Review core securities terms used throughout introductory FINRA-style study, including trading, products, portfolio concepts, and regulatory language.
This glossary is a study aid for the terms that appear repeatedly across introductory securities lessons. It is not meant to replace the deeper chapters. It is meant to help a student quickly confirm what a term means, how it is used, and which similar terms are commonly confused on exams.
The strongest exam use of a glossary is active, not passive. When a question includes a word such as liquidity, NAV, underwriting, or yield, the student should know more than a short definition. The student should recognize what the term implies about risk, pricing, timing, or investor protection.
flowchart TD
A["Key Securities Terms"] --> B["Market and Trading Terms"]
A --> C["Product Terms"]
A --> D["Portfolio and Analysis Terms"]
A --> E["Regulatory Terms"]
B --> B1["Bid, Ask, Liquidity, OTC"]
C --> C1["Stock, Bond, ETF, Mutual Fund, Option"]
D --> D1["Asset Allocation, Diversification, Volatility, Yield"]
E --> E1["SEC, Underwriting, Disclosure"]
Use this page when you need a quick recall tool. If a term is tied to a larger chapter topic, go back to that chapter after reviewing the definition here. Exams rarely test vocabulary in isolation. They usually test whether you can apply the term correctly in a fact pattern.
Ask Price: The lowest price at which a seller is willing to sell a security. It is paired with the bid price.
Auction Market: A market in which buyers and sellers submit competing bids and offers. The exchange matches interest based on price and order priority.
Bid Price: The highest price a buyer is willing to pay for a security.
Liquidity: The ease with which an investment can be bought or sold near its current market value. Highly liquid securities are generally easier to trade without a large price concession.
Over-the-Counter (OTC): A decentralized market in which securities trade through dealer networks rather than on a centralized exchange.
Ticker Symbol: The abbreviated identifier used to reference a publicly traded security in the market.
Bond: A debt security representing money lent by an investor to an issuer. The issuer promises repayment of principal at maturity and usually periodic interest.
Common Stock: An equity security representing ownership in a corporation. Common shareholders generally have voting rights and a residual claim on assets after creditors and preferred shareholders.
Coupon Rate: The stated interest rate on a bond, usually expressed as a percentage of par value.
Exchange-Traded Fund (ETF): A pooled investment vehicle that trades intraday on an exchange, often tracking an index, sector, or strategy.
Initial Public Offering (IPO): The first public sale of stock by a company moving from private ownership into the public market.
Maturity Date: The date on which a bond’s principal is due to be repaid.
Mutual Fund: An investment company that pools investor money and prices its shares based on end-of-day net asset value.
Net Asset Value (NAV): The per-share value of a fund’s assets minus liabilities. Open-end mutual funds transact at NAV, not at continuously negotiated market prices.
Option: A derivative contract granting the right, but not the obligation, to buy or sell an underlying asset at a stated price before or at expiration.
Par Value: The face amount of a bond that is repaid at maturity, commonly $1,000 for corporate and municipal bonds in exam questions.
Preferred Stock: A class of stock that typically pays a stated dividend and has priority over common stock for dividends and liquidation, but usually has limited or no voting rights.
Yield: The income return on an investment, commonly expressed as a percentage. In bond questions, yield often moves inversely to price.
Asset Allocation: The process of dividing a portfolio among asset classes such as equities, fixed income, and cash equivalents to reflect goals, time horizon, and risk tolerance.
Capital Gain: The profit realized when an investment is sold for more than its cost basis.
Diversification: A risk-management approach that spreads investments across holdings, sectors, or asset classes to reduce concentration risk.
Expense Ratio: The annual operating cost of a fund expressed as a percentage of assets.
Fundamental Analysis: The evaluation of a security using business, financial, economic, and industry information.
Market Capitalization: The market value of a company’s outstanding equity, usually calculated as share price multiplied by shares outstanding.
Return on Investment (ROI): A general profitability measure comparing gain or loss with the amount invested.
Technical Analysis: The evaluation of market activity using price, volume, and chart patterns rather than issuer fundamentals.
Volatility: The degree of price fluctuation in a security or market over time. Higher volatility generally indicates greater uncertainty and price dispersion.
Securities and Exchange Commission (SEC): The U.S. federal agency responsible for enforcing federal securities laws and regulating key parts of the securities markets.
Underwriting: The process in which an investment bank or syndicate helps bring securities to market, including pricing, distribution, and assumption of offering-related risk.
Disclosure: The communication of material information to investors so they can make informed decisions.
Prospectus: The formal offering document describing a new security or investment company offering, including risks, fees, and key terms.
Several glossary terms are easy to confuse:
Bid versus ask: bid is what the buyer will pay; ask is what the seller wants.ETF versus mutual fund: ETFs trade intraday; open-end mutual funds transact at end-of-day NAV.Coupon rate versus yield: coupon is the bond’s stated rate; yield reflects market price and income relationship.Diversification versus asset allocation: diversification spreads holdings; asset allocation is the higher-level mix across asset classes.Common stock versus preferred stock: common stock carries ownership control features; preferred stock usually emphasizes income priority.A customer says, “I want to buy a fund during the trading day when the market dips, and I want to know the price immediately before entering the order.” Which term best identifies the product structure that fits that description?
A. Open-end mutual fund priced once daily at NAV
B. ETF trading intraday on an exchange
C. Zero-coupon bond sold at original issue discount
D. Preferred stock with a stated dividend
Correct Answer: B
Explanation: ETFs trade throughout the day on an exchange and can be bought or sold at market prices during market hours. Open-end mutual funds transact at end-of-day NAV.