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What does “Breaking the Buck” mean? Breaking the buck means that a money market fund’s value has dropped to less than $1. This happens becaus...

What is Collateralized Mortgage Obligation (CMO)? A CMO is a mortgage bond that consists of a large number of different individual mortgages bundle...

What is Above Full Employment Equilibrium? Above Full Employment Equilibrium happens when an economy is basically doing more than it realistically...

What is a High Alpha Investor? A high alpha investor invests in securities with alpha values of 1 or higher. This means that the mutual fund or sto...

Maturity is, quite simply, the date when a debt becomes due. As for our maturity, well... we're still giggling about the word "due."

When a bond is secured, it means it's protected, i.e. there are assets that would be forfeited if repayment is not made. When it's unsecured... it'...

What is Counterparty Risk? Counterparty risk is the risk to either party within a transaction that the other will not or be unable to abide by the...

What are Bond Anticipation Notes (BANS), Revenue Anticipation Notes (RANS), and Tax Anticipation Notes (TANS)? BANS, RANS and TANS are all short-te...

What do you need to retire? Retirement - think: 401k, pension fund, IRA, roth IRA, etc. All of these savings socked away while you worked hard are...

Repossession is what happens when you can't make payments on a loan. It's only slightly less terrifying than demonic possession.

"Investment grade" indicates the quality of an investment. If it's investment grade, it's, well...worth investing in. Highly rated, and not too risky.

What are lenders? Lenders are parties which can be individuals, groups or institutions that are engaged in making liquid funds that they either own...

What is the primary market? Hit play to find out.

Subsidies are government donations given to industries who cannot operate profitably with the goal of keeping American citizens employed on the tax...

What is Contingent Liability? Contingent liability refers to a possible liability in the future contingent upon some other event being the trigger....

Power of attorney refers to the authorization to conduct business on legal and financial matters on behalf of another party. So...choose wisely.

What is an Agency Bond? Agencies bonds are issued by government agencies, not the treasury. The typical government bonds (T-bills, T-notes, and suc...

Painting the tape is an illegal way to manipulate stock prices. And yes, it’s still illegal, even if you paint it super pretty.

Term to maturity is kind of the life cycle of a bond, but luckily for the bond, it gets to skip puberty.

When-issued is a trading condition that applies to structural changes in companies that result in a new entity with its own set of trading rules.

What are T-Notes, T-Bonds, and TIPS? T-Notes are debt securities (like bonds) that are issued by the government and mature within one to 10 years. T-Bonds are exactly the same but their maturity is longer...more than 10 years. TIPS stands for treasury inflation protected securities. The government also issues TIPS; these securities are extremely safe, because not only are they backed but the government, but they also account for inflation and protect the investor in that way.

What is liquidity? Think: water. It's liquid. It can be squeezed into little, tiny spaces and infused into large spaces. A defining trait of liquid is that it can be subdivided into tiny pieces. those pieces move anywhere they want in the same way a liquid market trades actively.

A liquid market is a market featuring high trading volumes, i.e. investors actually want to put their cash to work.

What are the differences in S&P’s and Moody’s ratings? Both S&P and Moody’s give ratings that help investors determine if they are making smart investments, but they do look at the investments a bit differently to determine ratings. S&P considers how likely the debt issuer is to default on payments to investors, while Moody’s looks at how much will be lost upon a default. They also look a little different; Moody’s uses a combination of letters and numbers, while S&P uses letters and symbols (report card style); in both cases, A is good, D is bad.

What is AMBAC? AMBAC stands for American Municipal Bond Assurance Corporation. It provides insurance for municipalities that sell muni bonds, such that they are able to ensure their investors that they are protected against default.

What are credit ratings and how are they interpreted? Credit ratings describe a borrower’s likelihood to pay back their debts; it’s a look at how risky it may be to loan them money. Usually these are used when investors take on debt in a company. The company is assigned a credit rating, and investors can use that rating to determine if investing in their debt is a smart financial move.

What are bond ratings and what do they mean? Bond ratings are just credit ratings used on bonds. Just like a credit rating, they give the investor an idea of the issuer’s ability to pay the bond’s principal and interest payments. It’s common to see higher rated bonds with lower interest rates and lower rated bonds with higher interest rates because of the risk/reward factor.

What is the Federal Funds Rate? The federal funds rate is the interest rate used for overnight lending between banks. The amount banks are able to lend out depends on their reserve balances (as determined by the Fed). Anything above and beyond what they need on hand to service clients can be used in bank to bank lending that happens at the federal funds rate.

The Federal Open Market Committee's purpose is to manage financial outcomes through monetary policy.

What's the difference between senior and junior debt? No matter the differences, we know the similarity: you don't want to be in either of them.

When you realize a gain or loss, it means that you turn an investment into cash. Thrilling, we know.

What is a muni bond? Muni bonds are bonds issued by the government. They are used to raise the money required to pay for government responsibilities like schools and roadways. Because of their nature and purpose, they are not taxed, so they make for pretty good investment opportunities for people in high tax brackets.

What is Bond Amortization? Bond amortization is simply the spreading out of the cost of the bond over time. Bonds have amortization schedules and these lay out how the bond is paid including principal and what is owed in interest.

NAV isn't a cool new navigation app...it's how mutual fund shares are valued or priced at the end of each trading day.

What is amortization? Amortization tracks the decline in value of a contract or service, usually paid for in advance. You received $10,000 in advance to water Ms. Maple's lawn for 10 months. She amortizes your watering to the tune of a decline in value of that contract of $1,000 as each month goes by.

What is a Holding Company? A holding company is a company that controls enough voting stake in another company to have control over operations. Usually holding companies are just parent companies and the term holding refers to the relationship they have with their subsidiaries.

Strategic asset allocation means allocating your assets...strategically. Yup, no crazy plot twists here.

What is the difference between short-term and long-term liabilities? Short-term liabilities show up on the balance sheet. They need to be paid in the short-term using the inflow from cash and accounts receivable, as shown on the balance sheet. These are things like accounts payable and employee salaries. Long-term liabilities are things like loans and such that the company won’t need to pay back for over a year.

What is a basis point? Basis points are how changes in financial securities are described. “The stock dropped 100 points” actually means that the stock price decreased by 1%. One basis point corresponds with 1/100th of 1%; as the point system has to describe changes, it makes sense that this figure would be so small, because changes are typically not that drastic, but need to be described. For example, saying a stock price changed .01% is a little confusing to grasp, but 100 points is not, assuming the lingo is understood.

What is opportunity cost? In short, it's the eventual monetary cost of choosing to do one thing over another (often choosing travel or experiences over their monetary equivalent). That contract guaranteeing you $100k a year might sound terrific when you're staring $200k of student loans in the face, but if it locks you out of a much higher paying job five years down the road, you can kiss wealth and financial success good-bye.