Account balance - The account balance is the amount of money held in a financial institution, such as a savings or checking account, at any one time. The account balance is always the net amount, which includes all debits and credits. A negative account balance shows a net debt, such as when a checking account is overdrawn. An account balance may also reflect the amount owed for recurrent payments, such as a mortgage or an electric bill.
Acquisition - When a company acquires the majority or all of the shares of another company in order to take over that business, it makes an acquisition. If the acquirer purchases more than 50% of the target company's shares and other assets, the acquirer can make decisions on newly acquired assets and influence company's targets without needing the permission of the other shareholders.
Adjustable-Rate Mortgage (ARM) - A mortgage whose interest rate is cyclically changed based on an index. Because the lender can pass part of the risk to the borrower, adjustable-rate mortgages typically have lower beginning interest rates than fixed-rate mortgages. If market rates rise, the interest rate on a variable mortgage may also change.
Advance/decline ratio (ADR) - A typical market-breadth indicator used in technical analysis. Advance-decline ratio (ADR) contrasts the proportion of equities that closed higher with the proportion that closed lower than their closing prices from the prior day. To get the advance-decline ratio, divide the number of advancing shares by the number of sinking shares.
Alpha - The amount of return expected from an investment from its inherent value. The term alpha describes the ability of an investment strategy to outperform the market, or its "edge". As a result, alpha is also frequently referred to as "excess return" or "abnormal rate of return," which relates to the notion that because markets are efficient, it is impossible to consistently generate returns that are higher than those of the general market. The Greek letter beta, which represents the total volatility or risk of the broad market (sometimes referred to as systematic market risk), is frequently employed in conjunction with alpha.
Alternative Minimum Tax (AMT) - The Tax Reform Act of 1986 overhauled federal tax with the goal of requiring high-income people, trusts, estates, and companies to pay at least some taxes.
Angel investor - High-net-worth individuals who support small businesses or entrepreneurs with capital, frequently in exchange for ownership stakes in the enterprise. Angel investors are frequently found among an entrepreneur's friends and family. Angel investors may contribute one-time capital to help a firm get off the ground or continuing funding to help the business get through its challenging early phases.
American depositary receipt (ADRs) - The term American depositary receipt (ADR) refers to a negotiable certificate issued by a U.S. depositary bank that represents a predetermined number of shares of a foreign company's stock—typically one share. Similar to domestic shares, the ADR is traded on American stock exchanges. ADRs give American investors a chance to buy stock in foreign corporations that would not otherwise be possible. On the other hand, ADRs allow foreign corporations to draw in American money and investors without the difficulty and cost of going public on U.S. stock exchanges. ADRs are advantageous for both parties.
Annual Report - The annual audited report given to shareholders detailing the health and performance of a company or mutual fund. Public corporations are required to submit an annual report to shareholders that details their business operations and financial standing. The report's front section frequently includes an amazing collection of illustrations, images, and a narrative that describes the company's operations over the previous year and occasionally includes projections for the future. The report's extensive financial and operational information is located in the rear.
Annual percentage rate (APR) - APR is a percentage that expresses the actual annual cost of borrowing money throughout the course of a loan or the revenue from an investment. This does not account for compounding and includes any fees or additional expenditures related to the transaction. The APR gives customers a numerical value they can use to compare lenders, credit cards, or investment goods.
Annualized - A process by which data from periods of less than a year are extended to 12-month periods.
Annualized rate of return - The equivalent yearly return that an investment would have received during a specific period is used to determine the annualized rate of return. The returns of portfolios or composites for periods of less than a year may not be annualized, per the Global Investment Performance Standards. This prohibits the "projected" performance for the remaining part of the year.
Appreciation - The increase in an asset's value over time. The increase may be brought on by a variety of factors, such as a rise in demand, a decline in supply, increases in inflation or interest rates, or all of the above. Depreciation, which is a decline in value over time, is the opposite of appreciation.
Archipelago - Electronic communications network (ECN) that joined the New York Stock Exchange (NYSE) in 2006 to form the NYSE Arca Exchange. EVNs allow for automated trading, passive order matching, after-hours trading, and immediate order execution. One of the first ECNs, Archipelago, was established in 1996 and served as a model for the Archipelago Exchange (ArcaEx), which was established in 2001 to support electronic stock trading for the main U.S. stock exchanges. The NYSE became a publicly traded business with both new electronic and conventional floor-trading capabilities soon after the merger with Archipelago.
Ask - The ask, also known as the offer price, is the price a seller is prepared to take for a security. The quantity of the security that may be offered at the given price is also indicated in the ask quote along with the price. The ask will always be higher than the bid since the bid is the price a buyer is willing to pay for a security.
Asset allocation - Type of investment strategy that seeks to strike a balance between risk and reward by allocating a portfolio's assets in accordance with a person's objectives, risk tolerance, and investment horizon. Equities, fixed-income, and cash and equivalents are the three basic asset classes. Because each has a varied level of risk and reward, it will perform differently over time. Risk management for investments can be achieved through asset allocation. However, it does not provide insurance against lost investments.
Asset-backed security (ABS) - A financial investment known as an asset-backed security (ABS) is one that is secured by a pool of underlying assets, typically those that produce a cash flow from debt such loans, leases, credit card balances, or receivables. It takes the shape of a bond or note and provides income at a fixed rate till maturity over a predetermined period of time. Asset-backed securities can be a substitute for other debt products, such as corporate bonds or bond funds, for income-seeking investors.
Asset class - An asset class is a collection of investments that share similar traits and are governed by the same rules and laws. Thus, the instruments that make up asset classes frequently exhibit similar market behavior. The most common asset classes are stocks, bonds and cash equivalents. Stocks, bonds, and cash equivalents are the three most popular asset classes.
At the money (ATM) - When the strike price of an option matches the market price of the underlying security, this is known as being at the money (ATM). The delta of an ATM option is 0.50, which is positive for calls and negative for puts. ATM allows for the simultaneous use of call and put options. For instance, if the price of the XYZ stock is $30, both the XYZ 30 call option and the XYZ 30 put option are ATM. In contrast to in the money (ITM) and out of the money (OTM) options, ATM options have no intrinsic value but will still have extrinsic value or time value before expiration.
Average maturity - The sum of the declared maturity dates of the portfolio's debt instruments for a bond fund. additionally known as average weighted maturity. Generally speaking, the fund is more sensitive to fluctuations in interest rates, which results in larger price fluctuation, the longer the average maturity. A portfolio with a shorter average maturity is typically less volatile and sensitive.
Average true range (ATR) - Technical analysis indicator that evaluates market volatility by breaking down the whole range of an asset price for that period. It was first presented by market expert J. Welles Wilder Jr. in his book New Concepts in Technical Trading Systems. The largest of the current high less the current low, the absolute value of the current high less the previous close, and the absolute value of the current low less the previous close is considered to be the actual range indication. The ATR is then a moving average of the real ranges, often using a 14-day period.