← All Glossary Accredited Investor An individual or entity meeting SEC net worth ($1M+) or income ($200K+/$300K+ joint) thresholds, eligible to invest in private securities offerings not registered with regulators. Accrued Interest Interest that has accumulated on a bond since its last coupon payment date, which the buyer must pay the seller when purchasing the bond between payment dates. Active Management An investment strategy where a portfolio manager makes specific buy/sell decisions to outperform a benchmark index, typically resulting in higher fees than passive management. Adjustable-Rate Mortgage (ARM) A mortgage type with an interest rate that changes periodically based on a benchmark index, often starting lower than fixed-rate mortgages but carrying future rate risk. ADX (Average Directional Index) A technical analysis indicator measuring trend strength on a scale of 0 to 100, where values above 25 indicate a strong trend and below 20 suggest a ranging market. Alpha A measure of an investment's excess return relative to a benchmark index, representing the value added or subtracted by active management. Alternative Investment An asset class outside traditional stocks, bonds, and cash, including private equity, hedge funds, real estate, commodities, collectibles, and cryptocurrencies. American Depositary Receipt (ADR) A US bank-issued negotiable certificate representing shares of a foreign company, trading on US exchanges in dollars while providing dividend and capital gain exposure to international markets. Amortization The process of gradually paying off a debt over time through scheduled payments that cover both principal and interest, common in mortgages and loans. AMT (Alternative Minimum Tax) A parallel tax system in the US designed to ensure high-income individuals pay a minimum amount of tax by disallowing certain deductions and credits. Annual Percentage Yield (APY) The effective annual rate of return accounting for compounding interest, allowing accurate comparison of savings and investment products. Annual Return The percentage change in an investment's value over a one-year period, including income and capital appreciation, used to compare performance across assets. Annuity A financial contract with an insurance company where an investor pays a lump sum or periodic payments in exchange for guaranteed income streams, typically during retirement. Arbitrage The practice of simultaneously buying and selling an asset in different markets to profit from temporary price discrepancies, a key concept in efficient market theory. Ask Price The lowest price a seller is willing to accept for a security, representing one side of the bid-ask spread in a market transaction. Asset Allocation The strategy of dividing investments across different asset classes — such as stocks, bonds, and cash — to balance risk and reward based on an investor's goals and time horizon. AUM (Assets Under Management) A metric representing the total market value of investments managed by a financial institution, fund, or advisor on behalf of clients. Average True Range (ATR) A technical analysis volatility indicator that measures the average range between high and low prices over a specified period, used to set stop-loss levels.
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