← All Glossary MACD (Moving Average Convergence Divergence) A trend-following momentum indicator showing the relationship between two moving averages of price, used to identify buy and sell signals. Margin Borrowed money from a broker used to purchase securities, amplifying both gains and losses, with the securities serving as collateral for the loan. Margin Call A broker's demand that an investor deposit additional funds or securities when the equity in a margin account falls below the maintenance requirement. Market Cap (Market Capitalization) The total market value of a company's outstanding shares, calculated by multiplying the current share price by the total number of shares outstanding. Market Maker A firm or individual that quotes bid and ask prices for a security, providing liquidity by standing ready to buy or sell at publicly quoted prices. Market Manipulation Illegal practices — spreading false rumors, wash trading, spoofing, or cornering markets — intended to artificially influence security prices and deceive other investors. Market Order An order to buy or sell a security immediately at the current market price, guaranteeing execution but not controlling the final price paid or received. Maximum Drawdown The largest peak-to-trough decline in an investment's value over a specific period, a key risk metric for assessing downside potential. Medicare A US federal health insurance program for people aged 65 and older and certain younger individuals with disabilities, funded through payroll taxes. Mega Backdoor Roth A retirement strategy allowing high-income earners to contribute up to the full 401(k) limit (including after-tax contributions) and convert to Roth, far exceeding standard limits. Microcap Stock Shares of very small publicly traded companies with market capitalizations below $300 million, often trading on OTC markets with limited information and higher fraud risk. Mid Cap Companies with market capitalization between $2 billion and $10 billion, offering a balance of growth potential and stability between small and large caps. Modern Portfolio Theory (MPT) A framework for constructing portfolios to maximize expected return for a given level of risk through diversification and efficient frontier optimization. Momentum A factor investing strategy based on the tendency of assets with recent strong performance to continue performing well in the near term. Money Market Fund A mutual fund investing in short-term, high-quality debt securities like Treasury bills and commercial paper, aiming to maintain a stable $1 NAV while providing liquidity and modest yield. Monte Carlo Simulation A computational technique using random sampling to model the probability of different outcomes in investment portfolios, accounting for uncertainty and variability. Mortgage-Backed Security (MBS) An investment backed by a pool of mortgage loans, where investors receive payments derived from the underlying borrowers' principal and interest payments. Moving Average A widely used technical indicator smoothing price data over a specified period to identify trend direction and potential support/resistance levels. Municipal Bond (Muni) A debt security issued by state or local governments, often offering federal tax-exempt interest and potentially state tax exemption for residents. Mutual Fund A pooled investment vehicle managed by professionals, gathering money from multiple investors to buy a diversified portfolio of securities. Mutual Fund Class Different share classes (A, B, C, I) of the same mutual fund offering varying fee structures — front-end loads, back-end loads, and 12b-1 fees — to suit different investor needs.
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