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Money words you've heard: Financial terms defined so you can be smarter and more successful

Read up on these financial terms to understand what's going on in the news.

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NFTs, GDP, benchmarks, and bond yields: Financial jargon can confuse and confound anyone trying to learn more about their money.

To help you feel smarter and more successful, we've defined some of the most common financial terms in an easy-to-navigate glossary.

For more resources, check out our News You Can Use column breaking down the daily headlines, and follow the new CNBC + Acorns Instagram feed Money Word of the Day.

Glossary guide

Numbers and symbols | A-B | C-D | E-F | G-H | I-J | K-L | M-N | O-P | Q-R | S-T | U-V | W-X | Y-Z

Numbers and symbols

10-year Treasury note

A 10-year Treasury note is a loan you make to the U.S. government that matures in a decade. The yield on the 10-year note is considered a "benchmark" rate, meaning it influences rates on similar-length loans, such as 15-year mortgages, which rise and fall alongside it.

10-year Treasury yield 

A Treasury yield is the return on investment in the U.S. government's debt obligations. A 10-year Treasury yield is often watched as a sign of investor sentiment about the economy.

401(k)

A 401(k) plan is a workplace retirement account that lets employees set up automatic contributions from each paycheck. Typically, those contributions are pre-tax and grow tax-free until retirement. Some companies offer a Roth 401(k) option, where contributions are taxed, and then grow tax-free and can be withdrawn tax-free in retirement. Some employers offer matching contributions, which is money the company deposits based on how much an employee contributes.

In 2021, the maximum amount employers can contribute to a 401(k) is $19,500. If you're age 50 or older, you can make up to another $6,500 in "catch-up contributions."

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403(b) plan

A 403(b) plan is a tax-sheltered annuity plan for retirement, similar to a 401(k) but intended for employees of public schools, governments, and nonprofits. Usually 403(b)s have lower administrative costs and are run by insurance companies rather than by mutual funds.

A-B

Above-the-line deduction

An above-the-line deduction is a tax break that's available even if you take the standard deduction. A below-the-line deduction is available only to people who itemize their deductions. 

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Amorphous savings account

An amorphous savings account is one with no goals attached to it, CFP Brad Klontz told Grow. When you start putting money into general savings without a plan, "psychologically you're not very conscious about that account," he said. Being targeted can keep you motivated, though, so name accounts or set goals like emergency savings and a retirement fund.

Ancillary revenue 

Ancillary revenue is money a company makes from products and services other than its main offerings. In 2020, many major airlines eliminated change fees, one of their most lucrative forms of ancillary revenue. In 2019, the airline industry brought in $2.8 billion from such charges. 

Antitrust

Antitrust laws aim to regulate the concentration of power and promote competition within a particular sector like technology. In August 2020, the heads of Apple, Amazon, Facebook, and Google parent Alphabet testified in front of the House Judiciary Subcommittee on Antitrust regarding accusations their companies hold an unfair monopoly on power.  

Avalanche method 

One strategy for paying down debt is the avalanche method, in which you pay off the loans with the highest interest rates first. Other borrowers favor the snowball method, which has borrowers start with the smallest balance.

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Baby bonds

A baby bond is a small government trust account issued to citizens at birth. In early 2021, Senator Cory Booker, D-NJ, and Congresswoman Ayanna Pressley, D-MA, called for every American child to get $1,000 in a federally issued savings account at birth, with anywhere from $0 to $2,000 added yearly, depending on their family's income, until the child turns 18.

Balance transfer

A balance transfer moves all or part of a debt from one account to another. Used carefully, credit card balance transfer offers can temporarily reduce the interest rate on a debt, enabling borrowers to pay it off faster.

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Benchmark index

A benchmark index such as the S&P 500 tracks a range of companies in the market. Professional investors use benchmarks as a standard against which to measure the performance of an investment. 

Benchmark rate

A benchmark rate is an interest rate that serves as a guideline to lenders to set rates on loans of a certain length. For example, rates on long-term loans, such as mortgages, rise and fall alongside the yield of 10-year Treasurys.

Bitcoin

Bitcoin is the world's largest cryptocurrency and accounts for more than 50% of the market. The digital coin's worth has skyrocketed since its launch in 2009. Investors include major companies like electric automaker Tesla and tech giant Square.

Bond yield 

A bond yield is the interest accrued on a given bond as a percentage of its initial value. It's a way to measure how much investors have made on their investment.

Bubble

In financial terms, a bubble refers to a fast increase in an asset's prices, at a clip that exceeds its intrinsic value. That's often followed by a quick deflation.

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Buy and hold

Buy and hold is a relatively hands-off investment strategy of buying a stock or other investment type with a "set it and forget it" long-term mindset.

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C-D

Call option

A call option is a type of option trade that gives the trader the right to buy shares of stock at a specific price (known as the strike price) by a specified date, when the option expires. You pay a small amount of money up front to exercise your option later. Call options can increase dramatically in value if the price of the underlying stock goes up beyond the strike price.

Capital gains taxes

When you sell an investment for more than you paid for it, the difference is capital gains. Capital gains taxes on that profit depend on the kind of asset, and how long you have held it.

If you sell an investment at a loss, you can use those capital losses to offset capital gains and reduce your tax bill. 

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Chapter 11 bankruptcy

Chapter 11 is a form of bankruptcy that can allow businesses to restructure their debts and reorganize operations. It's named after a section of the U.S. bankruptcy code. Filing for Chapter 11 allows companies to continue to operate while in bankruptcy in the hopes of reemerging as more profitable and with a plan to repay creditors. 

COLA 

The Social Security cost of living adjustment, or COLA, is a regular adjustment to Social Security payments to counteract the effect of inflation. The COLA formula is based on the Consumer Price Index and adjusts every January.

Compound interest

Compound interest is the long-term investor's best friend: It means that you earn interest on your interest. Albert Einstein is said to have called it "the most powerful force in the universe." 

Say you started with $1,000 and earned 10% per year. After year one you'd have $1,100. Year two brings you 10% of your year-one total ($1,100), which brings your total amount to $1,210. After 40 years at this rate, you'd have $45,260.

You can use compounding to your advantage by starting to invest early. But be careful: The power of compounding can work against you, too, if you incur high-rate debt. Check out Grow's compounding calculator to see how your money can grow over time.

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Confirmation hearings

The Constitution gives the president the power to nominate candidates for various government offices, including justices of the Supreme Court. A Senate committee holds confirmation hearings to gather information and approve the president's choice before giving it to the whole Senate for a vote.

Consumer confidence 

How are you feeling about your personal financial situation and what's going on in the broader economy? Consumer confidence is an economic indicator that measures those sentiments based on household spending and savings habits. It factors in opinions on current conditions, as well as what people expect to happen in the future.

Several organizations, including The Conference Board and the University of Michigan, have created their own indexes to track consumer confidence based on survey data they collect.

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Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau, or CFPB, is a government agency created after the 2008 financial crisis. Its priorities include rooting out predatory banking practices, taking customer complaints, and financial education.  

Consumer price index (CPI)

The consumer price index (CPI) measures the average change over time in prices paid by consumers for common goods and services. It's one of three primary measures of inflation in the U.S.

Monthly CPI reports have the potential to move markets. Investors watch this metric to gauge what the Federal Reserve might do, because central bankers may boost interest rates to keep inflation in check.

When it comes to your personal finances, inflation can affect everything from the prices you pay to how much you earn. It can also cut into the value of your savings and give you more incentive to keep investing for long-term goals.

Cryptocurrency

Cryptocurrency is a form of digital money that's based on blockchain technology, which serves as a public ledger of all transactions. Cryptos aren't managed by a central banking system like the Federal Reserve; rather, they are decentralized, so that no single entity has control. The best-known cryptocurrency: bitcoin.

Demand-pull inflation

Investors worry that the flow of stimulus money into the economy will trigger demand-pull inflation, meaning consumer demand could grow faster than the supply of goods and services, causing prices to increase.

Direct listing

Traditionally, a company seeking to go public hires an underwriter, like an investment bank, to drum up investor interest and bring its shares to the market. With a direct listing, a company lists its own shares on an exchange. That saves the cost of hiring bankers, who not only charge for the service but typically list shares at an artificially low price to attract institutional investors.

Disposable personal income

Disposable personal income, or DPI, is another way of saying after-tax income. The calculation is typically:

Personal income - current tax liability = DPI

Don't confuse it with discretionary income, which is what you have left to invest, save, and spend after you cover taxes and necessary expenses like housing, utilities, and groceries.

Divided government

In a divided government, control of the executive branch and the legislative branch is split between two parties and neither holds a clear majority. 

Some economists say a divided government can be good for the stock market, as each party would keep the other in check regarding issues such as tax increases, health-care reform, and regulating Big Tech.

Domicile 

Domicile is a tax term that refers to the primary place where you live and where you are responsible for paying taxes. Your domicile is where your permanent home is located or the place you intend to return to after being away for vacation or on business. 

Double-dip recession

A double-dip recession, also called a W-shaped recession, is a set of back-to-back recessions with a brief period of economic recovery in between. While recessions are a normal part of the economic cycle, double dips are unusual: The last time the U.S. experienced one was in the 1980s, when there were two recessions between 1980 and 1982. 

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Dovish

When analysts are anticipating the Fed's next steps, they often refer to it as one of two birds: doves or hawks. Generally, a dovish stance means its policymakers are unlikely to take strong action, and that they prefer to keep interest rates low to stimulate economic growth. 

Dow Jones Industrial Average

The Dow Jones Industrial Average, also called the Dow or DJIA, is one of the most widely followed stock market indexes. The Dow is composed of just 30 stocks, all of them blue-chip companies that are leaders in their various industries.

E-F

Earnings guidance

In finance terms, earnings guidance is a corporation's prediction of its near-term profits and losses, typically for the quarter to come. It's not meant to be a precise forecast and generally comes in the form of announcements about current plans and industry trends.

Earnings season

Earnings season typically begins 1 to 2 weeks after the end of each quarter of a fiscal year. During each "season," which can last several weeks, publicly traded companies release their quarterly financial reports. Traders often use that news to inform their investing decisions, and earnings that are better or worse than expected can move the markets.

Easy money

When the Federal Reserve implements monetary policy that allows cash to build up in the banking system, it's called easy money. The Fed has applied such policies throughout the coronavirus pandemic to keep interest rates low and stimulate the economy. 

Economic slack

Economic slack measures the amount of resources that aren't being used in the economy, like equipment at factories or people out of work. Typically, economic slack is an indicator of the latter.

Emergency fund

An emergency fund is a savings account where you set aside money for unexpected expenses or a job loss. Many financial advisors recommend aiming to set aside funds equivalent to 3 to 6 months of expenses.

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Equal Pay Day

Women earn 82 cents for every dollar that men earn, according to the National Women's Law Center. Equal Pay Day marks the break-even point when the average woman will have earned as much as the average man did the previous year.

ESG

ESG stands for environmental, social, and corporate governance. These are the three areas on which sustainable investors — who aim to use money in their portfolio to make the world a better place — commonly assess companies when deciding how to invest. Ratings criteria vary, but generally, sustainable investors look for companies with policies and practices that support at least one of the three.

Estimated tax

Estimated tax is a regular IRS payment based on your earned income. Freelancers and small-business owners, who don't automatically get taxes taken out of their paychecks, typically pay each quarter

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FAANG

FAANG is an acronym for tech titans Facebook, Apple, Amazon, Netflix, and Google parent company Alphabet. The term, coined in 2013 by CNBC anchor and former hedge fund manager Jim Cramer, was originally FANG: Facebook, Amazon.com, Netflix, and Google. Apple was added later. If you have money in mutual funds, there is a very good chance you have some FAANG holdings.

Federal Open Market Committee

The Federal Open Market Committee, or FOMC, is the group of Federal Reserve policymakers tasked with making monetary policy decisions — most notably, setting interest rates. The committee meets eight times a year. 

Investors closely monitor the news that comes out of the FOMC meetings for clues on the Fed's next moves and what it could mean for their portfolios. They also pay attention because Fed news itself can move markets.

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FICA taxes

Employers withhold FICA taxes, which are named after the law that mandated them, the Federal Insurance Contributions Act, to help fund social programs. FICA taxes include a 12.4% Social Security tax and a 2.9% Medicare tax. Typically, you pay half (7.65%) and your employer covers the other half.

Financial infidelity 

Financial infidelity happens when someone hides spending, credit cards, debt, or financial accounts from a significant other. Many Americans admit to this type of activity, which can erode trust in a relationship.

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Financial literacy

Financial literacy is the ability to acquire the right knowledge and skills to wisely manage your money effectively throughout your life.

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Fiscal stimulus

A fiscal stimulus is an umbrella term for a government-led plan to jump-start an ailing economy through means like direct payments to consumers or raising/lowering interest rates. Don't confuse it with "bailout package," which typically refers to aiding individual industries — the auto industry or the financial services industry, for example. 

Full employment

Full employment means that as many job seekers as possible find work without so much competition that employers have to hike up wages and risk causing inflation. Even an America enjoying what counts as full employment, then, would still have some level of unemployment.

Furlough

A furlough is when an employee is placed on an extended unpaid leave as a result of employer needs or economic conditions. Furloughs may or may not have set duration. Most workers will not receive a paycheck and may not have access to benefits, though some do.

Futures

Futures let you bet on what you think will happen soon. When you enter a futures contract, you are agreeing to buy or sell assets, like stocks, at a predetermined date and price. Investors use futures for speculation based on their anticipation of coming events. For example, if an investor expects unrest in an oil-producing country, they might buy futures anticipating rising oil prices.

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G-H

GDP

The GDP, which stands for gross domestic product, is the total monetary value of all goods and services produced in a country's economy over a specific time period. It's arguably the most important indicator of the health of the economy.

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Government shutdown 

A government shutdown occurs when Congress fails to pass funding legislation to finance the government, forcing federal agencies to reduce or stop "nonessential" services. Federal employees may be furloughed, and consumers may see effects such as national park closures and longer airport security lines. The longer a shutdown lasts, the more effect it can have on the economy.

Health savings account 

A health savings account, or HSA, is a tax-advantaged account that can be paired with high-deductible health plans to cover medical expenses. There's a triple tax benefit: Your contributions are pre-tax, plus the money grows tax-free and can be withdrawn tax-free for qualified medical expenses. 

Qualified medical expenses can include insurance premiums if you are receiving unemployment benefits or on COBRA, and certain drugstore purchases like thermometers, allergy medicines, or first aid items. 

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I-J

Impulse buy

An impulse buy, or a purchase made on a whim, can be disruptive to your budget. It can be easier to avoid these types of transactions if you spend with cash, experts say, and put a limit on the amount of money you carry with you.

Income-driven repayment plan

An income-driven repayment plan determines your monthly federal student loan payment based on factors including your income, family size, and the total amount you borrowed. In some cases, that payment can be as low as $0. The trade-off is that such plans also increase the time it will take to pay off the full loan amount — meaning you'll ultimately pay more. 

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Index fund

An index fund is an investment vehicle that tracks the performance of a particular market index, like the S&P 500. Index funds are invested in all of the companies in the index, which means investors can easily diversify: With each share purchase, they are buying an assortment of assets all at once rather than having to select each component individually.

Inflation

The inflation rate is a measure of the change in prices, which typically increase. When it comes to your personal finances, inflation can affect everything from how much you pay to how much you earn. It can also cut into the value of your savings and give you more incentive to keep investing for long-term goals. 

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Initial valuation

When a company IPOs, an investment bank is hired to determine the initial valuation of the company, or how much it is worth, ahead of its debut on an exchange.

Interest rate

An interest rate is a percentage of a principal sum a lender charges a borrower. For instance, when you borrow money from a bank it calculates the risk of lending to you and tries to cover the risk by charging interest. Conversely when you deposit money in a bank, it pays you an interest rate to encourage you to save your money.

Intestacy laws

When someone dies without a will, much of their property is handed down via state intestacy laws, meaning the state will distribute the decedent's wealth. All 50 states and the District of Columbia have intestate laws or statutes determining who gets what share. 

Intraday high

An intraday high is a record set for a security or index during regular trading hours for the stock market. Traders pay close attention to intraday price changes, highs, and lows. But for long-term investors, closing prices can be a better way to track performance. 

IPO

An initial public offering, or IPO, refers to the moment a private company begins selling stock to the general public. After that, it's considered a public company, with shares tracked and traded on a major stock index.

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IRA

An individual retirement account, or IRA, is a tax-advantaged investment account meant to help people save for retirement. The two most popular kinds: traditional and Roth. Each has different benefits and eligibility requirements.

Compared to a 401(k), an IRA offers a wider range of investment choices and more flexibility to pick low-cost funds. You can put $6,000 in an IRA for 2021 ($7,000 if you're age 50 or older).

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IRS Free File

The IRS Free File program is a partnership between the IRS and a group of tax preparation companies that includes TurboTax and TaxAct. If your income is below a set threshold ($72,000 in 2020), you can use the provided software to file your federal tax return for free. Depending on your income and which product you choose, you may be able to file your state return for free as well.

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K-L

Liquidity

The liquidity of an organization refers to its cash reserves or assets that can be sold easily without having drastic effects on operations. During the pandemic, the Federal Reserve supplied liquidity to financial institutions participating in the Paycheck Protection Program to ensure small businesses across the country had access to financial aid.

Long-term unemployed

People who have been out of work six months or longer are considered long-term unemployed. That included nearly 40% of jobless workers in January 2021, according to the government's jobs report. That's almost four times as many as six months earlier.

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M-N

Market cap

Market cap, short for market capitalization, is the total dollar value of a company's outstanding shares of stock. You can calculate market cap by multiplying a company's current share price by its total number of outstanding shares.

Stocks generally fall into one of three categories, depending on that figure — large cap, mid cap, or small cap. Large-cap companies are the most established and are typically considered less risky for investing. You'll want to find the right mix in your portfolio to stay on track with your goals.

Market correction

A market correction occurs when a stock, bond, commodity, or index is down 10% or more from its 52-week high. A correction can prevent a given stock or sector from becoming overvalued, and it presents investing opportunities for anyone looking for value stocks.

Mixed earner

Mixed earners have multiple taxable income streams, but make the bulk of their pay through 1099 or self-employment work and receive lower benefits based on their W-2s. The $1.9 trillion American Rescue Plan Act provided unemployed mixed earners in some states with an additional $100 weekly supplement.

Mortgage forbearance

A mortgage forbearance is a temporary loan postponement offered by the lender. It lets the borrower lower or pause payments, but it does not lower the mortgage amount.

Nasdaq composite

The Nasdaq composite is one of the big-three stock market indexes, tracking more than 3,000 stocks. Half of the index comprises tech companies, which led the market's remarkable decade-long growth throughout the 2010s.

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Net operating loss

A net operating loss, or NOL, occurs when a business has more deductible expenses than income. Tax law allows these businesses to benefit from these deductions in future years rather than simply invalidating them.

NFT

An NFT, which is short for nonfungible token, is a digital asset, such as a short video clip, that uses blockchain technology (the stuff inside bitcoin that keeps track of its ownership history) to ensure that each NFT is verifiably unique and indivisible. In essence, it's a piece of internet content with a certificate of authenticity.

Some NFTs have fetched big bucks recently, including a video clip featuring former President Donald Trump for $6.6 million.

Nonfarm payrolls

Nonfarm payrolls are what the Bureau of Labor Statistics is counting when it calculates new job and unemployment figures for the monthly jobs report. According to the BLS, nonfarm jobs include all roles except "the economic activities of the following: general government, private households, nonprofit organizations serving individuals, and farms." Economists monitor nonfarm payrolls as a measure of the country's economic health. 

Non-filers

Not everyone needs to file a federal tax return. Non-filers, according to the IRS, are those who were not required to file because they had little or no taxable income.

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O-P

October Effect

The October Effect refers to the belief that October is a cursed month for markets. Some of the market's worst disasters occurred in October, including Black Tuesday in 1929 and Black Monday in 1987.

But overall, from 1960-2019, the change in the S&P between September to October was a nearly break-even 0.096%. 

Open enrollment

Open enrollment refers to the time window during which insurance plans allow people to change, discontinue, or start their policies for the following year. For many health-care plans, changes are not possible outside the open enrollment period unless you have a "qualifying life event" such as getting married or having a baby.

Overleveraged

 Being overleveraged means a person or company has borrowed more money than they can actively afford to pay back. For example, as the pandemic hurts Americans' finances, some homeowners are overleveraged with their mortgage and falling behind on payments.

Pain of paying

The "pain of paying" is the idea that when you buy something, it triggers the same region of the brain as physical pain. New technology has made it easier to pay with plastic, but using physical money can make consumers more aware of their spending in the moment.

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Pandemic Unemployment Assistance

Pandemic Unemployment Assistance is a temporary federal program extending jobless benefits to freelancers, gig workers, and the self-employed, who don't typically qualify for this type of aid. 

Panic sell

When the stock market becomes volatile, some investors may be tempted to panic sell, or get rid of investments they fear will drop in value. But experts say the most successful strategy is to prepare for the long term, since pulling out during a decline can make it tougher to recover your money when the market rebounds.

Passive income

Passive income is income that requires little or no effort to sustain after an initial outlay of time and resources. It can come from side hustles such as an e-book or online course, rental real estate, and from some investments.

Paycheck to paycheck

When a person lives paycheck to paycheck, expenses consume most of their salary, leaving little to no spare cash for saving or investing. That can mean they have trouble covering costs if something disrupts that regular income, like job loss or an emergency expense.

Payment for order flow

Payment for order flow, or PFOF, is the compensation that a brokerage firm receives for directing orders on its platform to a third party to execute a trade. Lawmakers asked about this practice during the GameStop hearings in early 2021, assessing its effect on retail traders and its role in the stock's surge.

Phishing scam

A phishing scam appears to be an email or phone call from a reputable source, enticing recipients to share sensitive personal information such as their Social Security number or bank account login details. Avoid falling prey to phishing scams by watching out for red flags including generic wording and not-quite-right email addresses and websites.

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PPP loans

The

(PPP) is a loan for small-business owners, administered by the Small Business Administration, that helps them continue to fund payroll throughout the pandemic.

Pre-market trading

Pre-market trading refers to the Wall Street buying and selling that occurs from 4 a.m. to 9:30 a.m. Eastern Time; in other words, before the regular trading hours of 9:30 a.m. to 4 p.m. Eastern. Don't confuse pre-market trading with terms like "early trading" or "morning trading," which are informal terms with no standard start and stop times.

Premium tax credit

A premium tax credit helps individuals and families cover the cost of premiums for health insurance plans purchased through public exchanges. The credit is refundable, meaning it could potentially result in a tax refund.

Generally, you qualify for a premium tax credit if your income falls within a certain range and you are not eligible to get coverage through an employer or through a government program like Medicaid or Medicare.

Price-weighted

The Dow Jones Industrial Average is price-weighted, meaning the index's value is calculated based on the share prices of the 30 blue-chip company stocks it tracks. The higher a company's stock price, the bigger the effect it can have on the Dow's movements.

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Q-R

Record date

Shareholders of an actively traded stock change all the time. So companies use a record date, also called a date of record, as a cutoff to determine which shareholders are eligible to receive distributions like dividends — and additional shares, in the case of a stock split.

Recovery Rebate Credit

Some of the people eligible to receive stimulus money didn't get it. The Recovery Rebate Credit enables qualifying taxpayers to claim those missing funds on their tax return and get a credit against their 2020 income taxes. 

Risk tolerance

Risk tolerance measures how much loss an investor can withstand without wanting to make changes to their portfolio. Investments that are riskier than you're comfortable with can lead you to make damaging decisions when markets get jumpy.  

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RMD

RMD, or required minimum distribution, refers to the amount of money that must be withdrawn each year in retirement from certain retirement plans, including traditional IRAs and 401(k)s, so as not to incur a penalty. You may withdraw more than the necessary amount, but not less. Generally, you must start taking RMDs once you turn 72.

Russell 2000

The Russell 2000 index tracks the performance of about 2000 small-cap companies. While lesser known than the big-three indexes, it's the anchor of many mutual funds. It's also considered an indicator of the health of the economy, as it reflects the performances of smaller businesses and not just huge corporations.

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S-T

SALT deduction

Before the Tax Cuts and Jobs Act of 2017, taxpayers could claim an unlimited federal tax deduction for state and local taxes (SALT), including state income, sales, real estate, and property taxes. The law capped the deduction at $10,000, a costly change for residents of high-tax states such as New York and California. 

Seasonal adjustment

When it comes to unemployment data, a seasonal adjustment means figures are evened out to account for statistical swings related to seasonal events and conditions. To get a better sense of how the economy is doing, for example, analysts may not count in the overall job loss data the number of Americans who filed for unemployment after wrapping up a temporary holiday gig or summer job.

Seller's market

A seller's market is one in which the seller has more power than the buyer. This occurs when there is more demand for the service or good than there is supply. For example, when there's a seller's market in real estate, sellers may benefit from bidding wars among eager buyers, and can quickly close a deal.

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September Effect

The stock market often drops slightly in September, a phenomenon known as the September Effect, or the September Slump. Since 1901, the Dow has dipped an average of 0.89% every September. Theories for the phenomenon include a practice among some mutual funds to rejigger their portfolios in September and that investors might sell off after a summer lull

Short selling

In a short sell, an investor borrows shares of a stock that they believe will decline and sells them at market price. Short-sellers expect that they will be able to rebuy the shares at a lower price before they must be returned. In other words, they are betting against the company to try and make a profit.

Short squeeze

A short squeeze happens when a stock's price suddenly jumps, and traders who had previously bet against that stock (i.e., short-sellers) start buying shares to mitigate their own losses. The increased buying pushes the stock's price even higher.

Side hustle

A side hustle is a way to make extra money, often in addition to a day job. 

Potential side hustles vary widely: Some of the most popular include taking surveys, selling items online, delivering groceries, working as a virtual assistant, and driving for a ride-share company. There are side hustles you can do in just a few minutes per day, outside of normal business hours, or without leaving your home. And some people are so successful that they're able to turn their gigs into a full-time job.

Take Grow's side hustle quiz to help find the right side hustle for you.

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How to turn a side hustle into a full-time job, according to Tori Dunlap

Video by Stephen Parkhurst

SPAC

A special purpose acquisition company, also known as a SPAC or blank-check firm, is a shell company that raises funds in an IPO with the aim of acquiring or merging with a private company. The private company then becomes public as a result of the deal. 

In February 2021, 23andMe, one of the most popular consumer-DNA testing providers, announced its plan to go public by merging with a SPAC backed by British entrepreneur Sir Richard Branson.

Statutory tax rate

Each year, the government sets the tax brackets and accompanying statutory tax rates, or the rate for taxable income that falls within each bracket. It's different than the effective tax rate, which is how much an individual actually pays. Effective tax rates are often much lower, due to the way income taxes are calculated and the various tax breaks that can help lower your bill. 

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Here's how tax brackets actually work

Video by David Fang

Stimulus payment

When a government issues a stimulus payment, it has two goals in mind. One is to provide relief for people most at risk during a harsh economic downturn. The other is to encourage citizens to spend money, thus increasing the demand for goods and services and lessening the effects of an economic downturn.

Stock

A stock is an investment in a public corporation. Corporations sell stock, in units called shares, to raise money to operate the business. In exchange, buyers get a share of the company's assets and earnings. There are two kinds of stock: common and preferred, each of which entitles the owner to different benefits. 

A stock's value goes up and down with the fortunes of that company. That's why many experts recommend diversifying your portfolio among different assets, and opting for investments like index funds and ETFs that let you buy shares in a range of companies.

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How to read a stock ticker

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Stock buyback

A stock buyback is when a company uses profits to buy shares of its own stock on the open market. The company reduces the total number of outstanding shares, so each share an investor owns represents a bigger piece of the overall company. Companies may do a buyback for any of several reasons, including to enhance its financial metrics or take advantage of an opportunity to buy its shares for a lower price than they are worth.

Stock market holiday 

The stock market is typically open about 250 days a year, with the exception of nine stock market holidays. Those include New Year's Day, Martin Luther King Jr. Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Before or after some market holidays, the stock market closes early.

Stock split

A stock split increases the number of shares in a company by issuing new shares to current shareholders. In doing so, it decreases the market price per share. For example: If you had one $1,000 share, after a 4-for-1 split, you'd have four $250 shares.

Experts consider splits a good thing: Shareholders get more shares for their money, and lower share prices draw in more investors. 

Super Saturday

Super Saturday is the Saturday before Christmas. It typically generates big sales from last-minute shoppers.

Supplementary leverage ratio

The supplementary leverage ratio measures as a percentage a bank's ability to take losses on its assets. As the pandemic spread across the country in 2020, the Federal Reserve calmed jittery markets by lowering the amount of capital banks needed, encouraging them to continue lending.

Tax Day

The deadline to file your federal tax return and pay your federal taxes, aka Tax Day, is traditionally April 15. The coronavirus pandemic prompted the IRS to postpone that deadline in 2020 (until July 15) and 2021 (until May 15). When there is a federally declared natural disaster, the IRS also typically delays the deadline for affected taxpayers.

But take note: If you pay estimated taxes quarterly for a business or side hustle, those are still due April 15. And states set their own filing and payment deadlines.

Thematic ETF

A thematic ETF is a kind of exchange-traded fund that tracks an array of assets related to a specific trend, such as online gaming or blockchain. More commonly, ETFs track an underlying index such as the S&P 500, or specific sectors or commodities.

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What is an ETF and should you invest in one?

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TINA

TINA, short for "There is no alternative," is a phrase Wall Street uses to describe market environments in which investors pile into stocks either solely or partly because other asset classes offer unattractive returns. For example, if persistently low interest rates mean that investors can't earn attractive yields on bonds or cash, they may stick with stocks, even if stocks look overvalued or primed for a pullback. 

Trading the news

Trading the news is a method of investing that involves monitoring current events to make investment decisions. For example, a news trader might watch the latest Covid developments to guess what pharma stocks to buy. This method is used by day traders (people who trade multiple times a day) but is not advised for long-term investors.

Trading session

A session, sometimes called a trading session, refers to a single business day on which the stock market is open and active, allowing traders to take part in normal activities. Regular trading hours for the U.S. stock market are between 9:30 a.m. and 4 p.m. Eastern Time.

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How buying stocks has changed over the centuries

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Trading volume

Trading volume measures the number of shares of a stock that have been traded in a certain period of time, usually over the course of the trading day. Investors look to volume patterns to help analyze market movements and make decisions about when to buy.

Treasury bonds

Treasury bonds are government-issued financial instruments that traditionally have a 30-year term and fixed interest rates. In 2020, the Treasury made the emergency measure of issuing 20-year bonds to raise money in light of the government's pandemic-relief-related expenditures.

Governments raise money by selling bonds to the public. When you buy a bond, you become a creditor of the government, and the government is in your debt — with interest. 

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U-V

Unicorn

On Wall Street, a unicorn is a privately held start-up company that's valued at more than $1 billion. Should a unicorn IPO and become a public company, that label becomes less notable.

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The difference between public and private, explained with veggie burgers

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Upskilling

Upskilling means learning new skills in order to find better-paid work. A 2021 analysis from the Federal Reserve of Philadelphia estimates upskilling could help workers without a bachelor's degree earn $15,000 more per year. Its tool, called Occupational Mobility Explorer, helps users compare jobs to see how upskilling could offer access to new opportunities.

Value stocks 

Value stocks are underpriced compared to their earnings. This is as opposed to growth stocks, which have high valuations and strong upside potential. Value and growth investing styles are different but can be used in combination to bolster the performance and diversification of your portfolio.

One of the most notable value investors? Berkshire Hathaway CEO Warren Buffett.

VIX

The VIX, or Cboe Volatility Index, is an index that measures the 30-day expected turbulence of the S&P 500 index, based on the real-time prices of S&P options. The VIX is viewed as a measure of investor uncertainty in the market and is closely followed by traders.

Volatility

When it comes to investments, volatility measures the rise and fall of a market index or an asset's price. The bigger those swings compared to its average, the more volatile that investment is — and, many experts say, the riskier it is, because its price is less predictable.

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W-X

W-2 worker

W-2 workers are salaried employees whose taxes are usually withheld from their paychecks by their employer and who are usually eligible for protections and benefits such as health insurance and paid leave.

Wealth tax 

A wealth tax is a tax levied on a person's total assets including cash, pension plans, and property. Sen. Elizabeth Warren, D-MA, and Sen. Bernie Sanders, I-VT, were among the policymakers who in March 2020 proposed the Ultra-Millionaire Tax Act, a 2% annual tax on wealth over $50 million and 3% for wealth over $1 billion. 

Windfall

A windfall is a large and sometimes unexpected financial gain from an inheritance, salary bonus, or property sale, for example. One lucky Michigan lottery player got a windfall in January 2021 when they won the $1.05 billion prize, the third biggest in lottery history.

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What to do if you win the lottery

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Witching day

A witching day in the stock market occurs on a specific day during the quarter when a set of futures or options contracts — stock index futures, stock index options, stock options, or single stock futures — expires. Witching days can lead to increased trading and volatility.

Double witching days occur when two of those four markets expire on the same day, and triple witching days, when three of the four do. So-called quadruple witching, when all expire on the same day, happens four times a year: in March, June, September, and December.

Withholding

When you fill out your W-4 at work, you're telling your employer the amount of federal tax you want to have withheld from your paycheck. Your withholding amount is based on factors like your filing status, number of dependents, and income from all sources. You should view it as an estimate only; come filing time, some people receive a refund check while some find that they owe more tax. 

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Y-Z

Year over year 

Market changes are sometimes measured year over year (yoy or y/o/y), which may compare the same date in the previous year or the closest trading session to that date, the same quarter, or the same month. 

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