Improve Your Financial Literacy With This Glossary

Baffled by buzzwords bandied about by high-finance big shots? Cut your confusion by consulting this glossary.

Asset allocation 

A fancy way of asking, “How much of my investments should I have in stocks versus bonds or other stuff?”— a crucial question for retirement investors. Not sure of the answer? Buy a target-date fund for your IRA or 401(k); the fund’s managers will make that decision for you based on when you’ll need the money. 

Bitcoin

A bunch of computer code that a bunch of criminals, idealists and speculators agree is worth “real” money. Sadly, its real-money value swings widely, making it impractical except for criminals, idealists and speculators.

Blockchain 

1. A different bunch of computer code containing an unalterable record of a series of transactions. The most famous is a digital ledger recording all bitcoin transfers.

2. A word often uttered by companies hoping to snare investors’ attention — and dollars.

Emerging markets

Countries — notably China, India, Brazil and Russia — that Wall Street deems as having less-mature economies than ours but greater opportunities for growth. The catch: Such markets’ infrastructure is shaky, and stocks tend to dive as aggressively as they soar.

Exchange-traded fund (ETF)

A bundle of stocks, bonds or other assets in a particular category, say, a country or industry. Unlike mutual funds, which they resemble, ETFs are an investment you can buy and sell throughout the day, like stocks. Marry a mutual fund to a stock and this is their baby.

FICO score

Usually between 300 and 850, Fair Isaac Corp.’s estimate, based on your borrowing behavior, of the odds you’ll repay any debts. Companies use it to make big decisions, such as whether they’ll lend you money. A scary test, an obscure scoring system and frightening consequences — it’s the SAT for adults.

Fiduciary

Among financial advisers, one obligated to put your desire to make money ahead of the desire to make money from you. Caution: Fiduciaries are like hotties on a dating app — not everyone who tries to look like one actually is.

Junk bonds

Bonds with an elevated chance of default and, usually, an elevated yield. Rebranded as “high-yield” bonds, they typify Wall Street’s love of a good euphemism.

No-load

A mutual fund with no percentage-of-purchase sales charge. Each $100 you pay typically buys $100 worth of the fund — not $100 minus the fee (up to $5.75, normally) pocketed by a broker.

Penny stock

A small company’s shares trading for less than $5 apiece, usually not on a major U.S. exchange (such as the Nasdaq ). “Penny” once referred to the low prices of such stocks, but more frequently it predicts your investment’s full value down the line.