Guide to Financial Acronyms

What Those Letters Stand For

Guide to Financial Acronyms
June 16, 2015

Are you knee-deep in financial acronyms? Can’t tell an ETF from an EFT, or a SPDR from a TIGR? Don’t worry, we are here to explain some of the more common financial acronyms (and a few that are less common).

  • NYSE, AMEX, and NASDAQ – All three are trading exchanges. The NYSE (New York Stock Exchange) is the primary exchange that most people think of as “the stock market”. The AMEX (American Stock Exchange) deals mostly in smaller or mid-cap stocks. NASDAQ (National Association of Securities Dealers Automated Quotation system) has no trading floor – it is a completely electronic stock exchange.

  • OTC – Over The Counter. OTC trading handles stocks that do not meet the criteria for any of the other stock exchanges.

  • S&P 500 – Standard and Poor’s 500 composite stock price index, containing 500 large-cap stocks from the NYSE or NASDAQ.

  • ROI – Return on investment, generally defined as net profits over total assets.

  • EFT – Electronic Funds Transfer, such as direct deposit of your paycheck or automatic bill payment deductions from your account.

  • ETF – Exchange Traded Funds, which are securities that track some index or defined mixture of assets. ETFs allow you to have greater diversity with relative simplicity.

  • NAV – Net Asset Value, or the price per share value of a mutual fund or an ETF. It is calculated daily for mutual funds and represents the value (total assets minus total liabilities) divided by the number of outstanding shares.

  • SPDR (pronounced “SPIDER”) – Standard and Poor’s Depositary Receipts, components of an ETF that only hold issues of companies in the S&P 500.

  • CFP – Certified Financial Planner, a financial professional that has been certified by the Certified Financial Planner Board of Standards. The designation requires thorough understanding of many aspects of financial planning, passing of multiple exams, and continuing education.

  • FOREX – Foreign Exchange, or the market where the world’s currencies are exchanged, sold, or bought. Currency rates are listed in acronym pairs like USD/JPY (U.S. Dollar to Japanese Yen) or EUR/AUD (Euro to Australian Dollar).

  • REITReal Estate Investment Trust, a security that invests in some form of real estate, either through holding properties or the mortgages on them. REITs sell like stocks, allowing you to invest in real estate in a more liquid form.

  • FDIC –Federal Deposit Insurance Corporation, created in 1933 to protect assets in U.S. banks against bank failure. Checking/savings accounts and CDs are typically covered up to $250,000 per depositor per insured institution.

  • GNP – Gross National Product, or the total value of the goods or services produced by a nation in a given period of time, typically a year.

  • YTM – Yield to Maturity, which is the rate of return on a bond if you were to hold it until it expires. This takes into account the time value of money, and is expressed as an annual interest rate. YTM represents investing all the coupon payments at a constant rate until maturity, and having that present value equal the market price of the bond.

  • ARM – Adjustable Rate Mortgage, where the interest rates are determined by a fixed margin plus a variable interest tied to some index. One such index is the London Interbank Offered Rate (LIBOR), the rate that banks use for charging each other interest on short-term loans. ARMs often have an initial fixed rate between three and five years before the variable period begins.

  • APR – Annual Percentage Rate, or a number that represents all borrowing costs over the life of a loan (including fees and other auxiliary costs) expressed as a constant interest rate.

  • EPS – Earnings Per Share, or the total earnings of a company divided by the outstanding stock shares. It is used to calculate the next two acronyms.

  • P/E – Price to Earnings ratio, used to evaluate the worth of a stock. It is the stock price divided by the EPS. P/E ratios may be trailing (using the earnings value from the last twelve months, sometimes called TTM P/E) or forward (using earnings estimates from the next twelve months).

  • PEG – P/E to Earnings Growth. This incorporates the rate of earnings in to the P/E ratio – a lower PEG at the same P/E suggests a faster growing, relatively undervalued company.

What about the TIGR (pronounced “TIGER”)? It stood for Treasury Income Growth Receipts and was part of the “feline” securities available from 1982-1986 that included CATS (Certificates of Accrual on Treasury Securities), LIONs (Lehman Investment Opportunity Notes), and COUGRS (Certificate of Government Receipts). No, we are not making that up. The feline series of securities were a type of bond issued at a discount and redeemed at face value without interest.

It seems appropriate to end with COB – Close of Business.

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