Frequently Used Terms

Seeking higher returns while accepting increased risk.

Certificates issued by U.S. banks representing shares of foreign companies traded on American exchanges, designed to reduce administrative and duty costs per trade.

An investment strategy that balances risk and reward by apportioning a portfolio’s assets according to goals, risk tolerance, and time horizon.

A group of securities with similar characteristics and behavior (e.g., equities, fixed-income, cash equivalents) governed by the same regulations.

Loans to a corporate or governmental issuer for a defined period at a stated interest rate; the issuer repays principal at maturity and pays interest as agreed.

A market in which prices are falling or expected to fall, often marked by pessimism and lower confidence. Bearish positions seek to benefit from declines (e.g., short or sell positions).

A measure of systematic risk relative to a benchmark (benchmark beta = 1). Betas > 1 tend to be more volatile than the market; betas < 1 less volatile. Example: beta 1.5 ≈ 50% more volatile; beta 0.5 ≈ 50% less volatile.

Well-established, financially sound companies known for durable performance through economic cycles and long records of stable growth.

A significant, highly unexpected event that is only rationalized in hindsight (e.g., 2008 derivatives collapse, 2010 “flash crash”).

A market in which prices are rising or expected to rise, typically characterized by optimism and strong corporate results. Bullish positions aim to benefit from growth (e.g., long positions in equities).

Increase in an asset’s market value above its original cost basis. One of two primary sources of return (the other is income from dividends/interest).

Assets that are cash or readily convertible to cash (e.g., bank deposits, money market instruments, Treasury bills).

Seeking lower risk and accepting lower expected returns.

A recurring payment from a company to shareholders as a distribution of profits or retained earnings.

Dividend per share divided by the market price per share (also called Dividend-Price Ratio). Indicates income return relative to price.

Spreading investments across assets/sectors to reduce unsystematic (company/industry-specific) risk—“don’t put all your eggs in one basket.”

Pooled investments that trade like stocks, typically tracking an index. Often lower-fee and more liquid than mutual funds; each share represents fractional interests in underlying holdings.

Arranging for asset management and transfer during life and at death—helping protect relationships and intentions while minimizing complications.

An individual or entity legally authorized to manage assets for another, obligated to act solely in that party’s best interest.

A holistic assessment of an individual’s/family’s current financial situation and goals—near-term and long-term.

Investing via strict rules that dictate asset allocation and timing.

When a short-term moving average crosses above a long-term moving average (e.g., 50-day above 200-day), often viewed as a bullish signal.

Positions taken to offset potential losses in another asset (risk reduction), commonly using related securities or derivatives.

Lower-rated corporate bonds (below “BBB-”) with higher default risk and typically higher interest rates than investment-grade or government bonds.

Evaluating inflows and outflows to guide budgeting, savings, and sustainable retirement income strategies.

Permanent life insurance with flexible premiums and potential cash value growth linked to a market index, subject to caps/floors.

Aligning investment selection and allocation to your objectives, time horizon, and risk tolerance.

Approaches for IRA legacy planning and handling IRA, 401(k), and 403(b) assets, including rollovers and beneficiary planning.

ETFs designed to amplify index returns (e.g., 2× or 3× daily). Gains and losses scale with the leverage factor and reset daily.

Coverage paying beneficiaries at death; riders may provide living benefits (e.g., critical/terminal illness access to proceeds).

Long: Buying to benefit from expected price increases.
Short: Selling borrowed shares, aiming to repurchase at a lower price; profit is the difference.

Total value of a company’s equity = shares outstanding × price per share.
Common groupings: Small (< $2B), Mid ($2B–$10B), Large (> $10B).

A composite that tracks performance of a defined basket of securities (e.g., S&P 500), measuring market or sector changes over time.

A momentum indicator using price and volume to assess the strength of money moving in/out of a security, often for spotting trend reversals.

Simulation technique that runs thousands of randomized trials to estimate the probability of different financial outcomes (e.g., retirement success rates).

Pooled vehicles managed to a stated objective. They offer access to diversified, professionally managed portfolios, generally with management fees.

Assets minus liabilities—a snapshot of overall financial health (often excluding a primary residence for planning comparability).

Plans that do not meet IRS requirements for qualified status and therefore don’t receive the same tax incentives.

Over-bought: Price rises rapidly above intrinsic value—may signal a short/mean-reversion opportunity.
Over-sold: Price falls rapidly below intrinsic value—may signal a buying opportunity.

A collection of investments designed to meet objectives within risk tolerance. At Texas Retirement Solutions, we blend model allocations of stocks and ETFs aligned to specific goals.

Plans meeting IRS requirements and eligible for certain tax benefits; they must primarily benefit employees or their beneficiaries.

Strategies driven by mathematical/statistical models using large data sets, price/volume patterns, and technical inputs.

Publicly traded vehicles representing ownership in real estate or mortgages; often offer higher yields and special tax treatment.

Methods for turning savings into sustainable income, coordinating Social Security, annuities, withdrawals, and tax efficiency.

Expected excess return for taking risk above the risk-free rate—compensation for bearing additional uncertainty.

The level of volatility and potential loss an investor is willing to accept. Lower-risk assets (e.g., bonds) have narrower ranges; higher-risk assets (e.g., high-beta stocks) have wider ranges.

A U-shaped price formation over weeks or months, transitioning from a downtrend to an uptrend.

Risk-adjusted performance = (Expected return − Risk-free rate) ÷ Standard deviation. Higher is better for a given level of risk.

Temporary health insurance to bridge coverage gaps (eligibility, limits, and benefits vary by plan and state).

Coordinating claiming strategies (including spousal benefits) to help maximize lifetime benefits within a retirement plan.

Financial instruments that represent value or ownership/creditor relationships (e.g., stocks, bonds, ETFs, derivatives).

Statistical measure of variability around the average return or price. Higher values indicate greater volatility.

Fractional ownership shares of companies, entitling holders to potential growth and (sometimes) dividends.

Systematic: Market-wide risks (e.g., rate changes) affecting most assets.
Unsystematic: Company/industry-specific risks (e.g., a product disruption). Diversification targets unsystematic risk.

Analysis based on price/volume patterns and derived indicators (e.g., moving averages, MFI). “Divergence” is when price/volume behavior conflicts with indicator signals.

Legal structures and strategies for managing and transferring wealth, often used for tax efficiency, governance, and legacy intent.

The degree of variation in returns or prices over time; often proxied by standard deviation.