An asset allocation is an investment strategy for managing risk by diversifying assets among different categories, such as stocks, bonds, or cash.
Assets are anything an individual owns that has monetary value. This includes any money that is owed, but hasn't yet been paid. Cash in a bank account and investments in stocks, bonds, and mutual funds are examples of assets.
A broker-dealer is a firm that has been licensed by the Securities and Exchange Commission (SEC) to buy and sell securities on behalf of its clients.
Capital is money that is invested or intended to generate income. For example, when an investor purchases a stock, the money that he or she invests is referred to as capital.
Cash equivalents are short-term, low-risk investments that can be quickly and easily converted into cash at little or no loss of value, such as money market funds.
The CRD contains information such as licensing status and disciplinary history. To obtain a CRD report, call the Texas State Securities Board, the securities regulator in your state, or visit FINRA at www.finra.org and click on BrokerCheck. You can locate your state’s securities regulator by contacting the North American Securities Administrators Association at www.nasaa.org, or 202-737-0900.
Cold calling is a sales method in which brokers telephone clients they do not know and offer to sell stocks or other types of investments.
Commissions are the fees, often calculated as a percentage, that brokers charge to execute securities transactions.
A confirmation is a written notice that a particular security transaction is complete. The confirmation includes details such as the date of purchase, price, number of shares, commission, fees, and settlement terms.
An investment’s current yield measures its rate of return. Current yield for a bond equals the current market price divided by the interest an investor receives. Current yield for a stock is calculated by dividing its annual dividend payment by the current market price.
Disclosure documents provide details about how a particular financial product works, the risks it may present, and other details mandated by the regulatory authority that must approve its sale.
Discretionary authority gives a broker the right to buy and sell securities on behalf of an investor, based on what he or she believes meets that investor’s investment objectives.
Diversification is an investment strategy that seeks to manage the impact of market and management risk on a portfolio’s overall performance. This is done by investing in a variety of products and asset classes within a particular portfolio.
Equity represents the ownership interest of shareholders in a corporation. Each shareholder of the corporation has equity in, or owns a portion of, the company issuing the stock.
An exempt security is one that does not have to be registered with a state securities regulator before it can be sold within the state because it is already registered with the Securities and Exchange Commission (SEC).
A fiduciary is a person or organization that has been legally designated to manage an individual’s assets for the benefit of that individual.
A financial professional is an individual who specializes in helping to make investing decisions or executing security transactions. Typically this includes investment advisers and brokers but may also refer to accountants.
Form ADV is a document an investment advisory firm must file when it registers with a state securities regulator or the Securities and Exchange Commission (SEC). The two-part form provides detailed information about the firm’s business.
Full and fair disclosure describes the federal and state securities market laws that require investors be given complete and accurate information so they can make informed decisions.
An index mutual fund is a passively managed mutual fund. The fund’s assets are invested in the components of a particular index, such as the S&P 500. The fund’s objective is to replicate the performance of the index it tracks.
In Texas, agents who sell insurance must be licensed by the Texas Department of Insurance. In addition, insurance agents who sell securities must also be registered by the Texas State Securities Board. Most agents, whether selling insurance or securities, are paid with commissions on the products they sell. Visit the Texas Department of Insurance website to check if an agent or agency is currently licensed to sell insurance in Texas. And call our Registration Division at (512) 305-8300, or email your request to email@example.com to check if an agent or agency is currently registered to sell securities in Texas.
Investment advisers are financial professionals who provide guidance to investors to help them make investing decisions. They may also manage an investor’s portfolio. A firm that is paid for providing investment advice must register as an investment adviser, either with the state or with the Securities and Exchange
Commission (SEC). To obtain background information on an investment adviser, contact the Texas State Securities Board, your state securities regulator or the SEC at www.adviserinfo.sec.gov. Registered investment advisers (RIAs) are required to file a document called Form ADV, which is composed of two parts. Part I is available online and Part 2 must be provided to you at your request. Form ADV provides educational background and work experience and discloses any legal or financial problems that have been reported to the adviser’s regulatory agency. (More
Investment objectives are the goals an investor hopes to achieve by making investments. Different financial products are appropriate for investors with different investment objectives.
A limited partnership is one way to organize a business venture. Limited partners are not actively involved in operating the business and are not liable for business losses beyond their initial investment. However, they are entitled to a share of the gains.
An individual’s net worth is the difference between the value of all assets a person owns and the amount of that person’s financial liabilities.
An offering circular is a summary document that allows brokers and potential investors to read the major details of a new investment offering without requiring them to read the entire prospectus.
Principal, in the context of this guide, is the amount of money an investor initially invests in a particular security or financial product.
A prospectus is the formal written offer that companies use to announce an offer to sell shares of stock or a mutual fund. The information a prospectus must include is mandated by regulators. (More
A realized gain results when an investor sells an investment for more than he or she paid to purchase it. A realized loss, on the other hand, results when an investor sells an investment for less than he or she initially paid for it.
Commonly referred to as brokers, registered representatives are licensed to execute investing decisions—like buying and selling securities—on behalf of an individual investor.
Return describes the total gain or loss on one investment or a portfolio of investments over a particular period of time.
Risk is the potential for loss an investor might experience if a particular investment does not perform as anticipated.
Risk tolerance describes the maximum amount of investment risk an investor is willing to assume, particularly with regard to the possibility of losing money.
In the context of this guide, the term security refers to a particular investment product, such as a stock or a bond. (More
Stock is a type of equity investment. Each share of stock represents one share of ownership in the issuing corporation. (More about common stocks
and preferred stocks
Treasury bills are a type of debt security. They are issued and backed by the full faith and credit of the US government and are generally considered a risk-free investment.
An unrealized gain results when an investment increases in market value. It becomes a realized gain if the investment is sold at a profit. An unrealized loss results when an investment’s value decreases below the purchase price. It becomes a realized loss if the investment is sold for an amount less than the purchase price.