Keeping up with the increasing number of investment products and services in the marketplace today can be confusing. This comprehensive investing glossary is designed to help you understand some of the more common investment and financial terms you may encounter. Your financial advisor can explain these terms more completely and discuss with you those relevant to your situation.

• ADR (American Depositary Receipt)
• Ask
• Bear Market
• Bid
• Blue-Chip Stock
• Bull Market
• Buyer's Call
• Buyer's Market
• Call
• Call Option
• Commodity
• Currency
• Dividend
• The Dow Jones Industrial Average
• Equity
• ETF (Exchange-Traded Fund)
• Forex Market
• Fundamental Analysis
• Hedge Fund
• Index
• IPO (Initial Public Offering)
• Large Capital Funds
• Liquid Asset
• Long (or Long Position)
• Option
• Penny Stock
• Portfolio
• Precious Metals
• Premium
• Put Option
• Risk
• Sec 13F Disclosure Form
• Short (or Short Position)
• Short Selling
• Small Cap
• Stock
• Stop-Loss Order
• Technical Indicators
• Trailing Stop
• Volatility

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General Investment Glossary

ADR (American Depositary Receipt):
ADR stands for American Depositary Receipt. An American Depositary Receipt is a physical certificate evidencing ownership in one or several American Depositary Shares (ADS). The terms ADR and ADS can be used interchangeably. An ADS is a U.S. dollar denominated form of equity ownership in a non-U.S. company. For example, Toyota Motor Corp. is a Japanese company listed on the New York Stock Exchange. Some of Toyota's shares are held by a custodian bank in Japan for the direct representation on the NYSE.

It's important to note that some ADSs or ADRs represent more than one share of the actual stock. One "share" of Toyota's ADS on the NYSE gives an investor the rights of two shares of the actual company stock.

Ask:
The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price.

Bear Market:
A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, which contributes to further pessimism. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.

Bid:
An offer made by an investor, a trader or a dealer to buy a security. The bid will stipulate both the price at which the buyer is willing to purchase the security and the quantity to be purchased.

This is the opposite of the ask, which stipulates the price a seller is willing to accept for a security and the quantity of the security to be sold at that price.

Blue-Chip Stock:
A stock of a nationally recognized, well-established and financially sound company that is able to weather economic downturns due to a long record of stable and reliable growth.

Bull Market:
A financial market of a group of securities in which prices are rising or are expected to rise. The term "bull market" is most often used to refer to the stock market, but can be applied to anything that is traded, such as bonds, currencies and commodities.

Buyer's Call:
An agreement between a buyer and seller whereby a commodity purchase occurs at a specific price above a futures contract for an identical grade and quantity

Buyer's Market:
A market condition characterized by an abundance of goods available for sale.

Call:
The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.

Call Option:
An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

Commodity:
A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.

Currency:
A generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy.

Dividend:
A distribution of a portion of a company’s earnings to shareholders, as decided by its board of directors. It is most often calculated in dollar amount by predetermined dividends per share or in terms of a percent of the current market price.

The Dow Jones Industrial Average:
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.

Equity:
Assets that the owner can readily sell for cash. This includes stocks as well as cars and houses with no outstanding debt.

ETF (Exchange-Traded Fund):
A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

Forex Market:
The Forex Market, made up of banks, commercial companies, central banks, investment management firms, hedge funds, retail forex brokers and investors, is a market in which participants are able to buy, sell, exchange and speculate on currencies. The currency market is considered to be the largest financial market in the world, processing trillions of dollars worth of transactions each day.

Fundamental Analysis:
A method of evaluating a security that attempts to measure its value by examining related economic, financial, quantitative and qualitative factors. The goal with this type of analysis is to produce a value that an investor can compare to the securities current price. This allows them to figure out what kind of position to take with that security, whether it is buy, sell, or hold.

Hedge Fund:
A hedge fund is an aggressively managed portfolio of investments with the goal of making high returns made possible by using advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets. Hedge funds are most often set up as private investment partnerships open to a limited number of investors and require a sizeable initial investment. Investments in hedge funds are illiquid, usually requiring investors to keep their money in the fund for at least a year.

Index:
A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it. Each index has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.

IPO (Initial Public Offering):
The first sale of a stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.

Large Capital Funds:
Investment funds that manage money from investors seeking private equity stakes in companies with strong growth potential. These are general known as high risk/ high return opportunities.

Liquid Assets:
An asset from an established market that is easily transferable. It can be converted to cash quickly with minimal impact to the price received. Liquid assets include stocks, foreign exchange markets and government bonds.

Long (or Long Position):
The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value.

Option:
A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date).

Options are extremely versatile securities that can be used in many different ways. Traders use options to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset.

Read our detailed Options Trading Guide to take the mystery out of options.

Penny Stock:
A stock that trades at a relatively low price and market capitalization, usually outside of the major market exchanges. These types of stocks are generally considered to be highly speculative and high risk because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. They will often trade over the counter through the OTCBB and pink sheets.

Portfolio:
A grouping of financial assets such as stocks, bonds and cash equivalents, as well as their mutual, exchange-traded and closed-fund counterparts. Portfolios are held directly by investors and/or managed by financial professionals.

Precious Metals:
Metals that are rare and have a high economic value. This value is determined by various factors, including their rarity, uses in industrial processes and use as an investment commodity.

Premium:
Simply, the premium is the price of the option you are buying. A premium can also refer to the monetary credit you get if you are selling an option.

Put Option:
An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.

Risk:
The chance that an investment's actual return will be different than expected. This includes the possibility of losing some or all of the original investment. Risk is usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment.

Any person, company, or other institution that owns at least one share in a company.

Sec 13F Disclosure Form:
Institutional investment managers who exercise investment discretion over $100 million or more in Section 13(f) securities must report their holdings on Form 13F with the SEC. Form 13F requires disclosure of the names of institutional investment managers, the names of the securities they manage and the class of securities, the CUSIP number, the number of shares owned, and the total market value of each security.

Short (or Short Position):
The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value.

Short Selling:
The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short.

Small Cap:
The "cap" in small-cap refers to the value of the stock's market capitalization. Small-cap stocks are stocks with small market capitalizations. In general, most brokerages define small-cap stocks as companies having a market cap between $300 million and $2 billion. Anything smaller than $300 million is often refered to as a "micro-cap" stock, and companies with market caps larger than $2 billion and less than $10 billion are "mid-cap" stocks. Companies with over $10 billion in market cap are "large-cap" stocks.

Stock:
A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

Stop-Loss Order:
An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position.

Technical Indicators:
Technical Indicators predict future price levels, or price direction of securities based upon past performance patterns. Active traders use them due to the fact that they are designed for analyzing short-term price movements.

Trailing Stop:
A stop-loss order set at a percentage level below the market price - for a long position. The price is adjusted as the price fluctuates.

Volatility:
A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.