Financial Terms Flashcards

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401(k) match

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Your employer contributes a certain amount to your retirement savings plan based on the amount you contribute, therefore matching a portion of your contributions.

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Asset class

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A group of financial instruments that have similar financial characteristics and behave similarly in the marketplace (like stocks, bonds, and cash).

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Bear market

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A market in which prices are falling, encouraging selling.

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Bull market

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A market in which there is increased stock trading and rising stock prices.

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Bond

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A security in which the investor loans money to a company or government, which then pays regular interest to the bondholder and returns the principal on the bond's maturity date.

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Brokerage account

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An account that lets individual investors trade stocks, bonds, mutual funds, and other investments.

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Capital gains

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Profits from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for.

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Diversification

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The practice of investing in a large variety of stocks, bonds, and/or funds as a way to reduce your overall risk.

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Dollar cost averaging

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The practice of putting a fixed amount into an investment over a period of time, regardless of the price of that investment.

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Exchange-traded fund (ETF)

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A collection of stocks and/or bonds that are traded on securities exchanges; they can be traded throughout the day like an individual stock.