Investment and Financial Terms

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Active Trading

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Buying and selling investments - typically individual stocks and funds - within a short time frame (from seconds/minutes to days/weeks) in hopes of making quick profits from the small price changes. Research shows that 95% of active traders lose money.

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Asset Allocation

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Dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash.

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Asset Class

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A group of financial instruments which have similar financial characteristics and behave similarly in the marketplace (like stocks, bonds, and cash).

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Bear Market

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A market in which prices are falling, encouraging selling.

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Bond

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A security in which the investor loans money to a company or government, which then pays regular interest to the bondholder and returns the principal on the bond's maturity date.

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Bond Rating

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A measurement of the likelihood that a bondholder will be paid back.

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Brokerage Account

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An account that lets individual investors trade stocks, bonds, mutual funds, and other investments.

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Bull Market

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A market in which there is increased stock trading and rising stock prices.

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Capital Gain

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Profit from the sale of an asset, such as a stock or a bond, calculated by subtracting the price you initially paid from the price you then sold it for.

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Capital Gains Tax

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A tax levied on profit from the sale of property or an investment.