Essential Definitions for a Confident Financial Future

An employer-sponsored retirement plan allowing pre-tax or Roth contributions. Employers may match a portion of contributions.

A 529 Plan is a tax-advantaged savings plan designed to encourage saving for future education costs, offering tax-free growth and withdrawals when used for qualified educational expenses.

An Accredited Investor is a person or entity allowed to invest in higher-risk securities, such as private equity or hedge funds, typically due to meeting specific income or net worth criteria.

Active Investment involves a hands-on approach where portfolio managers make specific investments with the goal of outperforming market indices.

Adjusted Gross Income, your total income minus certain deductions. Used to determine eligibility for tax deductions and credits.

Alternative Minimum Tax, a parallel tax system ensuring high-income individuals pay a minimum amount of tax.

The mixture of investments that you hold inside of your investment portfolio.

The financial statement that contains details of an individual’s or company’s assets and liabilities at a specific point in time.

A market characterized by falling prices and investor pessimism. Often signals an economic downturn.

A Bearer Bond is a fixed-income security owned by the holder (bearer), with no registered owner, making it transferable and payable to anyone in possession of the physical certificate.

Black Friday refers to the day after Thanksgiving in the U.S., known for major retail sales and the start of the holiday shopping season, often resulting in significant consumer spending.

A financial instrument where an investor lends money to a borrower, who agrees to repay the borrowed amount with interest at a later date.

A market characterized by rising prices and investor optimism. Generally indicates economic growth.

A savings vehicle issued by a bank, offering a fixed interest rate in exchange for keeping your money deposited for a set term.

Certified Financial Planner, a professional who helps individuals with personal financial planning and decision-making.

A licensed professional qualified to perform accounting, taxation.

A tax strategy to maximize deductions by consolidating charitable donations into a single tax year.

A trust that provides income to beneficiaries for a set term, with the remainder going to charity.

When you earn interest on both the money you’ve saved and the past interest you’ve earned.

A financial institution that holds and safeguards assets, such as stocks and bonds, on behalf of clients.

A maximum limit on the amount of debt a government can issue to fund its operations.

Direct Indexing involves creating a personalized index by directly investing in individual securities rather than a mutual fund or ETF, allowing for customized tax and investment strategies.

Spreading investments across different assets to reduce risk.

A portion of a company's earnings paid to shareholders, usually in cash or additional shares.

Investing a fixed amount at regular intervals, regardless of market conditions. Can reduce the impact of market fluctuations.

A Donor Advised Fund (DAF) is a charitable giving vehicle where donors contribute assets, receive an immediate tax deduction, and recommend grants to charities over time.

Typically, the value you may realize in owning shares of a company.

Exchange Traded Fund, a type of investment fund that holds a basket of assets and trades like a stock on an exchange.

Federal Deposit Insurance Corporation, a U.S. agency that insures deposits at banks and savings institutions.

A Fiduciary is an individual or organization that is legally required to act in the best interest of another person or persons, putting their clients' interests ahead of their own with a duty to preserve good faith and trust.

The interest rate on a loan or security that does NOT change.

The Halloween effect is the idea that markets perform better from November to April, supporting the adage "Sell in May and go away."

A type of employee stock option that provides tax advantages if specific holding and timing requirements are met.

A type of mutual fund or ETF designed to track a specific market index, such as the S&P 500.

The rate at which the general level of prices for goods and services is rising, causing a decrease in purchasing power.

The first sale of a company's stock to the public, marking the transition from private to public ownership.

A trust used in estate planning to transfer wealth while freezing estate tax value.

A trust designed to hold life insurance policies, keeping proceeds out of the taxable estate.

An Irrevocable Trust is a legal arrangement where the grantor permanently relinquishes control over assets, offering benefits like estate tax reduction and asset protection.

The ease with which an asset can be converted into cash without affecting its market price.

A Living Trust is a legal document created during an individual's lifetime where assets are placed into the trust for easy transfer to beneficiaries without probate after death.

The measurement of a company’s size, calculated by multiplying the share price by the number of shares.

A financial market for short-term debt securities. Money market funds invest in these low-risk instruments.

Monte Carlo Simulation is a statistical technique used in financial planning to model the probability of different outcomes in an investment portfolio by running multiple simulations based on random variables.

Debt security issued by a state or local government.

An investment vehicle pooling money from many investors to buy a diversified mix of assets, like stocks and bonds.

Net Worth is the total value of an individual's or entity's assets minus liabilities, representing the financial position and overall wealth.

The interest rate stated on a bond or other fixed-income security, expressed as a percentage of the face value. It does not account for the effects of inflation on the investment's actual returns.

An employee stock option that does not qualify for special tax treatment and is taxed when exercised.

Passive Investment is a strategy that aims to match the returns of a market index by investing in the same securities as the index, typically through index funds or ETFs.

Equity compensation tied to company performance metrics, often issued to incentivize employees.

Company shares awarded to employees, contingent on achieving performance goals over a specific period.

A collection of financial assets. This can include stocks, bonds, mutual funds, exchange-traded funds (EFTs), real estate, and other types of investments.

A legal document granting someone authority to act on another person’s behalf in financial or medical matters.

Private Equity involves investment funds that buy and restructure companies not publicly traded, aiming to improve operations and increase value before selling them.

Periodic tax payments made by self-employed individuals or those with significant non-wage income.

A retirement savings account allowing post-tax contributions. Withdrawals are generally tax-free.

The returns that a bond investor earns from interest payments after accounting for inflation. It shows how much your investment's value will actually grow, letting you know its true earning power.

Adjusting an investment portfolio to realign with the portfolio’s intended allocation.

A Registered Investment Advisor (RIA) is a firm or individual registered with the SEC or state regulators to provide financial advice and investment management services to clients, and is bound by state and federal laws.

Registered Investment Advisor, a professional who provides financial advice and manages investments for clients, regulated by the SEC or state securities authorities.

Restricted Stock Unit, a form of employee compensation involving company stock that vests over time.

A Revocable Trust, or living trust, is a flexible estate planning tool where the grantor can alter or revoke the trust during their lifetime, providing asset management and probate avoidance.

An individual's willingness to take on financial risk in pursuit of investment returns. Influences asset allocation decisions, and may change from time to time.

A Special Needs Trust is designed to provide financial support for individuals with disabilities without jeopardizing their eligibility for government benefits.

A trust that provides benefits to a spouse while keeping assets outside the taxable estate.

A contract giving the right to buy or sell a stock at a set price within a specific time frame.

Represent ownership in a company. Investors may profit from capital gains and dividends.

Income range used to determine the tax rate applied to your income. The higher your income, the higher the tax rate.

A dollar-for-dollar reduction of your tax liability. Can be refundable or nonrefundable.

An expense subtracted from taxable income, reducing the amount of income subject to tax.

Tax Deferred refers to investment earnings such as interest, dividends, or capital gains that accumulate tax-free until the investor withdraws and takes possession of them, typically at retirement.

A strategy that involves selling an underperforming investment to offset capital gains and reduce taxes.

An investment account subject to taxes on interest, dividends, and capital gains. No contribution limits.

A retirement savings account allowing pre-tax contributions. Withdrawals are taxed as ordinary income.

A designation allowing assets to pass directly to a beneficiary without probate after the owner’s death.

Long-term debt securities issued by the U.S. Department of the Treasury.

AKA an adjustable interest rate, is an interest rate or loan that fluctuates over time. The rate can vary either over a short period (monthly) or over a longer period of time (every few years).

Venture Capital is financing provided by investors to startups and small businesses with high growth potential in exchange for equity or ownership stakes.

The Wash Sale Rule prohibits investors from claiming a tax deduction for a security sold at a loss if a substantially identical security is purchased within 30 days before or after the sale.

Yield is the annual income you earn from an investment, expressed as a percentage of the investment's original cost.