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What is a Mutual Fund?

A mutual fund is an investment portfolio operated by an investment company that raises money from shareholders and invests in a group of assets with a particular investment objective in mind. Common assets in a mutual fund include stocks, bonds...

What is Net Worth?

Net worth is the value of assets minus liabilities. Net worth is a key measure of financial health applicable to individuals and businesses. In the business context, net worth is also known as book value or shareholders' equity.   See Also: How to...

What is an Option?

Basically, an option is an advanced investing strategy to bet on the price movement of an underlying security. Technically, an option is a financial derivative that represents a contract sold by one party (option writer) to another party (option...

What is an Overdraft?

An overdraft is an extension of credit from a financial institution that allows an individual to continue withdrawing money even after their account value is zero. If you have an overdraft account, your bank will cover checks which would otherwise...

What is a Payday Loan?

A payday loan is a type of short-term borrowing where an individual can quickly borrow a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in...

What is a Penny Stock?

A penny stock is a stock that trades at a relatively low price and is not usually listed on a major market exchange such as the NASDAQ. These types of stocks are generally considered to be high risk because of their lack of liquidity, pricing...

What is a Pension?

A pension is a post-retirement benefit an employee might receive from an employer that is based on the length of their employment and position. A pension is essentially deferred compensation received by the employee after retiring.   See Also: How...

What is a Pre-Paid Tuition Plan?

A pre-paid tuition plan is one of the two major types of 529 plans that allows investors to lock in the future cost of tuition in today's dollars. The amount invested is guaranteed to grow at the same rate as college tuition, regardless of its...

What is a Principal?

A principal is the amount of an original investment, or the part of a monthly payment that reduces the outstanding balance of a mortgage.    See Also: Your DIY Financial Planning Guide Top 8 Mistakes Investors Make Ask An Advisor: What Is a...

What is a Prospectus?

A prospectus is a legal document required and filed by the Securities and Exchange Commission (SEC) that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an...

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