Sometimes we fall prey to using jargon. To atone, we fill out this work-in-progress lexicon that we view as a community resource. Our definitions are intentionally brief and not meant to be exhaustive. To contribute a word and/or its definition, Click here.


We list beforehand some notable words that don’t have a specialized meaning in finance: care, charity, death, goals, purpose, family, price, saving, shelter, spending, spouse, values!.



1031 exchange: IRS provision under which real property held for investment purposes may be sold and the proceeds invested into like property without triggering taxable gains realization.


130/30: Levered methodology where 130% of starting capital is allocated to long positions, offset by shorting assets equal in value to 30% of the starting capital. With net exposure at 100% (=130%-30%), returns may resemble those of an index (say S&P 500 for U.S. stocks) while deliberately realizing capital losses — from shares held long in a bear market, or shares sold short in a bull market — that may be harvested to offset gains realized elsewhere.


401(k): Employer-sponsored retirement plan that allows employees to contribute a portion of their pre-tax wages (subject to annual IRS limits, and potentially supplemented by employer’s matching contributions) with withdrawal expected post-retirement at presumed lower income tax rates.


403(b): also called a tax-sheltered annuity or TSA plan: Retirement plan offered by public schools and certain 501(c)(3) tax-exempt organizations. Employees save for retirement by contributing to individual accounts. Employers can also contribute to employees' accounts.


40 Act: Investment Company Act of 1940.


529 Plan: Plan allowing tax-free investment growth and withdrawals for qualified education expenses. Parents who start saving in a 529 account when their children are young can take advantage of those tax savings, as well as compounded returns and — in some states — a tax deduction on contributions.


7520 rate: Hurdle rate (typically 120% of midterm AFR) used to determine which assets in certain trusts may pass to beneficiaries free of gift taxes.


Account: Legal structure in which assets may be held.


Accredited investor (AI): An individual or married couple with over $1 million in net worth, or more than $200,000 in earned income individually ($300,00 jointly) in the past two calendar years, with the expectation of the same earnings. Financial professionals with Series 7, 65 or 82 licenses also qualify. The accredited investor designation is meant to protect retail investors from losses that can come with unregulated investments.


Active: Investment approach that seeks to outperform a stated benchmark. Assets held will diverge from those in the benchmark, generating active share, tracking error and — when successful — alpha.


Active manager: Investment professional who invests actively.


Active share: Percentage of portfolio that deviates from its stated benchmark.


Activist: Investor who typically buys a significant minority stake in a publicly traded company in order to improve how it is run. The activist investor's goals may be as modest as advising company management or as ambitious as forcing the sale of the company, divestitures or restructuring, or replacing the board of directors.


ADV: Brochure submitted to SEC by every RIA, and required to be shown to clients at initiation of any advisory relationship as well as on the RIA’s website.


AFR: Applicable federal rate, published regularly by the US government for a range of maturities and often used as a reference rate by private investors.


AI: (1) Accredited Investor. (2) Alternative Investment.


Alpha: Excess returns earned over benchmark return when adjusted for risk.


Alternative: Term used to denote assets that are viewed as non-traditional or outside the mainstream, such as private equity, hedge funds, or commodities.


Arbitrage: Guaranteed risk-less profit, sought by professional investors and rarely to be found in an efficient market.


Ask: Minimum price at which a market-maker will sell a security.


Aspirational growth: The third layer of the wealth allocation framework. Funds available for deep social impact investments or speculative investments that can meaningfully enhance family wealth.


Asset: Store of value.


Asset allocation: Mix of asset classes (such as stocks, bonds, and real estate) in a portfolio.


Asset class: Set of instruments possessing similar characteristics, such as all stocks of a given country of origin.


Asset / liability management (ALM): Investment approach where assets are managed with an eye to a defined set of liabilities that must be met or preferably outperformed.


Asset location: Mix of accounts typically subject to distinct tax treatments and overlapping ownership eg. taxable and personal; joint and individual.


Asset location strategy: Tax-minimization approach that determines asset location. May involve wealth transfer trusts and philanthropic vehicles.


Balance Sheet: Listing of all assets and liabilities of a person or entity.


Bank: Depository and lending institution.


Bank loan: An amount of money loaned at interest by a bank to a borrower, usually on collateral security, for a certain period of time.


Basis point: One-hundredth of one percent.


Bearer: Type of security whose ownership record only exists on the security itself, not in a separate book of record.


Behavioral finance: Behavioral finance, a subfield of behavioral economics, proposes that psychological influences and biases affect the financial behaviors of investors and financial practitioners. Moreover, influences and biases can be the source for the explanation of all types of market anomalies and specifically market anomalies in the stock market, such as severe rises or falls in stock price.


Benchmark: Default portfolio to be held, that may be owned passively at low cost, hence serves as a point of reference for value added by an active manager.


Beneficiary: Person or entity to whom assets and cashflows are directed, potentially contingent on stated events eg. death of the asset owner.


Beneficial: Relationship that is presumed to create…


Beta: Ratio of expected price movement of an asset relative to that of the overall stock market. Values greater than 1.0 imply the asset is more volatile than the stock market, whereas values less than 1.0 imply the asset has lower volatility.


Bid: Maximum price at which a market-maker will buy a security.


Bitcoin: Most common cybercurrency, invented by likely pseudonym Satoshi Nakamoto in 2009 paper.


Bond: Fixed income security that promises its bearer a flow of income and principal repayment in amounts proportional to its par value until maturity.


Bond ladder: Mix of bonds of staggered maturities.


Book to price: The book-to-price ratio compares a company’s book value to its market share price, essentially showing the value given by the market for each dollar of the company's net worth.


Broker/dealer: Market making institution.


Business cycle: An economic cycle, also known as a business cycle, refers to economic fluctuations between periods of expansion and contraction. Factors such as gross domestic product (GDP), interest rates, total employment, and consumer spending can help determine the current economic cycle stage. The phases of the business cycle are expansion, peak, contraction and trough.


Capital asset pricing model (CAPM): Academic theory asserting that in an efficient market where all buyers and sellers transact myopically (with a common single horizon), absent transaction costs, with common information, everyone will hold a proportionate share of the market portfolio. Inspiration for passive investing.


Capital gains: A capital gain refers to the increase in the value of a capital asset when it is sold. Put simply, a capital gain occurs when you sell an asset for more than what you originally paid for it. Almost any type of asset owned is a capital asset. This can include a type of investment (like a stock, bond, or real estate) or something purchased for personal use (like furniture or a boat).

Capital gains are realized when an asset is sold at a value in excess of the original purchase price. The Internal Revenue Service  taxes individuals on most capital gains.

Capital gains tax: The capital gains tax rate is 0%, 15% or 20% on most assets held for longer than a year. Capital gains taxes on assets held for a year or less correspond to ordinary income tax brackets: 10%, 12%, 22%, 24%, 32%, 35% or 37%. Capital gains taxes apply to the sale of capital assets for profit.


Cap rate: Proportion of a real estate asset (or portfolio)’s value that is available to its owner annually from rental proceeds, net of property maintenance and management costs.


Carry: Percentage fee charged on profits to a limited partner.


Catch-up: Fee provision applicable above an asset’s hurdle rate, payable to general partner to compensate for fees forgone until the hurdle was achieved.


CFA: Chartered financial analyst.


Charitable giving fund (CGF): aka Donor Advised Fund (DAF): Commingled, professionally-managed portfolio created to hold assets irrevocably given away by a taxpayer. Assets in CGF may grow until they are gifted through grants to 501(c)3 charities proposed by donor and approved by the trustee.


Charitable lead trust (CLT): Irrevocable trust designed to provide financial support to one or more charities for a period of time, with the remaining assets eventually going to family members or other beneficiaries.


Charitable remainder trust (CRT): Tax-exempt irrevocable trust designed to reduce the taxable income of individuals and support charities. CRTs provide income to the donor or other beneficiaries during the trust term with the remaining assets going to charities.


Chartered financial analyst: A chartered financial analyst (CFA) is a globally-recognized professional designation given by the CFA Institute, (formerly the AIMR (Association for Investment Management and Research)), that measures and certifies the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas, such as accounting, economics, ethics, money management, and security analysis.


Chief investment officer (CIO): The CIO oversees the management of an organization's investments. Depending on the type and size of the organization, the CIO may directly oversee investments, or they may manage a team of professionals with this responsibility. The CIO may also choose to outsource some or all investments to an outside sub-manager.


Closed end fund: A closed-end fund is a type of investment company that pools money from investors to buy securities. Closed-end funds are similar to mutual funds in that they professionally manage portfolios of stocks, bonds or other investments (including illiquid securities).


Commingled: Assets owned in common by multiple investors, such as a fund in which they each own a fractional interest.


Commodity: Generic tradeable item including agricultural, industrial, energy or precious metals meeting pre-set quality standards that enable standardized pricing and terms of delivery. Often of interest to speculators.


Compliance: Financial compliance is the status a business achieves when it follows all of the relevant financial laws and regulations as the ruling regulatory bodies have outlined them. Financial compliance is a continual process that evolves with the changes in financial laws.


Convertible bond: Convertible bonds are fixed income securities that can be converted into common stock shares. This conversion can take place at the discretion of the investor, i.e., the bondholder, or it may be mandatory. Conversion can happen at various times over the bond's life.


Convertible arbitrage: Convertible bond arbitrage is an arbitrage strategy that aims to capitalize on mispricing between a convertible bond and its underlying stock. The strategy is generally market neutral. In other words, the arbitrageur seeks to generate consistent returns with minimal volatility regardless of market direction through a combination of long and short positions in the convertible bond and underlying stock.


Corporate bond: Bond whose issuer is a non-governmental entity.


Correlation: Tendency of two assets’ prices to fluctuate together or apart. Expressed as a correlation coefficient ranging from -1 (perfect anti-correlation or perfect hedge) to 0 (statistical independence) to 1 (perfect correlation).


Cost basis: Purchase price, used in computing returns and taxes due.


Counterparty: The party with whom you transact or otherwise contract.


Counterparty credit risk: Possibility that one’s counterparty will default on its obligation.


Coupon: A coupon payment refers to the annual interest paid on a bond. Coupons are expressed as a percentage of the face value and are paid from the issue date until maturity. The coupon rate is determined by adding the sum of all coupons paid per year, then dividing that total by the face value of the bond.


Covariance: Covariance measures the total variation of two random variables from their expected values. Using covariance, we can only gauge the direction of the relationship (whether the variables tend to move in tandem or show an inverse relationship).


CRS: The Common Reporting Standard is an information-gathering and reporting requirement for financial institutions in participating countries/jurisdictions, to help fight against tax evasion and protect the integrity of tax systems.


CRT: Charitable Remainder Trust.


Convexity: Curvature in the price-yield relationship of a bond. Rate at which bond’s duration changes as its yield fluctuates.


Credit: Credit is the ability of the consumer to acquire goods or services prior to payment with the faith that the payment will be made in the future. In most cases, there is a charge for borrowing, and these come in the form of fees and/or interest.


Credit spread: In bond trading, a credit spread, also known as a yield spread, is the difference in yield between two debt securities of the same maturity but different credit quality. Credit spreads are measured in basis points, with a 1% difference in yield equal to a spread of 100 basis points.


Critical lifetime needs: Food, shelter, safety and security.


Currency: Means of exchange and yardstick of value.


Custodian: Depository institution that specializes in holding securities and potentially other assets. Often facilitate trading, pricing, reporting and transfer.


Cybercurrency: Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrencies don't have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units.


Cyclical: Of or relating to the business or economic cycle. Subject to somewhat regular periodicity of smooth increase and decrease.


Depth: Financial depth captures the financial sector relative to the economy. It is the size of banks, other financial institutions, and financial markets in a country, taken together and compared to a measure of economic output.


Discount: A discount bond is a bond that is issued for less than its par, or face, value. Discount bonds may also be a bond currently trading for less than its face value in the secondary market. A bond is considered a deep-discount bond if it is sold at a significantly lower price than par value, usually at 20% or more.


Diversification: Spreading investments across a variety of assets, sectors, industries, factors or geographic regions to reduce uncompensated or undesired risk exposures.


Donor advised fund (DAF, aka Charitable Giving Fund, CGF): Commingled, professionally-managed portfolio created to hold assets irrevocably given away by a taxpayer. Assets in CGF may grow until they are gifted through grants to 501(c)3 charities proposed by giver and approved by the trustee.


Downgrade: A credit downgrade occurs when the financial condition of an issuer (sovereign, municipal or corporate) deteriorates. Credit downgrades often result in higher interest rates for issuers and downward price movements for outstanding debt securities.


Dark pool: A dark pool is a privately organized financial forum or exchange for trading securities. Dark pools allow institutional investors to trade without exposure until after the trade has been executed and reported. Dark pools are a type of alternative trading system (ATS) that gives certain investors the opportunity to place large orders and make trades without publicly revealing their intentions during the search for a buyer or seller.


Debt: Debt is something, usually money, owed by one party to another. Debt is used by many individuals and companies to make large purchases that they could not afford under other circumstances. Unless a debt is forgiven by the lender, it must be paid back, typically with added interest.


Default: Default is the failure to make required interest or principal repayments on a debt, whether that debt is a loan or a security. Individuals, businesses, and even countries can default on their debt obligations. Default risk is an important consideration for creditors.


Derivative: The term derivative refers to a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark. A derivative is set between two or more parties that can trade on an exchange or over-the-counter (OTC). These contracts can be used to trade any number of assets and carry their own risks. Prices for derivatives derive from fluctuations in the underlying asset. These financial securities are commonly used to access certain markets and may be traded to hedge against risk. Derivatives can be used to either mitigate risk (hedging) or assume risk with the expectation of commensurate reward (speculation). Derivatives can move risk (and the accompanying rewards) from the risk-averse to the risk seekers.


Direct indexing: Direct indexing seeks to replicate an existing stock index, such as the S&P 500 or the Russell 3000, in a taxable account. Through a separately managed account, an investment manager establishes direct ownership of individual stocks that make up the chosen index.


Disclosure: The timely release of all information about a company that may influence an investor's decision. It reveals both positive and negative news, data, and operational details that impact its business. Similar to disclosure in the law, the concept is that all parties should have equal access to the same set of facts in the interest of fairness. The Securities and Exchange Commission (SEC) develops and enforces disclosure requirements for all firms incorporated in the U.S. Companies that are listed on the major U.S. stock exchanges must follow the SEC's regulations.


Distribution: A distribution generally refers to the disbursement of assets from a fund, account, or individual security to an investor. Mutual fund distributions consist of net capital gains made from the profitable sale of portfolio assets, along with dividend income and interest earned by those assets.


Dividend: A dividend is the distribution of a company's earnings to its shareholders and is determined by the company's board of directors. Dividends are often distributed quarterly and may be paid out as cash or in the form of reinvestment in additional stock. The dividend yield is the dividend per share and is expressed as dividend/price as a percentage of a company's share price, such as 2.5%. Common shareholders of dividend-paying companies are eligible to receive a distribution as long as they own the stock before the ex-dividend date.


Dividend to book: The valuation metric using the ratio of a company’s annual dividends divided by the book value of its equity.


Drawdown: A drawdown refers to how much an investment or trading account is down from the peak before it recovers back to the peak. Drawdowns are typically quoted as a percentage, but dollar terms may also be used if applicable for a specific trader. Drawdowns are a measure of downside volatility.


Due diligence: Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.


Duration: Slope in the price-yield relationship of a bond. Extent to which bond’s price changes as its yield fluctuates. Duration is measured in years and is typically shorter than the bond’s maturity. A duration of 5 indicates that a 1% increase in yield would cause prices to drop by 5%, while a 1% decrease in yield would cause prices to rise by 5%, all else being equal.


EAFE: The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries. The Index is widely used as a benchmark and as the basis for index-linked financial products.  Multiple exchange traded funds are based on the MSCI EAFE Index and the ICE Futures Europe, ICE Futures US and Chicago Board Options Exchange (CBOE) are licensed to list futures contracts on this Index


EBITDA: Earnings (aka income) before Interest charges, Taxes, Depreciation and Amortization.


Economic cycle: An economic cycle, also known as a business cycle, refers to economic fluctuations between periods of expansion and contraction. Factors such as gross domestic product (GDP), interest rates, total employment, and consumer spending can help determine the current economic cycle stage. Understanding the economic period can help investors and businesses determine when to make investments and when to pull their money out, as each cycle impacts stocks and bonds as well as profits and corporate earnings.


Efficient frontier: An efficient frontier is a set of investment portfolios that are expected to provide the highest returns at a given level of risk. A portfolio is said to be efficient if there is no other portfolio that offers higher returns for a lower or equal amount of risk.


Efficient market: Confluence of large numbers of buyers and sellers of a commodity or security, where all are well informed, resulting in tight bid-ask spreads.


EMG: Emerging markets.


Environmental, social & governance (ESG): Environmental, social, and governance  investing refers to a set of standards for a company’s behavior used by socially conscious investors to screen potential investments. Environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change, for example. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.


Equity: Ownership of a corporation or other asset. Owner is the residual claimant after liabilities have been cleared. On a balance sheet, equals assets minus liabilities.


Equity risk premium (ERP): An equity risk premium is an excess return earned by an investor when they invest in the stock market over a risk-free rate. This return compensates investors for taking on the higher risk of equity investing.


ESG: Environmental, Social & Governance.


Estate: Balance sheet of a person upon their passing away.


Estate tax: The Estate Tax is a tax on the right to transfer property at death. It consists of an accounting of everything owned or in which an interest is held at the date of death. The fair market value of these items is used, not necessarily what was paid for them or what their values were when they were acquired. The total of all of these items is the "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. Certain states also impose estate taxes.


Estate tax exemption: A certain dollar amount above which estate tax is owed. The 2024 Federal estate tax exemption is $13.63 million per individual ($27.26 million per married couple). On January 1, 2025 the estate tax exemption is expected to fall to $7 million per individual ($14 million per married couple).


Estate plan: A process by which an individual designs a strategy and executes a will, trust agreement, or other documents to provide for the administration of his or her assets upon his or her incapacity or death.  Tax and liquidity planning are part of this process.


Exchange traded fund (ETF): Security that represents a Commingled portfolio of securities that can be bought and sold on an exchange much like an individual stock. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities.


Exchange: Venue for trading of securities meeting listed criteria.


Factor: Source of risk and return.


Factor beta: Sensitivities of an asset to a particular factor.


Factor risk exposure: Factor beta.


Factor return: Portion of asset’s return during a period that is attributable to a particular factor.


FDIC: U.S. federal agency that guarantees bank deposit accounts of up to $250,000 per person.


Fiduciary: Person or organization with legal duty to act in their client’s best interest. RIAs are fiduciaries while banks, brokerages and insurance firms are not.


Financial planning: Process of setting financial goals, assessing current resources, and developing strategies to achieve those goals, often including budgeting, saving, investing, and retirement planning.


FINRA: The Financial Industry Regulatory Authority is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD) as well as to the member regulation, enforcement, and arbitration operations of the New York Stock Exchange. The U.S. government agency that acts as the ultimate regulator of the U.S. securities industry, including FINRA, is the U.S. Securities and Exchange Commission (SEC).


First lien: First lien and second lien debt are both senior forms of debt, which have equal standing in terms of principal and interest payment but have different standing with respect to the collateral.  A lien is a claim on collateral pledged to secure the financing.  The first lien debt has the first claim on collateral, while the second lien has a second priority claim. Revolvers, also a form of senior debt, can be secured by their own pool of assets or share collateral with first lien debt.


Fiscal policy: Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions. These include aggregate demand for goods and services, employment, inflation, and economic growth. During a recession, the government may lower tax rates or increase spending to encourage demand and spur economic activity. Conversely, to combat inflation, it may raise rates or cut spending to cool down the economy. Fiscal policy is often contrasted with monetary policy, which is enacted by central bankers and not elected government officials.


Fixed Income: Debt assets.


Fixed Income arbitrage: The purchase of undervalued and the short-selling of overvalued securities, with the expectation that the pricing discrepancies will correct themselves within the defined investment horizon.


Floating rate: A floating interest rate is an interest rate that changes periodically. The rate of interest moves up and down, or "floats," reflecting economic or financial market conditions. Often, it moves in tandem with a particular index or benchmark, or with general market conditions. A floating interest rate can also be referred to as an adjustable or variable interest rate because it can vary over the term of a debt obligation.


Forecast: Speculative point estimate of a variable’s future value.


Forward: Derivative security that represents a contract to transact a fixed amount of an underlying commodity or security at an agreed price on a future date. Forward seller is obligated to deliver the physical commodity or security eg. Brent oil forwards to Cushing, OK.


Foundation: Charitable organization that does not qualify as a public charity by government standards. Usually created via a single primary donation, called an endowment, from an individual or a family. Must spend at least 5% of their assets on charitable causes each year.


Future: Derivative security that trades on an exchange and represents a negotiable right to transact a fixed amount of an underlying commodity or security at an agreed price on a future date. Unlike forwards, futures involve posting margin to the exchange, which removes counterparty credit risk, and they are often settled in cash rather than by physical delivery.


G1, G2, G3: Generations of a family. G1 denotes the founding generation ie. matriarch or patriarch and their spouse. G2 denotes the children and their spouses; G3 denotes the grandchildren.


GDP: GDP measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time (say a quarter or a year). It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. An alternative concept, gross national product, or GNP, counts all the output of the residents of a country. So if a German-owned company has a factory in the United States, the output of this factory would be included in U.S. GDP, but in German GNP.


Gift tax: The gift tax is a federal tax imposed by the Internal Revenue Service (IRS) on individual taxpayers who transfer property to someone else without receiving anything of substantial value in return. A gift can include cash, real estate, and other forms of property. The IRS limits how much you can transfer to someone as a gift. Any amount over this threshold must be reported and applied toward a lifetime gift tax exemption. Once you exceed this limit, the gift tax becomes payable. The gift tax can be imposed even if you never intended the transfer to be a gift.


General partner (GP): A general partner is a part-owner of a partnership business and is involved with its operations and shares in its profits. The general partner may be held personally liable for the debts of the business.


GPS: Altar Rock’s Global Path Simulator is an econometric system that incorporates starting economic and market conditions to produce plausible future economic and market paths. In tandem with Altar Rock’s allocation and tax system, it enables investors to pre-experience future outcomes and make informed decisions.


GRAT: Grantor Retained Annuity Trust.


Grantor retained annuity trust (GRAT): Instrument used in estate planning to minimize taxes on large financial gifts to family members. An irrevocable trust is created for a fixed period. Assets are placed under the trust, with an annuity paid out to the grantor annually. When the trust expires and the last annuity payment is made, the beneficiary receives assets and pays little or no gift taxes.


Gross: Gross means the total or whole amount of something, whereas net means what remains from the whole after certain deductions are made.


GST: Generation-skipping tax.


Hedge: To hedge, in finance, is to take an offsetting position in an asset or investment that reduces the price risk of an existing position. A hedge is therefore a trade that is made with the purpose of reducing the risk of adverse price movements in another asset. Normally, a hedge consists of taking the opposite position in a related security or in a derivative security based on the asset to be hedged. Derivatives can be effective hedges against their underlying assets because the relationship between the two is more or less clearly defined. Derivatives are securities that move in correspondence to one or more underlying assets. They include options, swaps, futures, and forward contracts. The underlying assets can be stocks, bonds, commodities, currencies, indexes, or interest rates. It’s possible to use derivatives to set up a trading strategy in which a loss for one investment is mitigated or offset by a gain in a comparable derivative.


Hedge fund (HF): Limited partnership whose assets are managed by professional fund managers using a wide range of strategies, including leverage or trading of non-traditional assets, in pursuit of above-average investment returns. Often considered a risky alternative investment choice and usually requires a high minimum investment or net worth, often targeting wealthy clients.


High yield: High-yield bonds (also called junk bonds) are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds. High-yield bonds are more likely to default, so they pay a higher yield than investment-grade bonds to compensate investors. Issuers of high-yield debt tend to be startup companies or capital-intensive firms with high debt ratios. However, some high-yield bonds are fallen angels, which are bonds that lost their good credit ratings.


Horizon: Time period one expects to hold or review investments.


Human capital: The skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.


Hurdle rate: The hurdle rate is the minimum acceptable rate of return on an investment that must be achieved before an investment or project is considered financially viable. It’s used to assess the viability of a potential investment. In the context of certain wealth transfer trusts, the hurdle rate is the going-in rate of return that must be exceeded for the trust to successfully transfer wealth at the end of the trust’s term.


IDGT: Intentionally Defective Grantor Trust.


Impact: Impact investing is the act of purposefully making investments that help achieve certain social and environmental benefits while generating financial returns.


Initial conditions: Prevailing economic and market circumstances at the time that a financial plan is created. Includes factors such as inflation, the shape and slope of the yield curve and market valuations.


Intentionally defective grantor trust (IDGT): Estate-planning tool used to freeze certain assets of an individual for estate tax purposes but not for income tax purposes. Grantor pays income tax on any generated income, but estate does not incur any estate taxes when the grantor dies.


Income beneficiary: An income beneficiary is a person or entity designated to receive income from a trust.


Income statement: An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period. The other two key statements are the balance sheet and the cash flow statement. The income statement focuses on the revenue, expenses, gains, and losses reported by a company during a particular period. Also known as the profit and loss (P&L) statement or the statement of revenue and expense, an income statement provides valuable insights into a company’s operations, the efficiency of its management, underperforming sectors, and its performance relative to industry peers.


Income tax: Tax levied by a government directly on income, especially an annual tax on personal income.


Index: A financial index produces a numeric score based on inputs such as a variety of asset prices. It can be used to track the performance of a group of assets in a standardized way. Indexes typically measure the performance of a basket of securities intended to replicate a certain area of the market. These could be constructed as a broad-based index that captures the entire market, such as the Standard & Poor's 500 Index or Dow Jones Industrial Average (DJIA), or more specialized such as indexes that track a particular industry or segment such as the Russell 2000 Index, which tracks only small-cap stocks.


Inflation: Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country. But it can also be more narrowly calculated—for certain goods, such as food, or for services, such as a haircut, for example. Whatever the context, inflation represents how much more expensive the relevant set of goods and/or services has become over a certain period, most commonly a year.


Instrument: A monetary contract that can be traded, such as a stock, bond, derivative, etc.

Insurance: Insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured. Most people have some insurance: for their car, their house, their healthcare, or their life. Insurance policies hedge against financial losses resulting from accidents, injury, or property damage. Insurance also helps cover costs associated with liability (legal responsibility) for damage or injury caused to a third party.


Insurance company: A company that creates insurance products to take on risks in return for the payment of premiums. Companies may be mutual (owned by a group of policyholders) or proprietary (owned by shareholders). (Also known as insurer or provider).


Insured: A person or organization covered by insurance.


Interval fund: An interval fund is a type of closed-end fund that is not listed on an exchange that periodically offers to repurchase a limited percentage of outstanding shares, as defined in its prospectus, from its shareholders.


Intestate: Not having made a will before one dies.


Investment committee: An investment committee is the group of people responsible for managing an organization's investments. The committee oversees investment policies, advisor selection, strategy and fund performance to ensure the best possible outcome for the members or beneficiaries.


Investment due diligence: Investment due diligence is defined as an investigation of a potential investment (such as a stock) or product to confirm all facts. These facts can include such items as reviewing all financial records, past company performance, plus anything else deemed material.


Investment strategy: Plan or approach for making investment decisions, typically based on an investor's financial goals, risk tolerance, time horizon, and market outlook.


Investment advisory: Providing guidance and recommendations on investment strategies, asset allocation, and portfolio management based on an investor's objectives, risk tolerance, and financial situation. This may involve ongoing monitoring and adjustments to optimize performance and manage risk.


Investment company: An investment company is a corporation or trust engaged in the business of investing the pooled capital of investors in financial securities. This is most often done either through a closed-end fund or an open-end fund (also referred to as a mutual fund). In the U.S., most investment companies are registered with and regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940. An investment company may be known as a "fund company" or "fund sponsor." They often partner with third-party distributors to sell mutual funds.


Investment Company Act (1940 Act): The Investment Company Act of 1940 is an act of Congress that regulates the organization of investment companies and the activities they engage in. It sets standards for the investment company industry. A primary purpose of the Act is to protect investors by ensuring that they're aware of the risks associated with buying and owning securities. Investment companies are required by the Act to provide investors with information about their investment objectives, investment policies, and financial condition when stock is first sold and, henceforth, at regular intervals. Investment companies must also inform investors about investment company structure and operations.


Investment advisory agreement: An investment advisory agreement is a legally binding contract that outlines the terms and conditions of a professional relationship between two different parties. It outlines the responsibilities, expectations, and obligations of both parties, and provides guidance on how the advisor will manage the client's investments.


Investment policy statement (IPS): An investment policy statement (IPS) is a document drafted between a portfolio manager and a client that outlines general rules for the manager. This statement provides the general investment goals and objectives of a client and describes the strategies that the manager should employ to meet these objectives. Specific information on matters such as asset allocation, risk tolerance, and liquidity requirements are included in an investment policy statement.


IPS: Investment Policy Statement.


IRA: An individual retirement account is a long-term savings account that individuals with earned income can use to save for the future while enjoying certain tax advantages.


IRR: Internal rate of return. A metric used in financial analysis to estimate the profitability of potential investments. IRR is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis.


Irrevocable: Not able to be changed, reversed, or recovered; final.


IRS: Internal Revenue Service.


ISO: An incentive stock option gives an employee the right to buy shares of company stock at a discounted price. The profit on qualified ISOs is usually taxed at the capital gains rate, not the higher rate for ordinary income.


J-curve: A J-curve is a trendline that shows an initial loss immediately followed by a dramatic gain. In a chart, this pattern of activity would follow the shape of a capital "J". The J-curve effect is often cited in economics to describe, for instance, the way that a country’s balance of trade initially worsens following a devaluation of its currency, then quickly recovers and finally surpasses its previous performance.


Jurisdiction: A country, state, or other area where a particular set of laws or rules must be obeyed.



Leverage: Financial leverage is the concept of using borrowed capital as a funding source. Leverage is often used when businesses invest in themselves for expansions, acquisitions, or other growth methods. Leverage is also an investment strategy that uses borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment.


Liability: A liability is something a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses. Liabilities can be contrasted with assets. Liabilities refer to things that you owe or have borrowed; assets are things that you own or are owed.


Life insurance: Insurance that pays out a sum of money either on the death of the insured person or after a set period.


Limited liability: Limited liability is a type of legal structure for an organization where a corporate loss will not exceed the amount invested in a partnership or limited liability company (LLC). The limited liability feature is one of the biggest advantages of investing in publicly listed companies. While a shareholder can participate wholly in the growth of a company, their liability is restricted to the amount of the investment in the company, even if it subsequently goes bankrupt and has remaining debt obligations.


Limited power of attorney: A power of attorney agreement authorizes one party–called the agent or attorney in fact–to act on behalf of the other party, called the principal. Under a limited power of attorney agreement, the agent can only act and make decisions on specified activities, and only to the extent that the principal authorizes.


Liquidity: Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. The most liquid asset of all is cash itself. Consequently, the availability of cash to make such conversions is the biggest influence on whether a market can move efficiently. The more liquid an asset is, the easier and more efficient it is to turn it back into cash. Less liquid assets take more time and may have a higher cost.


Liquidity budget: A liquidity budget shows a company's cash position by detailing the cash on hand and the budgeted cash inflows and outflows.


Long: The term long position describes what an investor has purchased when they buy a security or derivative with the expectation that it will rise in value.


Longevity: The amount of time that someone lives.


Long-only: A long-only hedge fund buys securities to earn a profit when they increase in price, and it does not bet against securities by borrowing to sell them in advance; the fund might invest in stocks, bonds, derivatives, structured products, and almost anything else.


Long term: Long term refers to the extended period of time that an asset is held. Depending on the type of security, a long-term asset can be held for as little as one year or for as long as 30 years or more. Generally speaking, long-term investing for individuals is often thought to be in the range of at least seven to 10 years of holding time, although there is no absolute rule.


LPs: A limited partnership is a business owned by two or more parties. These must include at least one general partner who runs the business and has unlimited liability for any debts. The limited partners have liability only up to the amount of their investment. The limited partnership business structure is often used as a vehicle for individuals who pool their money to invest in real estate or other assets.


LP: limited partner.


LLC: Limited liability company. A business structure in the U.S. that protects its owners from personal responsibility for its debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship. While the limited liability feature is similar to that of a corporation, the availability of flow-through taxation to the members of an LLC is a feature of a partnership rather than an LLC.


Long-short: Long-short equity is an investing strategy that takes long positions in stocks that are expected to appreciate and short positions in stocks that are expected to decline. A long-short equity strategy seeks to minimize market exposure while profiting from stock gains in the long positions, along with price declines in the short positions. Although this may not always be the case, the strategy should be profitable on a net basis.The long-short equity strategy is popular with hedge funds, many of which employ a market-neutral strategy, in which dollar amounts of both long and short positions are equal.


Long-short extension: Long-short extension strategies allow portfolio managers to reduce the implementation inefficiencies associated with the long-only constraint.


Macroeconomics: The part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.


Manager selection: Evaluating an investment manager is a complex and detailed process that encompasses a great deal more than analyzing investment returns. In conducting investment manager due diligence, the focus is on understanding how the investment results were achieved and on assessing the likelihood that the investment process that generated these returns will produce superior or at least satisfactory investment results going forward. Due diligence also entails an evaluation of a firm’s integrity, operations, and personnel. As such, due diligence involves both quantitative and qualitative analysis.


Margin: A margin account is a loan account with a broker which can be used for share trading. The funds available under the margin loan are determined by the broker based on the securities owned and provided by the trader, which act as collateral for the loan. The broker usually has the right to change the percentage of the value of each security it will allow toward further advances to the trader, and may consequently make a margin call if the balance available falls below the amount actually utilized. The broker will usually charge interest and other fees on the amount drawn on the margin account. If the cash balance of a margin account is negative, the amount is owed to the broker, and usually attracts interest. If the cash balance is positive, the money is available to the account holder to reinvest, or may be withdrawn by the holder or left in the account and may earn interest. In terms of futures and cleared derivatives, the margin balance would refer to the total value of collateral pledged to the CCP (central counterparty clearing) and or futures commission merchants.


Market analysis: Process of evaluating financial markets, including factors such as economic indicators, industry trends, company performance, and investor sentiment, to inform investment decisions.


Market maker: A dealer in securities or other assets who undertakes to buy or sell at specified prices at all times.


Maturity: Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed or it will cease to exist. The term is commonly used for deposits, foreign exchange spot trades, forward transactions, interest rate and commodity swaps, options, loans, and fixed income instruments such as bonds.


Mean reversion: Tendency of prices, earnings and other economic variables, particularly when at historical extremes, to eventually revert to their long-term normal mean or average level.


Merger arbitrage: Merger arbitrage, often considered a hedge fund strategy, involves simultaneously purchasing and selling the respective stock of two merging companies to create "riskless" profits. Because there is the uncertainty of the deal being completed, the stock price of the target company typically sells at a price below the acquisition price. A merger arbitrageur will review the probability of a merger not closing on time or at all and will then purchase the stock before the acquisition, expecting to make a profit when the merger or acquisition completes.


Mid-market: To be a middle market business, revenue must be between $10 million and $1 billion. Middle market companies are often dubbed not large enough to be big businesses, yet too big to be considered small businesses.


MOIC: Multiple on Invested Capital (“MOIC”) is a metric used to describe the value or performance of an investment relative to its initial cost, commonly used within private markets. MOIC is among the most relevant metrics to be assessed while conducting fund due diligence. It is also often referred to as Equity Multiple.


Momentum: Momentum investing is an investment strategy aimed at purchasing securities that  have been showing an upward price trend or short-selling securities that have been showing a downward trend.


Monetary policy: Monetary policy is a set of tools used by a nation's central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates and changing bank reserve requirements. In the United States, the Federal Reserve Bank implements monetary policy through a dual mandate to achieve maximum employment while keeping inflation in check.


Money supply: The total amount of money in circulation or in existence in a country.


Mortgage: A legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.


MSCI: MSCI is an acronym for Morgan Stanley Capital International. It is an investment research firm that provides stock indexes, portfolio risk and performance analytics, and governance tools to institutional investors and hedge funds. MSCI is perhaps best known for its benchmark index, including the MSCI Emerging Market Index and MSCI Frontier Markets Index, which are managed by MSCI Barra. The company continues to launch new indexes each year.


MSCI Barra: MSCI is a leading provider of investment decision support tools to investors globally, including asset managers, banks, hedge funds and pension funds.


MSCI Fabric: Fabric is a cutting-edge wealth technology platform designed for modern advisors to better manage portfolio risk.


Municipal bonds: The term “municipal bond” refers to a type of debt security issued by local, county, and state governments. They are commonly offered to pay for capital expenditures, including the construction of highways, bridges, or schools. Municipal bonds act like loans, with bondholders becoming creditors. In exchange for borrowed capital, bondholders/investors are promised interest on their principal balance—the latter being repaid by the maturity date. Municipal bonds are often exempt from most taxes, which makes them attractive to people in higher income tax brackets. Types of municipal bonds include general obligation and revenue bonds.


Multi-asset: A multi-asset class, also known as a multiple-asset class or multi-asset fund, is a combination of asset classes (such as cash, equity or bonds) used as an investment. A multi-asset class investment contains more than one asset class, thus creating a group or portfolio of assets. The weights and types of classes vary according to the individual investor.


Multi-factor model: In finance, a multi-factor model employs a set of different factors in its computations in order to analyze and explain market phenomena, as well as equilibrium prices of an asset. A multi-factor model can be used to analyze the returns of individual securities but also of entire portfolios.


Multi-horizon:  The notion that investors do not have a single investment horizon but instead have multiple investment horizons at the same time. Every long-term investor is therefore also a medium-term investor and a short-term investor. This has important implications for asset allocation and portfolio optimization. The total portfolio should be viewed as an aggregation of multiple sub-portfolios, each of which has a different investment horizon. The different sub-portfolios have different investment objectives, expected returns, and liquidity requirements, and may even be based on different capital market assumptions. The size of each sub-portfolio is determined by the spending requirements of the investor.


Multi-manager: Multiple managers refer to the numerous involvement of different managers in the investment strategy of a fund. In the case of multiple managers, an investment portfolio's assets are divided by individual managers. Various structures can be used for the management of multiple manager funds.


Mutual: comingled.


Mutual fund: A mutual fund is an investment vehicle where money from many people is pooled together to buy a variety of stocks, bonds, or other securities. This mix of investments is managed by a professional money manager, providing individuals with a portfolio that is structured to match the investment objectives stated in the fund's prospectus. By investing in a mutual fund, individuals gain access to a broad range of investments, which can help reduce risk compared to investing in a single stock or bond. Investors earn returns based on the fund's performance minus any fees or expenses charged. In this way, mutual funds can give small or individual investors access to professionally managed portfolios of equities, bonds, and other asset classes.

Net: What remains from the whole after certain deductions are made.


NIM: Net interest margin reveals the amount of money that a bank is earning in interest on loans compared to the amount it is paying in interest on deposits. NIM is one indicator of a bank's profitability and growth.


NQSO: A non-qualified stock option (NQSO) is a type of employee stock option wherein you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option. NQSOs are simpler and more common than incentive stock options (ISOs). They are called non-qualified stock options because they do not meet all of the requirements of the Internal Revenue Code to be qualified as ISOs.


OCIO: Outsourced CIO.


Offer: The offer price is one of the prices often quoted in the buying and selling of financial assets. It represents the price at which you can buy an asset, and as such will usually be higher than the market price. It is the opposite of the bid, and can often be known as the ask.


Oil: Any of a large class of substances typically unctuous, viscous, combustible, liquid at ordinary temperatures, and soluble in ether or alcohol but not in water: used for anointing, perfuming, lubricating, illuminating, heating, etc.


Operational due diligence (ODD): Operational due diligence is a type of due diligence that investigates the business model and operations of the target to ensure it’s a good fit for the buyer.


Operational risk: Operational risk summarizes the uncertainties and hazards a company faces when it attempts to do its day-to-day business activities within a given field or industry. A type of business risk, it can result from breakdowns in internal procedures, people and systems—as opposed to problems incurred from external forces, such as political or economic events, or inherent to the entire market or market segment, known as systematic risk. Operational risk can also be classified as a variety of unsystematic risk, which is unique to a specific company or industry.


Opportunistic: Investing in speculative opportunities with high net market exposure across varied markets. Opportunistic funds include global macro funds, commodity trading advisor funds, tail risk hedging funds and funds employing other similar strategies.


Option: The term option refers to a financial instrument that is based on the value of underlying securities such as stocks, indexes, and exchange traded funds (ETFs). An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset. Unlike futures, the holder is not required to buy or sell the asset if they decide against it. Each options contract will have a specific expiration date by which the holder must exercise their option. The stated price on an option is known as the strike price. Options are typically bought and sold through online or retail brokers.


Pairs trading: A pairs trade is a trading strategy that involves matching a long position with a short position in two stocks with a high correlation.


Par: Par value is the face value of a bond or a share of stock. Par value is set by the issuer and remains fixed for the life of a security—unlike market value, which fluctuates as a stock or bond changes hands on the secondary market.


Passive: Passive management is a reference to index funds and exchange-traded funds that mirror an established index, such as the S&P 500. Passive management is the opposite of active management, in which a manager selects stocks and other securities to include in a portfolio.


Path: One of many possible future outcomes for investors.


PE: Private Equity.


Performance: Investment performance is the return on an investment portfolio. The investment portfolio can contain a single asset or multiple assets. The investment performance is measured over a specific period of time and in a specific currency. Investors often distinguish different types of return.


Perpetual: A perpetual bond, also known as a "consol bond" or "perp," is a fixed income security with no maturity date. This type of bond is often considered a type of equity, rather than debt. One major drawback to these types of bonds is that they are not redeemable. However, the major benefit of them is that they pay a steady stream of interest payments forever.


Portfolio: A portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds (ETFs). People generally believe that stocks, bonds, and cash comprise the core of a portfolio. Though this is often the case, it does not need to be the rule. A portfolio may contain a wide range of assets including real estate, art, and private investments.


Portfolio management: Process of monitoring and rebalancing an investment portfolio to achieve targeted mixes of assets, vehicles, managers, risks, while staying within risk, tax, liquidity and fee budgets.

PPLI: Private placement life insurance is a specialized product that combines the benefits of life insurance with investment opportunities typically not available in traditional policies. This insurance provides high-net-worth individuals a unique way to invest large sums while also benefiting from the tax advantages and asset protection features of life insurance.


PPVA: A private placement variable annuity is an annuity that is available only to high-net-worth clients who qualify as “accredited investors.” PPVA investments do not offer the types of income guarantee riders and protection against market risks that more traditional retail annuities make available. However, a PPVA is flexible and allows tax-deferred growth, allowing the purchaser the discretion to make additional deposits into the annuity contract and change investment allocations based on investment options, including hedge funds and private equity investments which provide the potential for significant financial returns.


Probate: Probate is the process completed when a decedent leaves assets to distribute, such as bank accounts, real estate, and financial investments. Probate is the general administration of a deceased person's will or the estate of a deceased person without a will. An executor is commonly named in the will or an administrator, if there is no will, to complete the probate process. This involves collecting the deceased's assets to pay any remaining liabilities on their estate and distributing the assets to beneficiaries.


Public: Public refers to anything that can be accessed by any person or group in the general population. In the context of investment and finance, the term is most commonly used to describe securities that are available on an exchange or an over-the-counter market, and the population who trades those securities.


Public equity: Public equity refers to ownership in publicly traded companies, which are available to anyone with an investment account.


Private: Private investment, also commonly referred to as an alternative investment, is a financial asset outside public market assets such as stocks, bonds, and cash. Qualified investors often access private investments through an investment fund. Examples of private investment fund sectors include private credit, real estate, natural resources, private equity, infrastructure, and hedge funds.


Private credit: Private credit is an asset class of privately negotiated loans and debt financing from non-bank lenders. This includes small business and consumer loans, venture debt, and other forms of private debt. Small businesses, startups, and individuals seek private credit when they cannot access public credit markets.


Private equity: Private equity refers to capital investments made in companies that are not publicly traded. Most PE firms are open to accredited investors or high-net-worth individuals. Leveraged buyouts (LBOs) and venture capital (VC) investments are two key PE investment subfields.


Private real estate: Private equity real estate is an alternative asset class composed of professionally managed pooled private and public investments in the real estate markets. Involves acquisition, financing, and ownership (either direct or indirect) of property or properties via an investment fund.


Projection: Projections focus on long-term outcomes across an array of future economic and market scenarios. Neither a forecast nor an assumption.


QOZ: A qualified opportunity zone is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as QOZs if they were nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination was certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service (IRS).


QP: Qualified Purchaser.


QPRT: A qualified personal residence trust is a specific type of irrevocable trust that allows its creator to remove a personal home from their estate for the purpose of reducing the amount of gift tax that is incurred when transferring assets to a beneficiary.


Qualified purchaser (QP): Any natural person (including any person who holds a joint, community property, or other similar shared ownership interest) with a net worth in excess of $5,000,000, exclusive of primary residence.


Quant: A financial professional engaged in quantitative analysis making use of mathematical and statistical methods in finance and investment management.


Real: The real value of an item, also called its relative price, is its nominal value adjusted for inflation and measures that value in terms of another item.


Recovery: Recovery, in the realm of finance, refers to the process of returning to a stable financial state after a period of distress or decline. It typically involves regaining lost ground, such as improving economic indicators, restoring financially viable operations, or repaying debts.


Registered representative: The term "registered representative" means an employee engaged in the solicitation or handling of accounts or orders for the purchase or sale of securities, or other similar instruments for the accounts of customers of his employer or in the solicitation or handling of business in connection with investment advisory or investment management services furnished on a fee basis by his employer.


Remainder: An estate in property that takes effect at the termination of a life estate.One may transfer property to another for their lifetime or for the lifetime of a third party. The named person who defines the duration of the life estate is called the measuring life. The person who has the life estate is called the life tenant. When the measuring life ends, even if the life tenant is still alive, the person who owns the remainder is entitled to the full possession and enjoyment of the property. The interests may be contingent remainders, vested remainders, or vested remainders subject to divestiture.


Remainderman: A remainderman is a property law term that refers to a person who stands to inherit property at a future point in time upon the termination of a preceding estate, usually a life estate. A remainderman is a third person other than the estate's creator, initial holder, or either's heirs.


Residual: Residual value refers to the estimated worth of an asset after the asset has fully depreciated.


Revocable: Revocable trusts let the living grantor change instructions, remove assets, or terminate the trust. Irrevocable trusts cannot be changed; assets placed inside them cannot be removed by anyone for any reason.


Risk: Risk is defined in financial terms as the chance that an outcome or investment's actual gains will differ from an expected outcome or return. Risk includes the possibility of losing some or all of an original investment. Quantifiably, risk is usually assessed by considering historical behaviors and outcomes. In finance, standard deviation is a common metric associated with risk. Standard deviation provides a measure of the volatility of asset prices in comparison to their historical averages in a given time frame. Overall, it is possible and prudent to manage investing risks by understanding the basics of risk and how it is measured. Learning the risks that can apply to different scenarios and some of the ways to manage them holistically will help all types of investors and business managers to avoid unnecessary and costly losses.


Risk analytics: An assessment process that identifies the potential for any adverse events that may negatively affect an investment. Conducting a risk analysis can help determine what actions need to be taken to protect  against losses. Risk analysis often works to minimize the impact of future negative unforeseen effects.


Risk budget: A risk budget is the amount of investment risk, relative to liabilities, an investing institution wishes to take. Risk budgeting is a risk modeling tool (similar to asset liability modeling) which aims to define the risk budget and allocate it among different investments in the most efficient manner.


Risk capacity: Risk capacity refers to the amount of risk an individual or organization can responsibly take on without jeopardizing their financial stability or other key objectives. It is determined by objective factors like income, assets, liabilities & debts, insurance coverage, dependents, and time horizon.


Risk exposure: Risk exposure is a measure of possible future loss (or losses) which may result from an activity or occurrence. In business, risk exposure is often used to rank the probability of different types of losses and to determine which losses are acceptable or unacceptable.


Risk tolerance: Risk tolerance is the amount of market volatility and loss you're willing to accept as an investor. Determining your personal risk tolerance is perhaps the most fundamental step you can take in deciding what types of investments to make.


REIT: A real estate investment trust is a company that owns, operates, or finances income-producing properties. REITs generate a steady income stream for investors but offer little in the way of capital appreciation. Most REITs are publicly traded like stocks, which makes them highly liquid (unlike physical real estate investments). REITs invest in most real estate property types, including apartment buildings, cell towers, data centers, hotels, medical facilities, offices, retail centers, and warehouses.


Return: Return is a measure of an investment's total interest, dividends and capital gains, expressed as a financial gain or loss over a specific timeframe. Return provides a glimpse of the investment's prior performance and helps determine if a particular investment has been profitable over time.


RIA: Registered Investment Adviser.


Risk management: Identifying, assessing, measuring and mitigating potential risks that could negatively impact investment portfolios or financial goals.


ROE: Return on equity.


Roll-up: Roll-up mergers, also known as a "roll up" or a "rollup," combine multiple small companies into a larger entity that is better positioned to enjoy economies of scale.


Roth IRA: A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. Roth IRA rules dictate that as long as the account has been owned 5-years and the donor is 59½ or older, funds can be withdrawn tax-free.


SEC: Securities & Exchange Commission.


Sector: The financial sector is a section of the economy made up of firms and institutions that provide financial services to commercial and retail customers. This sector comprises a broad range of industries including banks, investment companies, insurance companies, and real estate firms.


Secular: Secular refers to market activities that unfold over long time horizons, or that aren't influenced by short-term factors. A secular trend or market is one that is likely to continue moving in the same general direction for the foreseeable future.


Security: The term "security" is defined broadly to include a wide array of investments, such as stocks, bonds, notes, debentures, limited partnership interests, oil and gas interests, and investment contracts.


Semi-active: Also known as enhanced indexing. An investment strategy through which the investment manager uses the components of an index to construct a portfolio, but expresses their own view by overweighting or underweighting certain sectors or securities.


Senior secured: Secured senior debt is backed by an asset that was pledged as collateral. For example, lenders may place liens against equipment, vehicles or homes when issuing loans. If the loan goes into default, the asset may be sold to cover the debt. Conversely, unsecured debt is not backed by an asset pledged as collateral.


Short: A short, or a short position, is created when a trader sells a security first with the intention of repurchasing it or covering it later at a lower price. A trader may decide to short a security when she believes that the price of that security is likely to decrease in the near future. In theory, the potential loss in a short position is limitless as there is no price above which a security could not rise.


Short term: Short-term investments, also known as marketable securities or temporary investments, are financial investments that can easily be converted to cash, typically within five years. Many short-term investments are sold or converted to cash after a period of only three-12 months. Some common examples of short-term investments include CDs, money market accounts, high-yield savings accounts, government bonds, and Treasury bills. Usually, these investments are high-quality and highly liquid assets or investment vehicles.


SIPC: The Securities Investor Protection Corporation (SIPC) protects customers if their brokerage firm fails. Brokerage firm failures are rare. If it happens, SIPC protects the securities and cash in your brokerage account up to $500,000.


Situation: The totality of circumstances surrounding a client’s life, financial resources and needs and goals.


SLAT: Spousal Lifetime Access Trust is a trust created by one spouse (trustmaker spouse) for the benefit of the other (beneficiary spouse). A SLAT is an irrevocable trust used to transfer money and property out of the trustmaker’s estate into a trust for the other spouse’s benefit. Using a SLAT, the trustmaker spouse can take advantage of their lifetime gift and estate tax exclusion amounts by making sizable, permanent gifts to the SLAT. This decreases the value of their estate while still allowing some limited access to the trust’s money and property.


Sleeve: A credit sleeve is a form of credit agreement backed by physical assets, where the sleeve providing party, known as the "sleeve provider," will offer working capital and collateral on behalf of another company, known as the "sleeve recipient."


Slope: The concept of slope is very useful in economics, because it measures the relationship between two variables. A positive slope means that two variables are positively related—that is, when x increases, so does y, and when x decreases, y decreases also.


SMAs: A separately managed account is a professionally-managed  investment account that can be customized for a client's specific investment objectives or desired restrictions. SMAs offer more transparency than mutual funds and allow for tax trading to offset gains with losses.


Sovereign: In the world of finance, sovereign refers to sovereign debt or a sovereign bond.


Speculator: Speculators generally buy assets for a short period in the hopes of selling them for a profit after a dramatic price increase. They may be active in the stock market and bond market, as well as less traditional investment markets such as trading currencies (forex), cryptocurrencies, and commodities.


Sponsor: Sponsors invest in private companies, raise funds, underwrite mutual funds or exchange-traded funds, and guide companies through initial public offerings (IPO). Venture capital firms are examples of sponsors that invest in private companies through Series A,B, or C funding rounds.


Sponsored: Companies backed by a financial sponsor.


Spread: The difference or gap between two prices, rates, or yields. One common use of "spread" is the bid-ask spread, which is the gap between the bid (from buyers) and the ask (from sellers) prices of a security or asset.


Statistical arbitrage: Statistical arbitrage (or stat arb) refers to a group of trading strategies that utilize mean reversion analyses to invest in diverse portfolios of up to thousands of securities for a very short period of time, often only a few seconds but up to multiple days.


Step-up: Step-up in basis refers to the adjustment in the cost basis of an inherited asset to its fair market value on the date of the decedent's death. Cost basis is what determines the taxes owed, if any, when the asset is sold. Cost basis starts with the price paid for an asset, plus any additional costs added over time to improve or maintain the original asset. Step-up in basis, or stepped-up basis, is what happens when the price of an inherited asset on the date of the decedent's death is above its original purchase price. The tax code allows for the raising of the cost basis to the higher price, minimizing the capital gains taxes owed if the asset is sold later. The step-up in basis provision applies to financial assets like stocks, bonds, and mutual funds as well as real estate and other tangible property.


Strategic asset allocation (SAA): Strategic asset allocation is a portfolio strategy whereby the investor sets target allocations for various asset classes and rebalances the portfolio periodically. The target allocations are based on factors such as the investor's risk tolerance, time horizon, and investment objectives.


Structural alpha: Growing wealth by harnessing persistent opportunities embedded in the tax code that can be controlled. It is more readily achieved than investment alpha, if investors are armed with the right tools. Structural alpha results from deep planning. It can be enhanced by investment disciplines that align asset allocation, location and portfolio construction with the overall plan to produce distinct outcomes.


Sub-advisor: A sub-adviser is an asset management firm hired by an investment adviser to help identify, evaluate and manage investments within a portfolio. Sub-advisers are typically selected based on their investment style, expertise and track record in a specific investment strategy.


Sub-custodian: A sub-custodian is a sub-contractor appointed by a main custodian as part of its custody network, to hold client assets on behalf of a main custodian — usually to carry out functions that the main custodian can't. for example, to hold assets in a jurisdiction where the main custodian has no license to do so.


Sustainable spending: A rate of spending, as a percentage of investment assets, that will outlast an individual’s life.


Supervisor: A financial professional that oversees the activities of a firm’s registered representatives and other personnel.


Systematic: Systematic risk is that part of the total risk that is caused by factors beyond the control of a specific company, such as economic, political, and social factors. It can be captured by the sensitivity of a security's return with respect to the overall market return.


Tactical: Tactical financial management focuses on more short-term goals by making decisions and creating an action plan based on current market conditions.


Tactical asset allocation (TAA): Tactical asset allocation (TAA) refers to an active management portfolio strategy that shifts asset allocations in a portfolio to take advantage of market trends or economic conditions. In other words, tactical asset allocation refers to an investment style in which asset classes such as stocks, bonds, cash, etc.


Tax: A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.


Tax avoidance: An action taken to lessen tax liability and maximize after-tax income.


Tax bracket: A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets.


Tax budget: The tax expenditure budget displays the estimated revenue losses from special exclusions, exemptions, deductions, credits, deferrals, and preferential tax rates in federal income tax law.


Tax efficiency: Tax efficiency is when an individual or business pays the least amount of taxes required by law.


Tax evasion: The failure to pay or a deliberate underpayment of taxes.


Tax loss harvesting: Tax-loss harvesting is a tax strategy that involves selling nonprofitable investments at a loss in order to offset or reduce capital gains taxes incurred through the sale of investments for a profit.


Tax rate: A tax rate is a percentage at which the income of an individual or corporation is taxed. The United States uses a progressive tax rate system imposed by the federal government and many states. With such a system, the tax rate charged increases as the amount of the person's or entity's taxable income increases.


Tax shelter: Tax shelters are ways individuals and corporations reduce their tax liability. Shelters range from employer-sponsored 401(k) programs to overseas bank accounts. The phrase “tax shelter” is often used as a pejorative term, but a tax shelter can be a legal way to reduce tax liabilities.


Term structure: The term structure refers to the relationship between short-term and long-term interest rates. The yield curve plots the yield to maturity against the term to maturity.


Tracking Error: Tracking error is the divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often in the context of a hedge fund, mutual fund, or exchange-traded fund (ETF) that did not work as effectively as intended, creating an unexpected profit or loss.


Traditional: A traditional IRA is a way to save for retirement that gives you tax advantages. Contributions you make to a traditional IRA may be fully or partially deductible, depending on your filing status and income.


Treasuries: United States Treasury securities, also called Treasuries or Treasurys, are government debt instruments issued by the United States Department of the Treasury to finance government spending in addition to taxation.


Trust: A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.


Trustee: A trustee is a person who takes responsibility for managing money or assets that have been set aside in a trust for the benefit of someone else. As a trustee, you must use the money or assets in the trust only for the beneficiary's benefit.


Upgrade: An upgrade is a positive change in a security's rating. An upgrade is usually triggered by a steady improvement in the fundamentals and financials of the entity that has issued the security. Upgrades to the credit rating of corporate issuers of debt securities are issued by rating agencies, such as Standard & Poor's.


Unitrust: A unitrust provides that the income beneficiary, instead of receiving the income from the trust, receives a set percentage of the net asset value (NAV) of the trust determined annually and usually paid monthly. A commonly used percentage is 4%.


UTMA/UGMA: UTMA and UGMA accounts are taxable investment accounts set up to benefit a minor, but controlled by an adult custodian (parent, guardian, relative, etc.) until the minor reaches their age of majority — when a minor is legally considered an adult, which differs by state. At that point, the account assets transfer into the name of the minor.


Values-based: Values-based investing is an investment approach that reflects an investor's values by avoiding or increasing exposure to specific companies, sectors or business practices. Values-based investing has the potential to offer a high degree of both customization and personalization.


VC: Venture capital.


Vehicle: Investment vehicles include any financial account or product used to generate returns. Wealth transfer vehicles include trusts designed to move money to descendants of family. Philanthropic vehicles include donor advised funds and private foundations, among others.


Velocity: The velocity of money is a measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another. The velocity of money also refers to how much a unit of currency is used in a given period of time.


Venture capital (VC): Form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from high net worth investors, investment banks, and other financial institutions. VC is typically allocated to small companies with exceptional growth potential or to those that grow quickly and appear poised to continue to expand.


Volatility: Volatility is an investment term that describes when a market or security experiences periods of unpredictable, and sometimes sharp, price movements. People often think about volatility only when prices fall, however volatility can also refer to sudden price rises too.


Wealth allocation: Purposed-based approach to arrive at investment decisions.


Wealth allocation framework: A process through which investments can be aligned with specific desired critical needs, wealth transfer desires and aspirational goals to derive structural alpha.


Wealth enhancement & transfer: The second layer of the wealth allocation framework through which a family can enhance its lifestyle while simultaneously providing intergenerational wealth stability and having philanthropic impact.


Wealth management: Comprehensive financial services tailored to high-net-worth individuals or families, which may include investment management, estate planning, tax avoidance optimization, and other personalized services.

Wirehouse: A wirehouse is a term used to describe a full-service broker-dealer. Modern-day wirehouses range from small regional brokerages to large institutions with global footprints.


Yield: Yield refers to how much income an investment generates, separate from the principal. It's commonly used to refer to interest payments an investor receives on a bond or dividend payments on a stock. Yield is often expressed as a percentage, based on either the investment's market value or purchase price.


Yield to call (YTC): Yield to call  is a financial term that refers to the return a bondholder receives if the bond is held until the call date, which occurs sometime before it reaches maturity.


Yield to maturity (YTM): YTM is yield to maturity which means the total return you expect from your investment in bonds/debt mutual funds if the same is held till maturity. It is expressed as a percentage of the current market price. It is used for comparing different bonds and debt funds with different maturities.


Yield to worst (YTW): Yield to worst is a measure of the lowest possible yield that can be received on a bond with an early retirement provision. Yield to worst is often the same as yield to call. Yield to worst must always be less than yield to maturity because it represents a return for a shortened investment period.

Altar Rock LLC is a Registered Investment Adviser. This website is limited to general information regarding Altar Rock’s investment advisory services. Nothing here should be viewed as a substitute for personalized investment advice from Altar Rock — which would begin with a review of the client’s situation, needs, objectives and aspirations — or as tax, legal or accounting advice.

Investments involve risk and are not guaranteed. Different investments involve different types — and varying degrees — of risk. Past performance is not indicative of future performance. Do not assume that future performance of any specific investment, strategy, vehicle or manager referenced directly or indirectly herein will be profitable. 

Any charts, graphs, vehicles, managers or strategies shown here are illustrative only, may be altered without notice, and should not be used as the sole basis for any investment decision.

Projections of structural alpha constitute neither actual nor hypothetical performance. They additionally assume the application of investment discipline, stable tax laws and rates, and efficient portfolio construction — none of which, by nature, can be guaranteed.

© 2024 Altar Rock LLC

Altar Rock LLC is a Registered Investment Adviser. This website is limited to general information regarding Altar Rock’s investment advisory services. Nothing here should be viewed as a substitute for personalized investment advice from Altar Rock — which would begin with a review of the client’s situation, needs, objectives and aspirations — or as tax, legal or accounting advice.

Investments involve risk and are not guaranteed. Different investments involve different types — and varying degrees — of risk. Past performance is not indicative of future performance. Do not assume that future performance of any specific investment, strategy, vehicle or manager referenced directly or indirectly herein will be profitable. 

Any charts, graphs, vehicles, managers or strategies shown here are illustrative only, may be altered without notice, and should not be used as the sole basis for any investment decision.

Projections of structural alpha constitute neither actual nor hypothetical performance. They additionally assume the application of investment discipline, stable tax laws and rates, and efficient portfolio construction — none of which, by nature, can be guaranteed.

© 2024 Altar Rock LLC

Altar Rock LLC is a Registered Investment Adviser. This website is limited to general information regarding Altar Rock’s investment advisory services. Nothing here should be viewed as a substitute for personalized investment advice from Altar Rock — which would begin with a review of the client’s situation, needs, objectives and aspirations — or as tax, legal or accounting advice.

Investments involve risk and are not guaranteed. Different investments involve different types — and varying degrees — of risk. Past performance is not indicative of future performance. Do not assume that future performance of any specific investment, strategy, vehicle or manager referenced directly or indirectly herein will be profitable. 

Any charts, graphs, vehicles, managers or strategies shown here are illustrative only, may be altered without notice, and should not be used as the sole basis for any investment decision.

Projections of structural alpha constitute neither actual nor hypothetical performance. They additionally assume the application of investment discipline, stable tax laws and rates, and efficient portfolio construction — none of which, by nature, can be guaranteed.

© 2024 Altar Rock LLC

Altar Rock LLC is a Registered Investment Adviser. This website is limited to general information regarding Altar Rock’s investment advisory services. Nothing here should be viewed as a substitute for personalized investment advice from Altar Rock — which would begin with a review of the client’s situation, needs, objectives and aspirations — or as tax, legal or accounting advice.

Investments involve risk and are not guaranteed. Different investments involve different types — and varying degrees — of risk. Past performance is not indicative of future performance. Do not assume that future performance of any specific investment, strategy, vehicle or manager referenced directly or indirectly herein will be profitable. 

Any charts, graphs, vehicles, managers or strategies shown here are illustrative only, may be altered without notice, and should not be used as the sole basis for any investment decision.

Projections of structural alpha constitute neither actual nor hypothetical performance. They additionally assume the application of investment discipline, stable tax laws and rates, and efficient portfolio construction — none of which, by nature, can be guaranteed.

© 2024 Altar Rock LLC