Diversification
Diversification is the strategy of distributing investments among different securities. This practice aims to limit losses in the event of a downturn in a particular market, industry, or sector.
Due Diligence
Due diligence is the performance of an investigation prior to entering into a proposed transaction with another party. The auditor examines all relevant facts, conditions, rules, laws, regulations, and financial considerations pertinent to the situation under review.
Exchange-Traded Fund
Similar to a mutual fund, an exchange-traded fund is a pooled investment security that tracks an underlying index, sector, commodity, or other asset. However, dissimilar to a mutual fund, an ETF is a listed security. Therefore, an investor can buy, sell, short-sell, and trade it on margin--like ordinary stock. Exchange-traded funds offer investors a low-cost way to diversify their portfolios.
Financial Advisor
A financial advisor (adviser) is a professional who provides financial guidance for compensation. These money managers offer a variety of services. For example, they can provide financial planning, portfolio management, and investor education.
Financial Asset
A financial asset is a non-physical item of monetary value. Examples of financial assets include banks accounts, stocks, bonds, and mutual funds.
Financial Liability
A financial liability is a monetary obligation that one must pay, usually over time. Examples of liabilities include taxes due, unpaid bills, mortgage payments, loans, and credit card debt.
Financial Literacy
Financial literacy is the ability to use monetary knowledge to acquire and communicate meaning in all aspects of economic life.