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Wealth management vocabulary – investment terms you should know

Every sector has its own ‘lingo’ or specific vocabulary words and terms. Wealth management is no different, especially when it comes to investment terminology. The below list includes some of the most common terms used by wealth advisors, publications, investors and more. Click the sections below to reach each definition.

Investment term used to describe an investment’s returns being greater than or less than the benchmark.

AUM stands for asset under management. This is a measurement of the size of a Registered Investment Advisor (RIA) and refers to dollars managed by the RIA.

Simply put, the market is going down. Typically, stock prices have fallen by 20% or more.

Usually an index used to compare or measure investment returns against, for example, S&P 500. S&P 500 is a stock market index tracking 500 of the largest companies on the stock exchange in the U.S. and their performance.

A measure of risk or volatility compared to a benchmark (usually S&P 500). A beta of less than one will have less volatility, and a beta of more than one will have more volatility.

A person or firm that buy and sell securities for clients or itself. They can broker a trade between two people or deal the securities from its own supply. Examples of broker-dealers include Morgan Stanley and Merrill Lynch, among others.

Simply put, the market is going up! Major stock market indexes are generally rising and expected to reach new highs.

CUSIP stands for Committee on Uniform Securities Identification Procedures. It is a number used to identify bonds and fixed income securities.

These are financial institutions that actually hold your money and investments. They have custody, so they are custodians.

ETF stands for exchange traded fund. An ETF is similar to a mutual fund, but it is traded on the open market.

Those who act in the best interest of their client, without regard to their own benefit.

IAR stands for Investment Advisor Representative. This is the term for a licensed individual working for a Registered Investment Advisor.

A group of high-performing stocks that fueled much of the growth of the market in 2023. The seven companies’ stocks include Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla.

When a companies’ stock has gained in popularity due to social media. These stocks may or may not be good “investments.” An example of a meme stock is GameStop.

A basket of stocks or bonds, pooled together to be purchased directly from the mutual fund company. These always have five letter tickers that end in X.

This is in reference to the tax treatment of an account type. Qualified accounts are funded with pre-tax dollars, and non-qualified accounts are funded with after-tax dollars. Trust accounts are non-qualified while 401(k) plans are qualified accounts.

REIT stands for Real Estate Investment Trust. Many REITs are traded like mutual funds; however some are non-tradable.

RIA stands for Registered Investment Advisor. This is a financial firm that advises clients on securities investments and may manage their investment portfolio. Baker Tilly Wealth Management, LLC is an RIA.

SEC stands for Securities and Exchange Commission. The SEC is responsible for maintaining orderly securities markets, overseeing FINRA and regulating federally registered investment advisors.

Shorthand term for the Federal Reserve. The Federal Reserve controls interest rates, manages the money supply and regulates financial markets.

One to five letters used by the stock exchange to identify a specific holding/company. For example, Ford is F, and Microsoft is MSFT.

Generally, stocks are determined to be value or growth stocks based on valuation metrics like price-to-earning or price-to-sales ratios. Stocks with lower valuations provide more value per dollar spent to purchase. Growth stocks usually have a higher price-earnings ratio because they are expected to grow quicker.

Are we missing any terms from the list? Contact us to let us know.

Baker Tilly Wealth Management, LLC (BTWM) is a registered investment advisor. BTWM does not provide tax or legal advice. BTWM is not an attorney. Estate planning can involve a complex web of tax rules and regulations. Consider consulting a tax or legal professional about your particular circumstances before implementing any tax or legal strategy. Information presented herein is for informational purposes only and should not be considered a solicitation to buy or sell any security. Investing in the market involves gains and losses and may not be suitable for all investors. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Baker Tilly Wealth Management, LLC is controlled by Baker Tilly US, LLP. Baker Tilly US, LLP, is an independently owned and managed member of Baker Tilly International. © 2024 Baker Tilly Wealth Management, LLC

Chris Cox
Senior Advisor, Wealth
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