Financial glossary
for new-age investors

Discover financial terms and learn new concepts.

Exchange-Traded Fund

An exchange-traded fund (ETF) is a pooled investment vehicle that trades on an exchange, often tracking a specific index. It combines the flexibility of buying and selling stocks with the diversification benefits of mutual funds and allows investors to buy into a mix of assets in a single purchase. ETFs can be bought and sold throughout the trading day like individual stocks, allowing trading flexibility and real-time pricing. They’re an accessible and cost-effective option for diversified investing thanks to their typically low expense ratios and attracting fewer broker commissions compared to buying up a handful of individual securities.

Export

Goods/services that companies sell to customers outside of their own country. They contributed positively to the size of a country’s economy (as measured by its Gross Domestic Product).

FAANG Stocks

FAANG is an acronym for Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet). These stocks are renowned for their influence on technological innovation and market trends. They dominate the technology sector while significantly impacting the global tech industry. The popularity of FAANG stocks has made them a critical focal point for investors and analysts alike, shaping investment strategies and financial narratives worldwide. Their role in driving technological advancements and setting industry standards underscores their importance to the global market.

Financial Result

All public companies have to report their financial results. The announcement includes things like how much revenue and profit the company generated. US companies report results four times per year (which is why you hear terms like “2nd quarter results…”) while non-US companies often report only twice per year. Investors usually measure the reported results versus expectations that the company itself and independent analysts previously published.

Fiscal Policy

Refers to how a government sets spending and tax policies and, by doing so, exerts a lot of influence on its economy. Governments generally like to spend money – especially in a democracy where it helps keep voters happy – but a government can’t spend too much above what it generates in tax revenue without risking serious long-term consequences (like it’s currency collapsing in value).

Fiscal Stimulus

When a government either increases its spending or cuts taxes in an effort to boost economic growth. Often, fiscal stimulus (especially the spending part) is meant to be short-term in nature but with benefits that supposedly last for decades. For example, building a bridge today creates jobs immediately for workers, while creating a more efficient river crossing would help the transport of goods for decades to come.

Foreign Exchange Reserve

Many countries maintain savings accounts of currencies other than their own (usually it’s the US dollar they are saving). This is typically so that the country can more easily guarantee that it will pay back any debt that is denominated in a foreign currency (again, usually that’s in dollars). Also, it can use its savings of foreign currencies to influence the value of its own currency, e.g. by selling dollars to buy its own currency and thus prop up its value.

Free Cash Flow Yield

Free cash flow yield, or FCF yield, measures how much cash a company generates relative to its size. All else equal, higher is better. A positive yield means a company makes excess cash and the higher it is, the more likely a company to reward shareholders by paying dividends or buying back shares.

Futures

Futures are contractual agreements to buy or sell a particular asset at a predetermined price at a specified time in the future. These derivatives are useful for managing risk because they lock in prices, thus protecting against price volatility and speculation on future price movements. Futures are standardized contracts that trade on regulated exchanges, making them accessible to everyday investors and ensuring a level of transparency and liquidity not always present in other types of derivatives.

Gearing Ratios

Gearing ratios are used to assess a company's financial leverage – indicating how much of its funding comes from shareholders versus debt holders. Essentially, gearing compares a company’s debt level to its equity (including common stock, preferred stock, and retained earnings). The ratios provide insight into the firm's stability and potential risk level by showing how much of its financing comes from borrowed funds. They’re also valuable for comparing the financial structures of different companies within the same industry.