- Preferred Stock
- An equity security that pays a fixed dividend and has priority over common stock for dividend payments and asset distribution in a liquidation, but typically carries no voting rights. It behaves partly like a bond because of its fixed income stream.
- Municipal Bond
- A debt security issued by a state, city, or local government to fund public projects, whose interest is generally exempt from federal income tax. The two main types are general obligation bonds (backed by taxing power) and revenue bonds (backed by project income).
- Call Option
- A contract giving the buyer the right, but not the obligation, to purchase an underlying security at a set strike price before expiration. Buyers are bullish, expecting the price to rise above the strike.
- Put Option
- A contract giving the buyer the right, but not the obligation, to sell an underlying security at a set strike price before expiration. Buyers are bearish, expecting the price to fall below the strike.
- Prospectus
- A formal legal document filed with the SEC that discloses material facts about a securities offering, including the company's financials, risks, and use of proceeds. It must be delivered to investors in a new-issue (primary market) offering.
- Mutual Fund
- An open-end investment company that pools money from many investors to buy a diversified portfolio of securities, with shares priced daily at net asset value (NAV). Investors buy and redeem shares directly from the fund rather than trading them on an exchange.
- Yield to Maturity (YTM)
- The total annualized return an investor earns if a bond is held until it matures, accounting for the purchase price, coupon payments, and the difference between price and par value. It is the most comprehensive measure of a bond's yield.
- Diversification
- An investment strategy of spreading money across different securities, sectors, or asset classes to reduce the impact of any single holding's poor performance. It lowers unsystematic (company-specific) risk but not systematic (market-wide) risk.
- Accredited Investor
- An individual or entity that meets SEC income or net-worth thresholds and is therefore permitted to invest in certain private, unregistered securities offerings. The status reflects a presumed ability to bear greater financial risk.
- Blue Sky Laws
- State-level securities regulations designed to protect investors from fraud by requiring registration and disclosure for offerings sold within that state. They operate alongside federal securities laws.
- Common Stock
- A security representing ownership (equity) in a corporation, giving the holder voting rights and a residual claim on assets and earnings after creditors and preferred shareholders are paid. Common stockholders are last in line during a liquidation but benefit most from a company's growth.