently a company uses its assets to generate revenue.

The total market value of assets that a financial institution or investment manager manages on behalf of clients.

The process of determining the current worth of an asset based on its market value, earnings potential, or replacement cost.

Short-term debt backed by collateral, typically receivables or loans.

A financial security backed by a pool of assets, such as loans or receivables.

A valuation method that determines the value of a company based on its assets minus its liabilities.

A loan provided based on the value of a company’s assets, such as inventory or accounts receivable.

The process of managing financial risks that arise due to mismatches between a company’s assets and liabilities.

A bond or stock selling at its face or nominal value.

An independent examination of financial records and statements to ensure accuracy and compliance with regulations.

A group of a company’s board of directors responsible for overseeing financial reporting and the audit process.

The risk that an auditor may issue an incorrect opinion on financial statements, failing to identify significant misstatements.

A professional who examines and verifies the accuracy of financial records and statements.

The formal statement issued by an auditor outlining their assessment of a company’s financial statements.

A document prepared by an auditor that includes the auditor’s opinion on the accuracy of a company’s financial statements.

The maximum number of shares a company is legally allowed to issue as stated in its corporate charter.

A machine that allows customers to perform financial transactions like withdrawals, deposits, and transfers without human assistance.

The amount of money in an account that is available for withdrawal or use.

The average yearly increase in an investment or economic indicator over a specified period.

The average yearly return on an investment over a specific period, usually expressed as a percentage.

The average number of shares or contracts traded per day over a specified time period.

The average value of a company’s inventory over a certain period, calculated as the beginning and ending inventory divided by two.

The mean of all returns on an investment over a specific period, indicating overall performance.

The administrative and support functions of a business, such as accounting, HR, and IT, that do not directly deal with customers.

A financial arrangement where a party agrees to buy securities that are not purchased by other investors during a rights offering.

Two linked letters of credit where one is issued to guarantee another, often used in international trade.

A method where high-income earners contribute to a traditional IRA and then convert it to a Roth IRA to bypass income limits on contributions.

A costing method where costs are recorded after production is complete, based on the output rather than tracking each process.

Orders that have been received but not yet fulfilled or processed by a company.

An order for a product that is not currently in stock but will be fulfilled once the product becomes available.

The process of testing a trading strategy or model using historical data to assess its viability.

A tax withheld on certain types of income (e.g., interest, dividends) when the recipient fails to provide a correct taxpayer identification number.

A strategy where a company acquires or merges with suppliers or other businesses earlier in its supply chain to control production.

A market condition where the current price of an asset is higher than its futures price, often due to supply shortages.

A low credit score or poor credit history, indicating a high risk for lenders.

An amount owed to a company that is unlikely to be collected and is written off as a loss.

The cost associated with receivables that cannot be collected, recorded as an expense on financial statements.

An investor holding a poorly performing asset or stock, hoping it will eventually recover.

A payment made to secure the temporary release of an accused individual, pending their court trial.

A process where a financial institution’s creditors and depositors bear some of the burden of rescuing the institution rather than external parties.

Financial support provided by a government or entity to prevent the failure of a struggling business or economy.

A deceptive sales tactic where a product is advertised at a low price, only to be replaced by a higher-priced item at the point of sale.

A record of all economic transactions between a country and the rest of the world over a specific period.

Measure of an asset’s volatility in relation to the overall market. Beta above 1 amplifies market moves.

Fixed income security issued by a corporation or government that pays interest.

Marketplace where debt securities like government and corporate bonds are issued and traded.

Commission paid to a broker for executing buy and sell orders on an exchange.

Optimistic outlook for a security or market indicating expectations of price gains.

The acquisition of a company’s controlling interest, typically by purchasing its outstanding shares or assets.

Financial contract giving the option holder the right but not obligation to buy the underlying asset at a specified price on or before a specified date.

Amount of owner’s initial investment of cash or assets when starting a business.

Profit realized from the sale of securities, real estate, or other assets at a price higher than the purchase price.

Corporate action decreasing a company’s share capital by reducing the par value of shares or number of shares outstanding.

Net amount of cash generated by a company’s business operations during a period.

Short-term bank deposit paying fixed interest rate with fixed maturity date up to 5 years.

Asset pledged by a borrower to secure a loan in case of default. Provides security to the lender.

Equity security representing ownership in a corporation. Provides voting rights and a share of profits through dividends.

Interest calculated on initial principal and accumulated interest from preceding periods. Results in exponential growth over time.

Average of analysts’ earnings per share forecasts for a given company.

A type of loan that can be converted into equity shares of the issuing company at a later date.

Bond or preferred share that can be exchanged for a fixed number of common shares under specified conditions.

Temporary limited decline in asset prices following a sustained uptrend.

Statistical measure of linear relationship between two variables ranging from -1 to +1.

Original dollar amount paid to acquire an asset, used to determine capital gains for tax purposes upon sale.

The interest payment made to bondholders, typically expressed as a percentage of the bond’s face value.

Assessment of the creditworthiness of a borrower or bond issuer based on their expected ability to fulfill debt obligations.

Private company that evaluates the creditworthiness of debt security issuers. Main ones are Standard & Poor’s, Moody’s, Fitch.

Annual income from an investment divided by its current market price. Measures income relative to price paid.

Individual investor who makes multiple trades daily aiming to profit from short-term price moves.

Fall in the price of a financial asset.

Employer-sponsored retirement plan where employees allocate contributions among various investment options. Payout depends on account balance.

Financial contract deriving value from an underlying asset like a commodity, currency, stock or market index.

Distribution of a portion of a company’s net profits to shareholders, paid in cash or additional shares.

Annual dividend per share divided by share price. Measures income paid to stockholders relative to share price.

Net income attributable to each outstanding share of common stock.

Stock market where shares of publicly listed companies are issued and traded between investors.

Holding shares or a stake in a company, giving the owner a portion of the company’s profits and losses.

Basket of securities that trades on an exchange like a stock. Offers diversified, low-cost access to markets.

Asset in the form of a tradable financial instrument such as a stock, bond, or derivative contract. Its value is tied to market prices.

Government actions involving taxation and spending to influence the economy.

Category of investments paying fixed or variable interest to investors including bonds, money market instruments, preferred stock.

Professional responsible for investment decisions in a mutual fund or hedge fund.

Evaluating a stock using economic and financial factors related to the underlying company. Assesses intrinsic value.

A severe worldwide economic crisis that occurred in 2007-2008, triggered by the collapse of the housing bubble in the United States.

Glossary description

The total value of all goods and services produced within a country’s borders in a specific period.

The total value of all goods and services produced by a country’s residents, regardless of location, in a specific period.

An individual with a significant amount of liquid assets, typically over $1 million.

Financial statement summarizing a company’s revenues, expenses, and net income over an accounting period.

Annual tax imposed on personal income from wages, investments, business activities and capital gains.

Passively managed mutual fund that replicates the composition and returns of a target market index.

Sustained rise in the general price level across an economy over time. Erodes purchasing power of a currency.

Situation where some parties have more information resulting in an imbalance of power in transactions.

The process by which a private company offers its shares to the public for the first time to raise capital.

The cost of borrowing money or the return on investment, expressed as a percentage of the principal amount.

Difference between two interest rates, often between rate where bank lends and borrows money.

Total amount originally invested by an investor into a given investment.

The act of allocating resources, usually money, into assets or ventures with the expectation of generating income or profit.

Asset purchased or deposited with the expectation of generating future income or appreciation.

Closed-end fund that invests in other securities like stocks and bonds. Trades on a stock exchange at market price.

Entity that develops, registers and sells securities for financing purposes.

High-yield, high-risk bond rated below investment grade by credit rating agencies due to higher chances of default.

Use of debt to amplify returns but also increases an investment’s overall risk exposure.

Degree to which an asset is readily tradable in the market without impacting its price. Cash is highly liquid.

Total market value of a company’s outstanding shares trading on the stock market. Share price multiplied by number of shares outstanding.

Date on which the principal amount of a debt security becomes due and payable to bondholders.

Combining of two companies into one new entity or absorbing one company into another.

Central bank actions relating to money supply, interest rates, inflation targeting to achieve economic goals.

The interest rate set by a central bank to control money supply and inflation.

Low risk mutual fund that invests in liquid short term fixed income securities like cash, Treasury bills, commercial paper.

Remaining income after all expenses, depreciation, interest and taxes have been deducted.

First time public issuance and sale of securities by a private company or government entity.

Pre-set time period over which a fund’s performance is measured and compared to its benchmark index.

Mutual fund that can issue and redeem shares on an ongoing basis. Holdings expand and contract based on flows.

Stated face value printed on a debt security. The amount repaid at maturity date.

Financial institution responsible for disbursing coupon payments to bondholders on behalf of the issuer.

The process of reducing interest rates or increasing money supply to stimulate economic activity.

The process of raising interest rates or reducing money supply to curb inflation and slow economic growth.

Collection of financial assets like stocks, bonds, cash equivalents held by an investor.

Stake in a financial asset created by purchasing or short selling shares.

Amount by which the purchase price of a security exceeds the face value when bought above par.

Unsustainable surge in asset prices fueled by speculation disregarding fundamentals.

Valuation ratio comparing a company’s current share price to its per-share earnings. Higher P/E suggests overvaluation.

Investment in private companies or buyouts of public companies, often involving direct management or restructuring.

Formal legal document filed by a company detailing required information for potential investors prior to issuing securities.

Corporation whose shares trade on a stock exchange. Also called publicly traded company.

Lowering of interest rates by the central bank to stimulate borrowing and economic growth.

Company owning and managing income-producing real estate assets. Shares trade on major exchanges.

A significant decline in economic activity across the economy, lasting for an extended period, typically defined as two consecutive quarters of negative GDP growth.

Repurchase of outstanding fund shares or units directly from investors by open-end funds and unit investment trusts.

Portion of net income not paid out as dividends but retained and reinvested into the company. Part of shareholders’ equity.

A measure of a company’s profitability, calculated as net income divided by shareholders’ equity.

Variable with potential to increase the overall risk exposure of an investment portfolio.

Extra return above the risk-free rate demanded by investors for bearing additional risk.

Leading U.S. stock market index based on market capitalization of 500 large publicly traded American companies.

A brokerage account holding investments in various financial assets.

Trade a financial asset by accepting payment in exchange for transfer of ownership rights.

Transaction in which a company buys back its own outstanding shares from shareholders. Aims to consolidate ownership.

Measure of risk-adjusted return relative to a risk-free asset. Higher Sharpe ratio indicates better historical risk-adjusted performance.

Investment strategy incorporating environmental, social and corporate governance (ESG) considerations.

Trading aimed solely at short-term profit with disregard for underlying asset quality. Illegal and punishable practice.

Difference between two rates, often between the rate at which a bank lends and borrows money.

A newly established business, often in the technology sector, aiming for rapid growth and innovation.

Organized securities marketplace where stocks and bonds are bought and sold.

Derivative contract giving holder the right to buy or sell an underlying stock at a pre-set fixed price on or before expiration.

Security giving the holder the right to purchase shares of stock at a specified price during a preset timeframe.

Derivative contract between two parties to exchange cash flows or liabilities. Used to hedge risk exposures.

Risk of collapse of an entire financial system or market caused by the failure of a single entity or group.

Physical asset that has material existence like real estate, machinery, equipment. Contrasts intangible assets.

Studying price charts to identify trends and trading opportunities. Useful for timing entry and exit points.

Number of units of a security traded during a specified time period. Measures liquidity and investor interest.

Market participant who trades securities or commodities for his own account, aiming to generate profits through price fluctuations.

Buying or selling of a security or financial contract between buyer and seller.

Interest rate on a security or loan that periodically resets based on an underlying benchmark rate like Prime or LIBOR.

A form of private equity financing provided to startups and small businesses with high growth potential in exchange for equity.

An investor who provides capital to startups and small businesses with high growth potential in exchange for equity.

Annual income generated by a security expressed as a percentage of its current market price or face value. Represents return on investment.

Total annual return anticipated holding a bond until maturity date, assuming reinvestment of all interest payments at the same rate.

A monetary policy where central banks set nominal interest rates near zero to stimulate the economy.