← All Glossary S&P 500 An index tracking 500 large US publicly traded companies by market cap, widely regarded as the best single gauge of the US stock market. Secondary Market The market where previously issued securities are traded among investors without involvement of the issuing company, providing liquidity through exchanges like NYSE and Nasdaq. Sector Rotation An investment strategy moving capital between market sectors based on economic cycles, anticipating which sectors will outperform in each phase. Secular Market A long-term market trend lasting 5 to 25 years that defines the overall direction regardless of shorter cyclical movements within it. Securities Lending The practice of temporarily transferring securities to a borrower in exchange for collateral and a fee, commonly used by short sellers and institutional investors for yield enhancement. Security A fungible, tradable financial instrument representing ownership (stock), debt (bond), or derivative rights, regulated by securities laws. SEP IRA (Simplified Employee Pension) A retirement plan for self-employed individuals or small business owners allowing tax-deductible contributions up to 25% of compensation, significantly higher than standard IRAs. Sequence of Returns Risk The danger that poor investment returns early in retirement significantly reduce portfolio longevity, as withdrawals compound the impact of market losses. Sharpe Ratio A risk-adjusted return measure calculated as the excess return over the risk-free rate divided by standard deviation, evaluating reward per unit of risk. Short Position A trading strategy where an investor borrows and sells a security expecting its price to decline, aiming to repurchase it at a lower price. Short Squeeze A rapid price increase in a heavily shorted stock, forcing short sellers to buy back shares to cover positions, further accelerating upward momentum. Simple Interest Interest calculated only on the original principal amount, without compounding on accumulated interest, resulting in linear rather than exponential growth. SIMPLE IRA A retirement plan for small businesses (under 100 employees) allowing both employer and employee contributions with simpler administration than 401(k)s. SIP (Systematic Investment Plan) An investment strategy of regularly investing a fixed amount at scheduled intervals, leveraging dollar-cost averaging to reduce market timing risk. SIPC (Securities Investor Protection Corp) A nonprofit membership corporation insuring up to $500,000 in securities and cash per customer if a brokerage firm fails. Small Cap Companies with a market capitalization between $300 million and $2 billion, offering higher growth potential but greater volatility and risk than large caps. Smart Contract Self-executing computer code on a blockchain that automatically enforces contract terms when predetermined conditions are met, without intermediaries. Social Security A US federal program providing retirement, disability, and survivor benefits funded by payroll taxes, serving as a base income layer for most retirees. SOFR (Secured Overnight Financing Rate) A benchmark interest rate based on overnight Treasury repurchase agreement transactions, replacing LIBOR as the primary reference rate for USD derivatives and loans. Sole Proprietorship The simplest business structure where one individual owns and operates a business, with no legal separation between personal and business liabilities. Solo 401(k) A retirement plan for self-employed individuals with no employees, allowing both employer and employee contributions up to significantly higher limits than IRAs. Sortino Ratio A risk-adjusted return metric similar to Sharpe Ratio but penalizing only downside volatility, focusing on harmful rather than total price variability. Special Purpose Acquisition Company (SPAC) A shell company raising capital through an IPO to acquire a private company within a specified timeframe, taking it public through a merger rather than a traditional IPO. Speculation Trading or investing based on anticipated price movements rather than fundamental value, typically with higher risk and shorter time horizons. Spin-Off A corporate action where a parent company creates a new independent company by distributing shares of a subsidiary to existing shareholders, unlocking value through separation. Spot Price The current market price at which an asset can be bought or sold for immediate delivery and settlement, as opposed to futures or forward prices. Spread The difference between bid and ask prices, or between the prices of related securities, representing transaction costs or market expectations. Stablecoin A cryptocurrency designed to maintain a stable value relative to a reference asset (usually USD), backed by reserves or algorithmic mechanisms. Staking The process of locking cryptocurrency holdings to support a proof-of-stake blockchain's operations, earning rewards similar to interest on deposits. Standard Deviation A statistical measure of return dispersion around the mean, used in finance as the primary measure of investment volatility and risk. Stock A share of ownership in a corporation representing a claim on its assets and earnings, giving shareholders voting rights and potential dividends. Stock Split A corporate action increasing the number of outstanding shares while proportionally reducing the share price, keeping market capitalization unchanged. Stop-Limit Order A conditional order combining stop and limit features, triggering a limit order once a specified stop price is reached, controlling both entry and price. Stop-Loss Order A protective order instructing a broker to sell a security when it reaches a specified price, limiting potential losses on a position. Straddle An options strategy buying both a call and put at the same strike price and expiration, profiting from significant price movement in either direction. Strangle An options strategy buying an out-of-the-money call and put with different strike prices but same expiration, profiting from large moves with lower premium cost than a straddle. Strike Price The predetermined price at which an option holder can buy (call) or sell (put) the underlying asset upon exercising the option contract. Support Level A price level where buying interest historically exceeds selling pressure, preventing further price declines and potentially reversing the downtrend. Sustainable Withdrawal Rate (SWR) The percentage of a portfolio that can be withdrawn annually without depleting it over a defined retirement period, typically cited as 4% historically. Swap A derivative contract exchanging cash flows or liabilities between two parties, commonly interest rate swaps or currency swaps for risk management.
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