Retail Securities key terms

A share of ownership in a company that gives the holder a residual claim on assets and earnings, typically carrying voting rights and no promised repayment schedule.

The basic ownership unit of a corporation, entitling holders to vote on major matters and receive dividends only after preferred claims and debt obligations are satisfied.

A hybrid security paying a stated dividend ahead of common shareholders, usually without voting rights, and often redeemable or convertible on set terms.

A distribution of cash or stock paid to shareholders from company profits or reserves, declared by the board and not guaranteed to continue.

Annual dividend per share divided by the current share price, expressed as a percentage, showing the income return a buyer would receive at that price.

An instruction to buy or sell immediately at the best available price, guaranteeing execution but not the price received.

An instruction to trade only at a specified price or better, guaranteeing price but not execution if the market never reaches that level.

An order that becomes a market order once a trigger price is reached, often used to limit losses on an existing position.

The gap between the highest price buyers will pay and the lowest price sellers will accept, a measure of trading cost and market liquidity.

A debt instrument in which the issuer promises periodic interest and return of principal at maturity; holders are creditors, ranking ahead of shareholders.

The stated annual interest rate a bond pays, calculated on face value and usually distributed in fixed semiannual installments.

The total annualized return an investor earns by holding a bond to maturity, assuming all coupons are reinvested at that same rate.

The danger that rising market rates will lower the price of existing fixed-income holdings, with longer maturities generally more sensitive.

A measure of a bond's price sensitivity to interest rate changes, roughly the weighted average time until cash flows are received.

The possibility that a bond issuer or borrower fails to make scheduled interest or principal payments, reducing the security's value.

An independent agency's letter grade estimating an issuer's ability and willingness to meet debt obligations, ranging from high quality to speculative.

Failure by an issuer to pay interest or principal when due, or breach of a material covenant in the debt agreement.

A pooled investment vehicle that sells shares to the public, invests in a diversified portfolio, and prices shares at net asset value once daily.

Total fund assets minus liabilities, divided by shares outstanding; the per-share price at which open-end fund shares are bought and redeemed.

The annual cost of running a fund, expressed as a percentage of average assets, deducted from returns before they reach shareholders.

A pooled fund whose shares trade intraday on an exchange like stock, generally tracking an index with low costs and tax efficiency.

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price before expiration.

A contract granting the holder the right to buy the underlying security at a specified strike price within a stated period.

A contract granting the holder the right to sell the underlying security at a specified strike price within a stated period.

A corporate bond that holders may exchange for a fixed number of common shares, combining interest income with equity upside potential.

Spreading investments across assets, sectors, or regions so that poor results in one holding are offset by others, reducing overall portfolio volatility.

Dividing a portfolio among asset classes such as stocks, bonds, and cash to balance risk and return against an investor's goals and horizon.

Market-wide risk from economic, political, or interest rate forces that affects nearly all securities and cannot be removed by diversification.

A statistic measuring how much a security's price moves relative to the broad market; above one means more volatile than the market.

The degree to which a security's price fluctuates around its average over time, often expressed as standard deviation of returns.

The risk that an investor cannot sell a security quickly at a fair price because trading volume is thin or buyers are absent.

A brokerage account permitting investors to borrow funds against securities to buy more, subject to maintenance requirements and interest charges.

A broker's demand that an investor deposit additional cash or securities, or reduce positions, when account equity falls below the required minimum.

Using borrowed money or derivatives to increase the size of a position, magnifying both potential gains and potential losses.

An investor's willingness and financial capacity to accept losses or volatility in pursuit of higher expected returns.

The formal disclosure document accompanying a securities offering, describing the issuer, the terms of the security, and the principal risks involved.

The filing submitted to securities regulators before a public offering, containing detailed business, financial, and management disclosures.

The marketplace where investors trade previously issued securities among themselves, with proceeds going to sellers rather than the issuer.

Trading on material, nonpublic information about a company in breach of a duty of trust, which is prohibited by securities law.

The regulatory obligation of a broker to verify a client's identity, financial situation, and investment objectives before recommending or opening accounts.

The standard requiring that a recommendation be reasonably appropriate for a particular client's objectives, financial circumstances, and risk tolerance.