Archive for the ‘Definitions’ Category

FICO is an acronym for the creators of the FICO score, Fair Isaac Credit Organization. It is a standard credit score which makes up a substantial portion of a credit report that credit bureaus sell to lenders so they can asses an applicant’s credit risk and whether to extend them credit.
Here is a visual [...]

Fixed interest rate loan or mortgage has an interest rate that will remain at a the same rate for the entire term of the loan. This allows the borrower to accurately predict their future payments.

Growth stocks are shares in a company whose earnings are expected to grow at an above-average rate relative to the market. The company is growing earnings and/or revenue faster than its industry or the overall market. However, It’s important that you do not mistaken “growth” for higher return on investment.
Based on the Efficient Market [...]

Home Equity Line Of Credit, or HELOC, is a line of credit designed specifically for homeowners.  With HELOC, the borrower’s home is used as a collateral to allow the homeowner to draw on the line of credit at his or her discretion (up to the maximum established amount). Interest is charged on a predetermined variable [...]

Individual Retirement Account, or IRA, is a retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can opens an IRA account at a financial institution such as a bank or a brokerage firm.  Funds in the IRA account can be invested in investments such as stocks, bonds, and mutual [...]

Leverage, or financial leverage, is the practice of using borrowed fund to increase potential profit. For example, if you invest $10,000 and earned a 20% return, your profit is $2,000. However, if you borrow $50,000 at 10% interest rate and earned the same 20% return, your profit is $5,000.

Your marginal tax rate, which includes federal, state, and local income taxes, self-employment taxes, and federal payroll — is the percentage that will come off the top of your next dollar of incremental taxable income. Put another way, if your marginal tax rate is 25%, you get to keep 75 cents on the next dollar [...]

Market capitalization is the market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Morningstar categorizes a fund’s market capitalization by studying the size of the companies that the fund is investing in. There are three categories: large, medium, and small. In general, the largest 250 [...]

Morningstar Style Box is a visual tool created by Morningstar, a premier mutual fund data sources provider. Morningstar helps make asset allocation decision easier by categorizing mutual funds by their market capitalization and valuation to nine categories.

Large Value
Large Blend
Large Growth
Medium Value
Medium Blend
Medium Growth
Small Value
Small Blend
Small Growth

A mortgage is a financial agreement between a lender and a borrower in which the property is used as collateral for the loan. A mortgage gives the lender the right to collect payments on the loan (and to foreclose on the property if those payments are not made).