Glossary

I know there are plent of terms not yet on this list. I add to the glossary as I use certain words or concepts in my posts. If you have a suggestion for the glossary feel free to email me at info[at]richeobscure[dot]com.

Emergency fund: Savings that can be used for emergencies such as an unexpected repair, job loss or illness.

Liquidity: Money or assets that are easily converted to cash. Savings in the bank are the most liquid. Stocks need to be sold but are fairly liquid. The equity in your house is not very liquid as it takes a lot to get a loan. Related posts: Credit Cards, Your Savings Rate.

LBYM: Living Below Your Means, spending less than you earn. How much you LBYM determines how successful you are. Related posts: The National Savings Rate, Mass Dumb, Three Month Test, Trading Up, The Meaning of Frugal.

Margin: A form of credit given by stock brokers it is used to buy stocks with borrowed money in the hopes that your investment will return enough to pay off the loan and leave you with a profit. Related posts: Products, Booyah Yeah Boo

HELOC: An acronym for Home Equity Line of Credit. A loan taken out against the value of your home. Related posts: Mixed Assets, Credit Scores

Active Management: The practice of using trading to improve returns versus buy and hold investing where an asset is purchased and allowed to grow without active participation by the investor. Related posts: Products, Experts, Don't Take The Bait

ETF: An Electonically Traded Fund (ETF) is a mutual fund that is traded on the stock market and acts like a stock with the price fluctuating throuout the day as opposed to a traditional mutual fund that is price only once a day. Related posts: The ETF Trap, The ETF Trap Part 2

Asset Allocation: The distribution of your wealth among different types of investments. For example if you had 20% in large caps stocks, 20% in small cap stocks, 20% in mid cap stocks, 20% in foreign stocks and 20% in bonds, you could say you have a diversified asset allocation. Related posts: Don't Take The Bait, Knowledge by Association

Stock Split: A reduction in the price of a share of stock while at the same time increasing the number of shares. This does not change the value of the stock since the number of shares are increased in proportion to the price reduction. Example: a $100 stock with a million shares means the company is worth 100 million dollars. If it splits 2 for 1, the stock will now be worth $50 with 2 million shares which makes it worth the same 100 million dollars.

Dollar Cost Averaging: A regular amount of money invested at regular intervals. Rather than trying to time the market and buy low, this will lead to buying when prices are high as well as low leading to an average somewhere in the middle.

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