Delayed Gratification
The resistance to the temptation of immediate pleasure in hope of obtaining a more valuable and long-lasting reward in the future.
Finance
The management, creation, and study of money and investments. Specifically focusing on how an individual, company, government, or entity acquires money and then how they choose to spend or invest.
Registered Investment Advisor (RIA)
An individual or firm that advises clients on investments, financial planning, and in many cases they manage client portfolios. The main difference between an RIA and a Broker-Dealer Advisor is the fiduciary standard. It is the advisor’s duty to provide advice that is in the client’s best interest.
Modern Monetary Theory
A progressive macroeconomic theory that believes that countries that can spend, tax, and borrow in a fiat currency are not constrained by revenues when it comes to government spending. Essentially, it’s an economic belief that governments can’t spend or borrow too much because they can always print more money.
Inflation
The decline in purchasing power of a specific currency over a given period of time.
Certified Financial Planner (CFP)
The designation awarded to the financial professionals who complete the necessary course-work, pass the board exam, maintain the proper continuing education, and uphold the values and standards of the CFP Board. Generally considered the gold standard of financial advisors.
Stock
A financial security that represents the ownership (or equity) in a specific business. This entitles the owner of the stock to a proportion of a corporation’s assets and profits relative to their overall percentage of ownership.
Bond
A fixed income investment that represents a loan made by an investor to a borrower. In exchange the bond holder receives a periodic return of their loan amount along with interest income of a set percentage amount over a set amount of time.
Open-End Mutual Fund
A professionally managed investment fund that pools money from many investors to purchase stocks, bonds, and/or other assets. Mutual Funds are traded daily based on the Net Asset Value (NAV) of all portfolio holdings calculated at the end of each day.
Key Benefits
- Investment management by the fund managers and diversification.
Exchange Traded Fund (ETF)
ETFs are pooled investment securities that typically track a particular index, sector, commodity, or asset. Unlike mutual funds, these are traded intraday, similar to purchasing stocks.
Key Benefits
- Low expense ratios
- Intraday trading
- Portfolio diversification
Annuity
Annuities are financial instruments that provide for a guaranteed income stream over a set period of time in exchange for a set investment amount.
Individual Retirement Account
IRAs are retirement accounts that allow individuals to save and invest for their retirement goals.
Key Benefit
- Funded with pre-tax dollars and can be invested in any investment assets rather than being limited to the funds allowed for by typical employer-sponsored plans.
Roth
- These accounts are contributed to after paying taxes and then benefit from tax free growth on investments. Usually, Roth accounts are attached to a type of retirement account.
Fun Fact
- Senator William Roth introduced these account types as part of the Taxpayer Relief Act of 1997.
Bull Market
A sustained period of rising market prices. Typically, a bull market is a 20% rise in markets.
Bear Market
These are periods of continued decreases in stock prices. The opposite of a bull market, a bear market is typically a 20% drop in stock prices and is oftentimes accompanied by recessions.
Net Worth
Net worth = Assets − Liabilities
It is the total wealth or value of an individual, household, or company. Net worth is a key indicator of current financial position because it takes both assets and liabilities into consideration.
Active Investing
The process of buying and selling investments based on qualitative and quantitative factors to determine the best pricing.
Passive Investing
A buy-and-hold strategy focused on diversification of assets, low costs, and tax efficiency. Typically, passive investing is a long-term approach.
Retirement
The common term for when you stop working in a particular profession. When it comes to finance, usually retirement planning is focused on a strategy to make your money last through its duration.
Currency
A means of exchange for goods or services.
Ordinary Income
Income that is earned in that calendar year and taxed marginally like wages.
Capital Gains
Capital Gains refers to income that was earned and realized after holding an investment for over one calendar year. These earnings receive favorable tax treatment below the ordinary income marginal tax rates.
Interest Rate
The percentage of the original loan that is paid as interest by a lender to a borrower. Typically, these are in an annualized format. Interest rates are important because they not only influence the cost of borrowing, but the likelihood of borrowing as well.
Profit
Earnings − Expenses = Profit
The financial gain from any business activity.
Loss
When the net business activity return is negative. For example, if you invest $100 and you end up with $90, you have a loss of $10.
Recession
A period of significant economic decline spread across an economy that lasts for at least two quarters.
Revenue
Income from a given source. The difference between revenue and income is that revenue is the amount of money before removing any expenses, while income is after removing expenses.
Debt
Debt is an amount that is owed; typically, this refers to money and is borrowed by one party from another.
Collateral
Something that can be held liable for debts unpaid. For example, a home mortgage is a “collateralized loan” because if you don’t pay the debt, the bank can take the home.
Mortgage
The agreement between a lender and a borrower to exchange money for the purchase of real estate.
Overdraft
When you withdraw more from a banking account than is currently available. This typically incurs a penalty fee as well.
Shares
In finance, shares refer to units or a portion of company ownership.
Leverage
Leverage refers to the amount of money borrowed to purchase a specific investment.
Hedge
Hedging in finance refers to taking a strategy to offset potential losses.
Private Equity
Private Equity is ownership of a company that isn’t sold to the general public on trading platforms. These investments generally require the investor to be an “accredited investor” to qualify for this likely higher-risk purchase.
Alimony
Alimony is money that is paid to an ex-spouse as a part of a divorce agreement. How much the spouse must pay and how long they are required to pay is dependent on the marriage terms, timeline, income, etc.
Estate
Estate refers to all property owned by an individual at and prior to the time of death. For individuals with considerable-sized estates, the concern is calculating a possible Taxable Estate and trying to avoid the potential 40% tax hit on those inheritable assets.
TOD
TOD is an abbreviation for the words Transfer on Death. This is an account designation that allows the account assets to pass directly upon death to the stated beneficiary(ies).
Beneficiary
A beneficiary is the person who is designated to inherit property. You may have multiple beneficiaries and in some cases you can set up charitable organizations as the beneficiary of a specific account.
Lease
Leasing is renting a property. You can lease real estate, land, machinery, vehicles etc.
Liquidity
Liquidity refers to easily spendable and transferable assets like cash or money market investments.
Merger
Merger refers to the merging of two companies. Oftentimes one company (entity) will remain and absorb the smaller company (entity).
Audit
Inspecting and confirming data. Audits in financial terms are typically run internally (within a company to confirm their data), externally (run by a third party to ensure compliance), or by the IRS (to verify the taxpayer’s return information).
TVM
TVM stands for Time Value of Money. This refers to the trade-off between the money you have now vs. potential value at a future time. Calculating this reveals the trade-offs between time available, interest rate changes, pricing and payment changes, and present & future value of dollars to help investors make better financial decisions.
Diversification
Diversification is finance jargon for spreading out risk by investing in many different holdings. This may mean investing in different companies, sectors, asset classes, market caps, etc.
Market Cap
Market Cap is short for Market Capitalization, which is finance jargon for stating the total value of, or size of, a business. When determining this number, you multiply the number of shares outstanding by the current share price. If the calculation yields above $10B it is a “Large Cap” company, next $2B-$10B is “Mid Cap,” and $300M-$2B are “Small Cap.”
Short
In finance, you can consider the words “long” and “short” relative to an investor’s outlook on the time they think they should hold an investment. “Long” on a specific investment means you’re holding it long term with the outlook that it will continue to grow. Shorting is the opposite. You can “sell short” an investment that is expected to drop in value and profit on that drop in value.
Commodity
Commodity is a basic good that can be bought and sold interchangeably for other similar goods. For example lumber, precious metals, or coffee.
Philanthropy
Philanthropy is a Greek word meaning “love of humanity”. Typically, it refers to charitable giving via monetary donations and time donations with a specified goal or purpose.
Default
Default is when a borrower is delinquent on a debt payment. This breach of agreement can be resolved by paying late fees or, in the worst-case scenario, by the lender taking possession of the borrower’s collateralized assets.
APR
APR is the abbreviation for Annual Percentage Rate. This refers to the interest charged over a one-year timeframe.
Basis Points
Basis Points refer to one hundredth of 1%. For example, if someone says the fee for a specific service is 50 basis points, that fee is .50%. It is typically used to show the change in value or the difference between different rates.
Robertson Stephens paid no fee to obtain recognition but has paid licensing fees to reference its appearances on the Newsweek, USA Today, and FA Magazine rankings lists. See Awards Disclosures
