MBG360 Financial Dictionary 

Acceleration Clause

This is a clause in your mortgage that allows the lender to call the remaining principal of the loan due under certain circumstances.

The most common reason for this occurring is if the borrower defaults on the loan.

Adjustable-Rate Mortgage (ARM)

A mortgage in which the interest changes periodically. The interest rate is tied to a specified index.

Alternative Investments

Assets that fall outside traditional categories like stocks, bonds, or cash.

They often have lower liquidity but can diversify a portfolio and hedge against market risks.

Amortization

Your mortgage payment is applied to two things: the interest and the principal. As the loan is paid down, the interest portion of the payment decreases and the portion used toward the principal increases.

Amortization is primarily used as an accounting technique to lower the book value of an asset or a loan over a period of time.

Annual Percentage Rate (APR)

The total yearly cost of borrowing money, expressed as a percentage. It includes the interest rate plus any lender fees or additional charges, giving you a complete picture of the loan or credit’s true cost.

Annual Report

All companies are required by the SEC to produce an annual report. This report is sent to all shareholders and provides the financial results for the previous fiscal year. Accredited accounting firms review and verify the results.

Annual report/earnings

An annual report is a comprehensive report on a company's activities throughout the preceding year.

Annual reports are intended to give shareholders and other potential investors information about the company's activities and financial performance.

Annuities

A financial product sold by insurance companies that provides a stream of income, typically for retirement, in exchange for an upfront payment or series of payments

Appraisal

A professional and independent valuation of a property, to establish a property’s market value. An appraisal can help a seller and buyer determine the right sales price for a property.

Appreciation

The increase in the value of a property over a period of time. Appreciation can occur because of home improvements, changes in the housing market, etc.

Assets

An asset is a product/item that has a monetary value to it. The details of value, ownership, etc., are in the paperwork of the financial institution

Asset Allocation

The strategy of dividing your investment portfolio among different asset classes (like stocks, bonds, cash, and alternatives) to balance risk and reward based on your goals

Asset Management

Asset management is the process of organizing and managing your money across different accounts and asset types to match your goals and risk tolerance

Assumable Mortgage

A mortgage that can be assumed by the buyer when the home is sold. There is usually a qualification process for the new owner before he or she can assume the mortgage.

Auto Insurance

Covers damages to vehicles, medical expenses, and liability in case of accidents

Balance Sheet

 A financial statement that provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time

Balanced Mutual Funds

Mixture of bonds and stocks to balance risk and return

Balloon Mortgage

A mortgage that has a large final payment due at some point.

For example, a loan may be amortized over a thirty-year period, but at year ten, the remaining principle must be paid in full.

Bear Market

A bear market is one where there are considerable and long-term declines in the value of the market, typically for two or more quarters

Behavioral Risk

The risk of making emotional decisions during market highs and lows

Blue Chip

The most stable and established stocks on the stock market. For example, companies like Disney, Coca-Cola, and IBM are frequently considered to be Blue Chip stocks.

Bonds

A loan you provide to a company or government, earning interest in return

Bonds (Corporate, Municipal, and Government)

Income-focused strategy

Bull Market

The opposite of a bear market is a bull market. Two or three quarters of significant stock market growth and a positive outlook are characteristics of a bull market.

Burn Rate

The rate at which a startup spends its capital.

Buybacks

A stock market buyback, also known as a share repurchase, is when a company buys back its own shares from the stock market or directly from shareholders

Capital Gain Tax:

 Assets that are held for less than one year and sold for a profit are subject to ordinary income tax; also known as short-term capital gains tax.

Catalyst

An event or news report that causes the price of a security to drastically move up or down

Cash Value Life Insurance:

A type of permanent life insurance (e.g., whole life or universal life) that combines a death benefit with a savings/investment component

Certificate of Deposit (CDs)

CDs are time deposits offered by banks with fixed interest rates and specified maturities, ranging from a few weeks to several years

Closing

This will mean different things in different states. In many states, a real estate transaction is not “closed” until the documents are recorded at the recorder's office

Closing Costs

These are the fees and charges in excess of the purchase price of the property due at the closing of a real estate transaction

Commercial Paper (CD’s)

Commercial paper are unsecured, short-term promissory notes issued by corporations to finance their immediate needs

Common Stock

The basic unit of ownership in a corporation

Commodities:

Physical goods like gold, oil, or agricultural products

Crowdfunding Platforms

Pooling money with other investors to fund real estate projects through online platforms

Cryptocurrencies

Digital assets such as Bitcoin or tokenized real estate on a blockchain

Current Yield

Focuses on the current price of a bond, as opposed to its face value

Debt-to-Income Ratio (DTI)

Measures the amount of income a person generates in order to pay a debt

Deed

The legal document that conveys the title or ownership to a property

Default

The failure to make payments on a home loan

Direct Ownership

Owning physical properties such as residential, commercial, or industrial real estate

Discretionary Expenses

These are non-essential expenses that you have control over and can adjust based on your budget

Diversification

Investing broadly across a number of different securities, industries, or asset classes to reduce risk

Dividend Income

Payments made by companies to shareholders from their profit

Dollar-Cost Averaging

The practice of investing a fixed amount of money on a constant periodic basis

Earned Income

Money earned from working, including salaries, wages, tips, and commissions

Earnings Reports

Financial statements released by publicly-traded companies, detailing their financial performance over a specific period

EPS or Earnings per Share

This formula tells how much money a company makes for each share of its stock

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders to make credit equally available without discrimination

Equity

The difference between the fair market value of the property and the amount owed on the mortgage

Escrow Account

A specific account that a lender uses to hold your monthly payments toward property taxes and insurance

Evergreen Funds

An investment fund that does not have a fixed end date and operates indefinitely

Exclusions

Specific situations or risks that are not covered by an insurance policy

Face Value / Par Value

The principal value of the bond paid at maturity.

Fair Market Value

The price that an asset or property would sell for in an open market

The Fed or Federal Reserve Board

The governing entity of the Federal Reserve System, America’s central bank

Financial Risk

The danger of losing money due to market crashes, bad investments, inflation, or high debt

First Mortgage

The mortgage that is the primary lien on the property

Fixed Expenses

These are essential expenses required for daily living that you cannot avoid

Fixed-rate Mortgage

A mortgage in which the interest rate is fixed throughout the life of the loan

Foreclosure

The legal process when a lender takes back ownership of a home due to lack of payment

Front-End Load

A fee that some funds impose at the time of purchase

Fundamental Analysis

Looks at the economic and financial factors that influence a business

Good Faith Estimate (GFE)

A document breaking down estimated costs associated with a reverse mortgage loan

Growth Stocks

Stocks that reinvest profits into the company rather than paying dividends

Health Insurance

Protects against medical expenses

Hedge Funds:

Private investment pools that use advanced strategies like short selling and leverage

Home Equity Line of Credit (HELOC)

A line of credit secured by home equity

Home Equity Loan

A loan secured against a property's equity

Homeowners Insurance

Protects against losses and damage to one’s home

Hybrid Fund

A mutual fund that invests in both stocks and bonds

Income Statement

A financial report summarizing a company's revenues, expenses, and profits

Income Stocks

Stocks that pay regular dividends

Index Fund

A fund intended to mimic the performance of a market index

Inflation

The general increase in the prices of goods and services

Initial Public Offering (IPO)

The first sale of a company's stock to the public

Insurance

A financial product that protects against unexpected losses

Interest Income

Money earned from lending money via savings accounts, bonds, or loans

Interest Rate

The cost of borrowing money or the return earned on lending money

International Relations Analysis

The study of interactions among countries and global players

Investing

Buying and holding assets for the long term to grow wealth

Investment Risk

Specific risks related to stocks, bonds, and other financial instruments

Investment Vehicles

Tools or methods used to invest money (e.g., stocks, bonds, mutual funds)

Keogh

A tax-deferred pension plan for self-employed individuals

Liabilities

A financial obligation that a person or company owes

Life Insurance

Provides financial support to beneficiaries upon the policyholder's death

Limited Partnerships

A business structure where only the general partner manages the business

Liquidity

How quickly an investment can be converted to cash

Liquidity Risks

Challenges of converting investments into cash without significant loss

Load Fund

A mutual fund that charges a sales commission

Lock-Up Periods

Periods where funds in certain investments are inaccessible

Long-Term Care Insurance (LTC)

Helps pay for extended care services

Market Capitalization

The total dollar market value of a company's outstanding shares.

Market Indexes

A market index is a statistical measure that tracks the performance of a specific group of securities (such as stocks, bonds, or other assets) to represent a segment of the financial market.

These indices serve as benchmarks to evaluate the performance of investments, economic trends, or specific sectors.

Market Order

An order to buy or sell a stock at the best available current price

Mid Cap

Companies with a market capitalization between $2 billion - $10 billion

Money Market Fund

A mutual fund that invests in short-term, low-risk securities

Mortgage

A loan used to purchase real estate

Mutual Fund

An investment company that buys a portfolio of securities

NASDAQ

A stock exchange primarily for technological companies

Net Income

Profit after subtracting all expenses

New York Stock Exchange (NYSE)

The oldest and most prestigious U.S. stock exchange

NIL

Rights of athletes to be compensated for the use of their name, image, and likeness

No-Load Fund

A mutual fund that does not charge a sales commission

Open-end Fund

A mutual fund that sells shares directly to investors

Operational Risk

Risks from systems failing or supply chain issues

Option Contract

An agreement to buy or sell an underlying security at a specified price

Options

Financial derivatives that give the right to buy/sell assets at a set price

P/E Ratio (Price/Earnings Ratio)

Shows how a company's earnings relate to its stock price

Penny Stocks

Low-priced, high-risk stocks typically under $5/share

Personal Risk

Loss of income or assets due to illness, job loss, or emergencies

PITI (Principal, Interest, Taxes, Insurance)

Components of a mortgage payment

Portfolio

A collection of investments held by an individual or institution

Preferred Stocks

Stocks with priority over common stocks for dividends

Premiums

Payments made to an insurer for coverage

Prime Rate

The interest rate commercial banks charge their best clients

Principal

The amount of money borrowed or remaining unpaid on a loan

Private Equity

Investments in private companies through buyouts or venture capital

Prospectus

An official document detailing an investment offering

Qualified Retirement Plan

IRS-approved retirement plans with tax benefits

Real Assets

Tangible investments like real estate and commodities

Real Estate Investment Trusts (REITs)

Companies that own or finance income-generating real estate

Recession

A period of economic decline lasting at least two quarters

Renters Insurance

Covers a tenant’s personal belongings and liability

Required Minimum Distribution

Mandatory withdrawals from retirement accounts after age 72

Return on Investment (ROI)

A measure of investment profitability

Revolving Debt

A flexible credit line, like a credit card

Risk Management

Identifying and mitigating financial risks

Risk Tolerance

An investor’s ability to endure market volatility

Rollover

Transferring funds from one retirement account to another

Roth IRA

A retirement account with tax-free growth and withdrawals

Royalty Income

Money earned from licensing intellectual property

Second Mortgage

A loan secured against home equity, subordinate to the first mortgage

Secondary Markets for Alternatives

Platforms for buying/selling alternative investments

Securities and Exchange Commission (SEC)

The chief regulatory body over U.S. markets

Seed Funding

Early capital for startups to develop a product

Self-Directed IRA (SDIRA)

An IRA allowing alternative investments like real estate

Seller Concession

An agreement where the seller pays certain costs for the buyer

Series A/B/C Funding

Growth capital provided in rounds to scaling companies

Short Selling

Betting a stock will decline by borrowing and selling shares

Small Cap Stock

Companies with market capitalization of $2 billion or less

Stock (Equity)

Represents partial ownership in a company

Stock Split

When a company issues more shares without diluting value

Stop Limit Order

An order that triggers a limit order at a stop price

Stop Market Order

An order to buy/sell when a security reaches a specific price

Structured Products

Custom financial products combining derivatives with traditional investments

Technical Analysis

Uses price data to predict future movements

Time Horizon

The length of time an investment is held

Total Addressable Market (TAM)

Total revenue opportunity if a product captures 100% market share

Total Return

A fund’s performance including capital gains, dividends, and NAV changes

Trading

Buying/selling assets short-term to profit from price changes

Trailing Stop Order

A stop order that adjusts as the stock price moves favorably

Treasury Bills (T-Bills)

Short-term government securities sold at a discount

12b-1 Fee

A mutual fund fee for marketing/distribution costs

Umbrella Insurance

Extra liability coverage beyond standard policies

Underwriting

The process of evaluating a borrower’s risk for a loan

Universal Life Insurance

Flexible permanent life insurance with an investment component

Value Stocks

Stocks perceived as undervalued relative to fundamentals

Venture Capital

Funding for early-stage, high-growth startups

Whole Life Insurance

Permanent life insurance with a savings component

Yield

The annual return on an investment expressed as a percentage

Yield to Maturity

 A bond’s total return if held until maturity

Zero Coupon Bonds

Bonds sold at a discount that pay no periodic interest