11 investing acronyms you need to know to manage your money
Thinking about investing money in an ETF, IRA, or REIT, or contributing on behalf of your kids to a UTMA? Or maybe your CFP® recommends you invest in stocks based on their EPS that trade on NASDAQ or the NYSE. Maybe you’re tracking stocks on the DOW or the S&P 500 to add to your portfolio—in that case, you may want to consult an RIA firm.
Alphabet soup, huh? Oh, the many acronyms of investing and managing money.
It can be a little confusing, especially if you’re just getting started. Here’s a handy reference to expand your investing vocabulary.
Acronyms in investing, stock exchanges, and stock indices
CFP® – Certified Financial Planner
Financial professionals awarded the CFP® designation have successfully completed extensive education in financial planning, taxes, insurance, estate planning, and retirement. A certification exam is administered by the Certified Financial Planner Board of Standards. There are also professional experience and ethics requirements, plus background checks. CFPs take an additional 30 hours of education every 2 years to maintain their designation.
DJIA – DOW Jones Industrial Average®
Often shortened to just “The DOW®,” this is the best-known stock market index that shows how 30 large, publicly-owned U.S. companies have traded during a regular trading session in the market. People watch the DOW to get an indication of how well the overall stock market is performing. (Transportation and utilities are excluded). It’s composed mainly of companies on the New York Stock Exchange (NYSE), with only a couple of Nasdaq-listed stocks. Ticker symbol: INDU. Learn more about the DOW Jones Industrial Average®.
EPS – Earnings Per Share
EPS is a company’s profit divided by its number of common outstanding shares. For example, if a company earning $2 million in 1 year had 2 million common outstanding shares, its EPS would be $1 per share. When calculating EPS, companies often use a weighted average of shares outstanding over the reporting term. EPS can indicate a company’s profitability.
ETF – Exchange Traded Fund
An investment fund, similar to mutual funds, that trade throughout the day on the stock exchanges. An ETF pools money in a fund that invests in stocks, bonds, or other assets. As an investor, you receive an interest in the fund. Most ETFs are professionally managed and can be traded within the day.
IRA – Individual Retirement Account
A type of investment account that helps you save for retirement. It’s like a 401(k), but it’s not tied to your employer. You may be able to deduct your IRA contributions from your taxes, depending on your income level, which may lower your taxable income for the year. (Having access to a 401(k) may reduce deductibility, too.) You can read more about IRAs.
NASDAQ – National Association of Securities Dealers Automated Quotations
An American stock exchange, it’s the second largest in the world by market capitalization, behind only the New York Stock Exchange. (Market cap is the total value of all shares of stock a company has issued.) It’s a global electronic marketplace for buying and selling securities. The Nasdaq Composite (ticker symbol: IXIC) is an index of more than 3,300 stocks listed on its exchange, including the world’s foremost technology and biotech companies. Check out more information on NASDAQ.
NYSE – New York Stock Exchange
A stock exchange located in New York City, founded in 1792. Considered the largest equities-based exchange in the world, based on total market capitalization of its listed securities. It’s also known as the “Big Board” and includes more than 2,000 stocks. Find out more information on the New York Stock Exchange.
REIT – Real Estate Investment Trust
REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership—without actually having to buy commercial real estate. REITs receive rental income from properties like apartment complexes, hospitals, office buildings, hotels, etc. You can buy shares in a REIT, which is listed on major stock exchanges.
RIA – Registered Investment Adviser
An RIA is an investment advisory firm registered with the Securities and Exchange Commission (SEC) or a state securities regulator. Individuals who work for an RIA are called an Investment Adviser Representative (IAR) and are paid to provide advice to clients about securities. Some RIA firms manage investment portfolios. Others offer financial planning services or brokerage services (if licensed).
S&P 500® – Standard & Poor’s 500
Widely regarded as the best single gauge of the large-cap U.S. stocks, weighted by market capitalization. This stock index on the NYSE includes 500 leading companies. Ticker symbol: SPX. Read more about the S&P 500®.
UTMA – Uniform Transfers to Minors Act
Legislation that offers a tax-effective way to transfer assets to minors without establishing a special trust. Anyone can open an account or contribute—you don’t need to be the parent. The irrevocable “gift” is held in the child’s name, and can include almost any asset, even real estate. Nearly all states have adopted the UTMA law. (Its close cousin, UGMA—Uniform Gifts to Minors Act, is similar but assets are limited to cash, securities, and insurance policies.) Learn more about the Uniform Transfers to Minors Act.
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