Plain-English definitions of the key terms you’ll need for the SIE and Series 7 exams. Click any term for the full explanation and Ken’s video walkthrough, and join the free live Q&A every Tuesday and Thursday night.
Accredited Investor
An individual or entity that meets SEC income or net-worth thresholds, allowing it to invest in private, unregistered securities offerings. Watch & read →
Accretion
The annual adjustment that raises a discount bond’s cost basis toward par value over the life of the bond. Watch & read →
Accrued Interest
Interest a bond has earned but not yet paid. The buyer pays it to the seller at settlement so each side gets interest for the days it held the bond. Watch & read →
Ad Valorem Tax
A tax based on assessed property value, commonly the revenue source that backs general obligation municipal bonds. Watch & read →
Advance/Decline Theory
A market-breadth indicator that compares the number of advancing stocks to declining stocks to gauge the strength behind a market move. Watch & read →
AIR (Assumed Interest Rate)
The benchmark return used to project payouts on a variable annuity. Performance above or below the AIR raises or lowers the payment. Watch & read →
Alpha
The portion of a return that exceeds, or trails, what an investment’s risk level would predict. It measures the value a manager adds. Watch & read →
Annuity
An insurance contract that converts a sum of money into a stream of income, often used for retirement. Watch & read →
Arbitrage
Profiting from a price difference for the same security in two markets by buying low in one and selling high in the other. Watch & read →
Arbitration
The binding dispute-resolution process FINRA uses to settle disagreements between investors, firms, and associated persons outside of court. Watch & read →
Asset Allocation Fund
A mutual fund that spreads holdings across stocks, bonds, and cash and shifts the mix according to a set strategy. Watch & read →
Associated Person
Anyone employed by or affiliated with a FINRA member firm in a securities capacity, subject to registration and regulation. Watch & read →
Balanced Fund
A mutual fund that holds both stocks and bonds in relatively steady proportions to balance growth and income. Watch & read →
Beta
A measure of how much a security moves relative to the overall market. A beta above 1 is more volatile than the market. Watch & read →
Modern Portfolio Theory
The framework for building portfolios that maximize expected return for a given level of risk through diversification. Watch & read →
Standard Deviation
A statistical measure of how widely an investment’s returns vary from their average. It is a common gauge of volatility and risk. Watch & read →
Systematic vs Unsystematic Risk
Systematic risk is market-wide and cannot be diversified away. Unsystematic risk is specific to one company or industry and can be reduced through diversification. Watch & read →