Glossary of Terms

Asset Allocation

A proven method of reducing risk by allocating assets over several different classes (or types) of investments. Example: Large and Small US Companies, International Companies, Bonds, and Cash
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Bond

Longer term debt securities (IOUs) issued by corporations and governments to raise money for growth and expansion. A bond holder receives a stated rate of interest plus the return of their investment.
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Consumer Price Index (CPI)

A measure of the increase or decrease in prices for goods and services. Measures inflation.
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Dow Jones Industrial Average

Most common method of measuring daily stock market performance. Based on 30 large companies representing different industries.
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Money Market (Cash)

Short-term IOUs issued by corporations or the US Government. Although not guaranteed, money markets provide a current rate of interest with very little risk.
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Mutual Fund

Many investors pool their funds together. A mutual fund offers professional management and diversification by investing in hundreds of companies.
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Russell 2000 Index

Another method of measuring daily stock market performance. Based on 2000 of the smallest companies in the US.
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Standard & Poors 500 Index

Another method of measuring daily stock market performance. Based on 500 of the largest companies in the US.
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Stock

Another way for corporation to raise money for growth and expansion is by issuing stock (equity securities). A share of stock represents a small share of ownership in a company. Higher risk means an opportunity for higher returns.
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Stock Exchange

Marketplace where stocks are listed and traded between buyers and sellers. New York Stock Exchange is oldest and largest. The FINRAAQ Exchange is electronic and lists many smaller companies, particularly technology stocks.
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