Investing Terms

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  • Secured Overnight Financing Rate (SOFR)

    What Is Secured Overnight Financing Rate (SOFR)? The Secured Overnight Financing Rate (SOFR) is an interest rate benchmark chosen by the Alternative Reference Rates Committee (ARRC) in 2017 as an alternative and eventual replacement for the London Interbank Offered Rate, more commonly known as Libor, which is slated to be phased out by 2021. ARRC is a committee set up by the U.S. Federal Reserve Board and the Federal Reserve…

  • Systemically Important Financial Institutions (SIFIs)

    What Are Systemically Important Financial Institutions (SIFIs)? Systemically Important Financial Institutions, or SIFIs, are a group of 29 large international banks that are required to hold extra equity capital against losses because of their size, complexity and importance to the international financial system. These institutions are generally regarded as "too big to fail," meaning they would require being bailed out by taxpayers if they were threatened with failure during a…

  • Short Covering

    What Is Short Covering? Short covering is the act of closing out a short position in a security. Investors who believe that a stock, bond or commodity is overvalued and is likely to decline in price can try to profit on that belief by selling short that particular asset. In a short sale, the investor borrows the security from their broker and immediately sells it. At some point the investor…

  • Short Interest

    What Is Short Interest? Short interest is the number of shares of a stock that have been sold short by investors but have not yet been paid back. Investors who believe a stock is overpriced and headed for a fall can short a stock by borrowing shares from their broker and then selling them, the proceeds of which go into their account. At some point they have to buy the…

  • Short Squeeze

    What Is A Short Squeeze? A short squeeze is what happens when many investors with a short position in the same security—meaning they are betting that the price will drop—are forced to cover their positions and buy the security back when the price rises unexpectedly. The resulting demand usually forces the price to rise even higher, exacerbating the situation and the potential losses for short sellers. Investors who believe a…

  • Cyclical Stock

    Like commodity, income and pink sheet equity offerings, cyclical stocks are a very specific type of corporate listing. Featuring unique tendencies in price action, cyclical stocks are frequently targeted for active speculation as well as portfolio diversification. What Is A Cyclical Stock? A cyclical stock is an equity product that experiences pricing fluctuations in concert with the prevailing macro economic trends of the day. Accordingly, stock prices typically exhibit bullish…

  • FANG Stocks

    "FANG" is an acronym for four U.S. technology stocks—Facebook, Amazon, Netflix and Google—that have been among the best performers in the stock market since the bull market began in 2009. James Cramer, host of CNBC's Mad Money program and the founder of TheStreet.com, is credited with coining the term to describe these tech stocks in 2013. Amid challenging financial environments such as the COVID-19 pandemic, FANG stocks have proved to…

  • Floating Stock

    What Is Floating Stock? Floating stock represents a company's shares that are currently available for trading. Simply put, it is the number of shares that investors can trade in an open market. Investors can calculate floating stock (also known as share float) by taking shares outstanding and then subtracting both restricted shares and closely held shares. By determining a figure for floating shares, investors can establish how many shares are…

  • Fiat Money

    Fiat money has value because the government has declared that it does. This kind of money has no intrinsic value, but since a government supports it, fiat currency can be exchanged for goods and services. Let's now look at exactly what fiat money is, how it can be used, and its benefits and downfalls. Money Basics Money comes in many different forms. However, anything that is used as money needs…

  • Common Stock Vs Preferred Stock

    Stocks come in two varieties. "Common stocks" are indeed the most common, hence the name. For most people, the words "stocks" and "common stocks" are nearly synonymous terms. However, there is another type of stock, known as "preferred." While both common and preferred offer ownership shares in a company, there are big differences between the two. In a nutshell, common stocks offer the greatest reward but at the greatest risk.…

  • Balance Sheet

    What Is A Balance Sheet? The balance sheet is one of the three most important documents—the other two are income statement and the statement of cash flow—that companies produce that enable their investors to examine and assess their financial health. Publicly traded companies are required to produce and publish these documents regularly, usually once per quarter, to shareholders as well as to tax and regulatory authorities. The balance sheet shows…

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