Marketplace - EverFi

Monetary Policy

Refers to policies set by the Central Bank (or Fed in the United States) to influence the amount of available money and credit in the economy. One way the Central Bank does this is by adjusting the interest rate banks charge each other for short term loans. This interest rate influences how much money individuals and businesses are willing to borrow from banks

Going Public

Refers to the process of a private company becoming a publicly traded company. When a company does this, they must go through the initial public offering (IPO) process. Once the company is on the stock market, investors anywhere are able to buy shares of the company.

Calculated Risk

Refers to the risk of failure an entrepreneur takes on after carefully weighing the advantages and disadvantages of starting a new business.

Labor Market

Refers to the supply and demand for labor in which employees provide the supply and employers provide the demand.

Fiscal Policy

Refers to the use of government spending and tax policies to influence the economy.

Cash Equivalent

Short-term investments that are considered liquid, which means you can exchange them for money quickly without a big change in value.

Offering Price

The price at which stocks are listed at when they first become available on the stock market. It is usually set by an investment bank.

Time Value of Money (TVM)

The principle that money now is worth more than the same amount of money in the future due to its potential to grow through interest or capital appreciation.

Asset Allocation

The process of deciding how to divide your investment portfolio among different asset categories, such as stocks, bonds, and cash equivalents.

Return

The profit or loss on an investment.

Money Market Investment

A type of short-term investment that is considered safe and easily accessible. Examples include money market funds and short-term government bonds.

Money Market Fund

A type of mutual fund that invests only in high liquid cash and cash equivalent investments.

Fixed Income Fund

A type of mutual fund that is primarily invested in fixed income investments, such as bonds.

Private Company

A business who does not have stocks available on a public exchange.

Public Company

A company that has stock available on the stock market for investors to trade.

Derivative Product

A contract that is priced based on the value of the good or investment being sold. They include futures, forwards, and options.

Dividend

A distribution of a portion of a company's earnings to its shareholders.

Registration Statement

A document filed with the Securities and Exchange Commission by a privately held company. This document declares the company's intent to offer shares of its stock to the general public on a public exchange.

Venture Capital

A form of equity financing that investors provide to to startup companies and small businesses that are believed to have long-term growth potential. It comes from investors, investment banks, and other financial institutions.

Prospectus

A formal legal document that is required to be filed with the Securities and Exchange Commission when a company goes public. It provides details about the investment offering sale to the public.

Passively Managed Fund

A fund that follows a market index and does not have a management team making investment decisions. This is different than an actively management fund, which refers to a fund where a manager or a management team makes decisions about how to invest the fund's money

Securities and Exchange Commission (SEC)

A government agency that protects investors and ensure the capital markets are fair.

Short-Term Government Bond

A government bond with a maturity of less than one year.

Board of Directors

A group of individuals elected to represent shareholder interest. They are often responsible for establishing management policies, providing company oversight, and making decisions on major company issues. Every public company must have one.

Standard and Poor's 500 Index

A list that tracks the overall performance of the 505 largest public companies in the world.

Equity Fund

A mutual fund that invests primarily in stocks.

Money Manager

A person or financial firm that manages an investment portfolio for someone else. Mutual funds that are actively manager are run by them.

Angel Investor

A person or group of people who invests in a startup, usually in the early stages. They are often friends and family of the entrepreneur.

Designated Market Maker

A person who works on the stock floor. They are responsible for providing the most up-to-date prices on investments in the marketplace and taking investment orders from brokers.

Contraction Phase

A phase of the business cycle when the economy moves from a peak to trough. This phase occurs when the economy falls and GDP is decreasing.

Expansion Phase

A phase of the business cycle when the economy moves from a trough to peak. This phase occurs when the economy is growing and GDP is increasing.

Stock

A piece of ownership in a company. When you purchase it, you become a part owner of the company.

Savings Account

A place where you can store cash securely while you earn interest on your money.

Initial Public Offering (IPO)

A private company or corporation raises money by offering its stock to the public for the first time.

Algorithm

A self-contained set process of actions, or a defined list of steps, used to solve a particular problem used for calculation and decision making. It is used for a wide variety of applications, including robo-advisors.

Ticker Symbol

A set of letters assigned to a company trading on the stock market. Investment banks and companies usually work together to create them. Examples are SNAP for Snapchat or FB for Facebook

Depression

A severe and prolonged downturn in economic activity. It is commonly defined as an extreme recession that lasts two or more years. They are usually characterized by large decreases in GDP and high rates of unemployment

Investment Bank

A type of financial institution that helps companies access the capital markets to raise money. It is different than a commercial bank, which refers to a financial institution that provides services such as accepting deposits, providing loans, and offering basic investment products.

Bond

A type of fixed income investment. When you buy one, you loan money to a borrower (usually a corporation or the government) for a set amount of time in return for interest paid at fixed periods. When it becomes due, you get the full amount you loaned back.

Fixed Income

A type of investment whose return is usually predictable and paid on a regular schedule. An example is a bond, which usually pays out interest twice a year.

Index Fund

A type of mutual fund designed to match major market indexes, such as the S&P 500.

Balanced Fund

A type of mutual fund that invests in a fixed mix of stocks and bonds. An example of is a mutual fund that invests 50% in stocks and 50% in bonds.

Market Cap Mutual Fund

A type of mutual fund that invests in companies of a certain size. Examples include micro, small, mid, large, and mega cap mutual funds.

Market Index

A weighted average of several stocks or other investment vehicles from a section of the stock market. They are calculated from the price of the selected stocks. It is meant to represent an entire stock market and track market changes over time.

Global Economy

All the transactions that occur in connected markets across economies of different countries.

Actively Managed Fund

An actively managed fund is a fund where a manager or management team makes decisions about how to invest the fund's money. This is different than a passively managed fund, which refers to a fund that follows a market index and does not have a management team picking investments.

Bootstrapping

An entrepreneur uses their own money to start a business. Entrepreneurs will often put in just enough money to test out their business idea—even if it's not perfect yet.

Transaction

An exchange between people. They can occur in the goods and service, labor, and financial market.

Inflation

An increase in the prices of goods and services across many markets in the economy

Capital Appreciation

An increase in the value of an investment. It is the difference between the purchase price and the sale price of an asset. For example, if you buy a stock at $10 and it goes up to $12, you now have a $2 appreciation.

Broker

An individual or business that specializes in bringing together buyers and sellers of stocks.

Brokerage Account

An investment account used to purchase stocks, bonds, and other financial assets

Exchange-Traded Fund (ETF)

An investment that tracks an index (like an index fund) or basket of assets. ETFs trade on stock exchanges, similar to stocks.

Liquid

An investment you can quickly buy or sell in the market without a dramatic increase in price. Cash equivalents is an example of this type of investment.

Robo-Advisor

An online software that uses algorithms, or sophisticated math formulas, to manage investments for their clients.

Asset

Anything of value or a resource of value that can be converted into cash. Individuals, companies, and governments all own them.

Loan

Borrowing a sum of money with the expectation that you will pay the full amount back plus interest in the future.

Diversification

Choosing investments that come from different categories rather than investing all of your money in one company, industry, or country.

Hyperinflation

Extremely rapid or out-of-control inflation.

Exit Strategy

How an investor plans to get out of an investment. An investor, such as an angel investor, may this strategy to get out of a business that is not profitable in order to limit their losses. If a business is profitable, an investor may encourage the company to go through an IPO as their exit strategy.

Personal Financial Health

How much money you have after counting what you own and what you owe others. It can give you an indicator of how capable you are of reaching your financial goals.

Declining Economy

Is characterized by falling GDP, decreasing inflation, and expected rises in the unemployment rate

Market

Is used to describe all of the transactions for the same thing. Examples of markets include the footwear, restaurant, and stock market.

Entrepreneur

People who start a new business and assume all the risk and rewards of the business

Investing

Putting money into something with the expectation of earning profitable returns in the future through interest or an increase in investment value.

Investing in Yourself

Putting time and money towards your own personal growth.

Saving

The amount of income not spent or used.

Risk Tolerance

The amount of market ups and downs an investor can tolerate.

Profit

The amount somebody (usually a company) makes. This is found by subtracting how much money they have spent (expenses) from how much money they have brought in (revenue).

Interest

The cost of using somebody else's money. Interest is calculated as a percentage of a loan balance, paid to the lender periodically for the privilege of using their money.

Maturity Date

The date that the full amount of the loan (or bond) is repaid to the lender and interest payments stop.

Peak Phase

The highest point in the business cycle. It occurs at the end of the expansion phase and at the start of the contraction phase.

Time Horizon

The length of time you plan on holding on to your investments.

Trough Phase

The lowest point in the business cycle. It occurs at the end of the contraction phase and at the start of the expansion phase.

Bond Market

The market where you can trade bonds.

Business Cycle

The natural rise and fall in GDP in an economy. It goes through four phases: expansion, peak, contraction, and trough.

Unemployment Rate

The percentage of people who currently don't have jobs but are looking for work.

Market Capitalization

The total dollar market value of a company's outstanding (or available) shares. It is calculated by multiplying a company's outstanding shares by the current market price of one share. For example, if a company has 1,000 outstanding shares and the price of one share is $1, then the results would be $1,000.

GDP (Gross Domestic Product)

The total value of all the finished goods and services in a country over a certain period of time. You can think of these goods and services as all of the things individuals, companies, and governments buy (clothing, food, electronics, aircrafts) or do with their money.

Currency

The type of money a country uses as a medium of exchange.

Growing Economy

This is characterized by rising GDP, steadily increasing GDP, and an expected decline in the unemployment rate.

Goods and Services Market

This is where individuals, businesses, and governments complete transactions for different goods and services.

Contractionary policy

Used by the government and Central Bank to fight rapid inflation in the economy. This policy discourages individuals and businesses from spending in the economy.

Expansionary Policy

Used by the government and Central Bank to stimulate growth in the economy. This policy encourages individuals and businesses to spend more in the economy.

Mutual Fund

Uses money from many investors to invest in a diverse collection of stocks, bonds, and other assets.

Capital

Wealth in the form of money or anything else that has value. Examples include money, property, buildings, and machinery.

Net Worth

What you own (your assets) minus what you owe (your liabilities).

Debt Financing

When a company borrows money to fund their business. When companies use this financing, they must pay back the amount they borrowed plus interest.

Equity Financing

When a company raises money by selling shares of ownership in the company to investors. They hope that their investment will grow in value over time.

Financial Market

Where you trade different types of investments, including stocks, bonds, currencies, derivatives, and more.