Financial Glossary

Capital Gain - An increase in the market value of an investment.

Capitalization - Market value of a company, calculated by multiplying the number of shares outstanding by the price per share. Often referred to as "cap," as in a "large cap stock."

Cash Flow - The relationship between household income and expenses. For example, households that spend more than they earn have negative cash flow.

Cash Investments - Highly liquid securities that are appropriate for emergency savings and short-term financial goals.

Cash Value - The savings component of a whole life, variable life, or universal life insurance policy.

Caveat Emptor - "Buyer beware" A warning for all consumers to shop carefully.

CD - A fixed amount of money deposited with a financial institution for a specified amount of time. An acronym for Certificate of Deposit, CDs are sold by banks with principal insured by the Federal Deposit Insurance Corporation (FDIC). Brokerage firms may also sell CDs. Interest paid on CDs varies with the amount deposited and the length of time the money is invested.

Checking Account - An account that allows owners to draw upon deposited funds by writing a check.

Collateral - Something of value pledged to secure a loan (e.g., a car as security for a car loan).

Collectible - A tangible item, such as coins, stamps, and art, purchased as an investment.

Commission - Fee paid to a broker to trade securities, generally based on the number of shares trade or the dollar amount of the trade.

Compound Interest - Interest credited daily, monthly, quarterly, semi-annually, or annually on both principal and previously credited interest.

Consumer Price Index (CPI) – The Consumer Price Index (CPI) is a measure of inflation used by the U.S. Bureau of Labor Statistics. Changes in the price of more than 300 goods and services are tracked and recorded.

Core Holding - The foundation of a portfolio (e.g., a stock index fund) to which an investor might add additional securities. Financial author Charles Schwab calls this strategy "core and explore."

Co-signer - Someone who agrees to make payments on a loan if the primary borrower does not.

Contribution - A voluntary deposit to a retirement plan such as a 401(k) or IRA.

Conversion - The transfer of funds from a traditional IRA to a Roth IRA. IRA conversions are a taxable event in the year that a conversion is made.

Credit - The receipt of money, good, or services in exchange for a promise to repay the amount borrowed at a future date.

Credit Card - A plastic card issued by a financial institution indicating that an account has been established to make purchases or cash advances in exchange for a future payment and a fee called interest. Any debt balance remaining is revolved to the following month.

Credit Card (Secured) - A credit card backed by a sum of money deposited with the creditor by the account holder to use as security for the loan.

Credit Counseling Agency - An organization, which can be structured as for-profit or not-for-profit, that administers debt repayment plans for individuals who are having difficulty repaying their creditors. Agencies generally charge a fee for this service, which can vary among agencies.

Credit History - How a person has used credit in the past (e.g., paying bills on time vs. late payments).

Credit Report - A report issued by a credit reporting agency that indicates how a person has used credit in the past. It is generated from data provided by creditors and public records upon the request of consumers, creditors, and others with a legitimate business reason to check the report.

Credit Union - A member-owned financial institution where consumers can access a variety of services such as checking and savings accounts, credit cards, safe deposit boxes, and loans. Members generally have some type of common affiliation such as employment.

Updated:E.J.B.