Rule of 72 – Dividing interest rate by 72 results in the number of years to double your investment.
Long Put – Insurance (option) for stock or ETF. Whereas “calls” are long, or to own, “puts” are for shorting, or selling.
Wealth – Abundance of money, valuable possessions, and material prosperity. Wealth is a measurement of a person’s ability to think. (Ayn Rand)
Federal Reserve Act (1913) – Gave the U.S. central banking and the income tax. Later debased U.S. currency in Great Depression and in 1971.
Secure Overnight Financing Rate – SOFR. (to replace LIBOR). The secured overnight financing rate, or SOFR, is an influential interest rate that banks use to price U.S. dollar-denominated derivatives and loans. The daily secured overnight financing rate (SOFR) is based on transactions in the Treasury repurchase market, where investors offer banks overnight loans backed by their bond assets. (Investopedia)
Cash Flow – the total amount of money being transferred into and out of a business, especially as affecting liquidity. Also, Rich Dad says these are important words.
Asset – a useful or valuable thing, person, or quality.
Rich dad definition: Something that puts money in your pocket.
Common definition: Any item which can be sold for cash.
Plan B – A back up plan. Can refer to relocation outside native or currently inhabited nation. Plan B could also be a side business or hobby that could replace present employment.
Passive Income – Income earned from investments, rents, notes, and royalties. Income not earned from work.
Liquidity – Can easily and quickly be converted to cash.
Obsolete – No longer produced or used; out of date. cause (a product or idea) to be or become obsolete by replacing it with something new.
Autodidact – A self-taught person. An autodidact studied without the guidance of masters or schools. Generally, autodidacts are individuals who choose the subject they will study, their studying material, and the studying rhythm and time.
Tall Poppy Syndrome – A social phenomenon in which people of genuine merit are resented, attacked, cut down, or criticised because their talents or achievements elevate them above or distinguish them from their peers. This is similar to begrudgery, the resentment or envy of the success of a peer. (Wikipedia) (“One author senses something sinister behind the Tall Poppy Syndrome.”)
Investment – An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.
Speculation – Investment in stocks, property, or other ventures in the hope of gain but with increased risk of loss due to lack of firm evidence.
Due Diligence – Separating opinion from fact. I.e. reading last 3 years of 10K and 10Q reports, or paying to have a property (building) professionally inspected.
Beta – Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Hedge Fund – A limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.
Margin – Debt leverage.
Inflation – A general increase in prices and fall in the purchasing value of money.
Deflation – A general reduction of the general level of prices in an economy.
Cantillon Effect – The economic/monetary distortion caused by how and where central banks inject cash into the economy. The Cantillon Effect is thought of as a regressive tax.
SHTF – Sh*t hits the fan. This refers to a breakdown of supply chains, markets (including currency), energy delivery, and/or any other catastrophe or severe civil unrest.
Upward Mobility – The ability and opportunity to improve yourself through accumulation of wealth, education, creation and development of assets, economic activity, social interaction, and family formation
P/E Ratio – The price to earnings ratio generally indicates how high a share price is, relative to its earnings.
P/B Ratio – The price to book ratio indicates how close the price of the share is compared to its book value (or “actual value.”
Minimalism – A lifestyle of minimizing possessions and expenses.
Parkinson’s Law – A rule of economics that dictates (household) expenses rise to meet income.
Disruptive – A technology or innovation which makes an existing technology obsolete. E.g. electric or driverless cars.
Boundary Spanning – An entrepreneur’s surveillance of external environments to identify what is happening or likely to happen, and how those events may influence your business’ plans, forecasts, and organization.
Red Pill – Seeing or understanding “reality” the way it really is.
Opportunity Cost – the loss of potential gain from other alternatives when one alternative is chosen.
Derivative – To derive from. I.e. orange juice comes from oranges. A NVDA call is a derivative of Nvidia company stock.
Seeking Alpha – To attempt to make the best trades possible.
Critical Mass – The minimum size or amount of something required to start or sustain a venture.
Universal Law of Prosperity – A law that states individuals and governments must produce more than they consume.
Paradigm Shift – Changing underlying assumptions and/or approach until objective is reached.
Target Retirement Number – Dollar amount needed to retire. Multiply your (desired) annual budget times 25 and that’s the nest egg you need to retire. The webmaster suggests multiplying annual budget x 25 x 2 for cushion or other reasons.
Balance Sheet – A balance sheet is a financial statement that summarizes a business’ or individual’s assets, liabilities, and cash (equity) over a period of time (quarterly, yearly, etc.) A balance sheet is expressed as: assets = liabilities + cash (equity).
Asset Allocation – Asset allocation is a method of spreading out your investments into different categories of assets. The idea behind this strategy is to spread the opportunities and limit the risks. This strategy is commonly used by advisory firms to attempt to minimize risks of client’s portfolios.
Black Swan Event – An unpredictable destructive negative occurrence which disrupts financial markets.
Anti-fragile – The state of being strengthened by stress and attacks. (I.e. Trump is anti-fragile.)
Permanent Portfolio – (Harry Brown) A four-part portfolio to hold indefinitely. The permanent portfolio is 1/4 cash, 1/4 Government bonds, 1/4 stocks, and 1/4 gold.
Blockchain – Blockchain is a distributed, decentralized, public ledger. When we say the words “block” and “chain” in this context, we are actually talking about digital information (the “block”) stored in a public database (the “chain”). (Investopedia)
Extreme Saving – Living on 50% or less of one’s income, usually in order to become financially independent by 30, 40, or 50.
Earnings call – A telephone called hosted by a publicly traded company where earnings and guidance are announced and discussed.
J Curve – The J Curve is an economic theory which states that, under certain assumptions, a country’s trade deficit will initially worsen after the depreciation of its currency—mainly because higher prices on imports will be greater than the reduced volume of imports. (Google)
Cost of Capital – When analysts and investors discuss the cost of capital, they typically mean the weighted average of a firm’s cost of debt [interest] and cost of equity blended together. (Investopedia)
Arbitrage – is the purchase and sale of an asset in order to profit from a difference in the asset’s price between markets. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.
Universal Principle of Risk Management – dictates not to pursue expenditures which require so much capital the individual or company can be financially ruined.
HELOC – Home equity lines of credit (HELOC) are a revolving source of potential funds, much like a credit card, that you use as you see fit with a variable interest rate. HELOC’s use the equity in your home—that is, the difference between your home’s value and your mortgage balance—as collateral. (Investopedia)
Mininationals – Newer companies with sales between $200 million and $1 billion that are able to serve the world from a handful of manufacturing bases.
Born global – Newly founded firm that, from it’s inception, is established as an international business.
Differentiation – Takes advantage of the company’s real or perceived uniqueness on elements such as design or after-sale service.
Soft power – The ability to obtain what one wants through co-option and attraction.
Contender – A local company whose assets are transferable, allowing it to compete head-on with established global players worldwide.
Learned helplessness – With learned helplessness, people feel like victims, as if they are overwhelmed by the situation, and there is nothing that they can do. They start to use the words, “I can’t” over and over, which is a way of saying that they don’t see any way forward. But there is always a way forward. Learned helplessness can be avoided once it is recognized and consciously corrected. (Brian Tracy)
Dow to Gold Ratio – This ratio divides the Dow Jones Industrial Average to the price of gold. The number tells you how many ounces of gold it would take to buy the Dow on any given month. Previous cycle lows have been 1.94 ounces in February of 1933 and 1.29 ounces in January of 1980. This ratio is used to gauge the direction of the market.
Rich Dad’s Wealth Ratio – The wealth ratio tells the user how close to or beyond being FI they are. Yearly passive income + yearly portfolio income / yearly expenses = wealth. Courtesy of the Rich Dad company.
Mirroring – (NLP) Mirroring is simply the process of mimicking subtle behaviors within whoever we are communicating. Before you go and start mimicking someone’s every word, be aware that mirroring must be subtle as to appear to be unconscious!
Repo market – A repurchase agreement (repo) is a short-term secured loan: one party sells securities to another and agrees to repurchase those securities later at a higher price. The securities serve as collateral. The difference between the securities’ initial price and their repurchase price is the interest paid on the loan, known as the repo rate.
A reverse repurchase agreement (reverse repo) is the mirror of a repo transaction. In a reverse repo, one party purchases securities and agrees to sell them back for a positive return at a later date, often as soon as the next day. Most repos are overnight, though they can be longer. The Federal Reserve uses the repo market to inject cash into “the economy” via financial institutions. (Brookings.edu)
Wealth Equation – The equation for the plan of any given person to acquire wealth. (Different from Rich Dad’s wealth ratio) If one’s plan (equation) is too slow or impossible, then change your wealth equation. (MJ DeMarco)
Locus of Control – Locus of control is the degree to which people believe that they, as opposed to external forces (beyond their influence), have control over the outcome of events in their lives.
Hustler – An aggressively enterprising person, who knows how to get around problems; a go-getter.
HODL – (acronym) Hold on for dear life.
LTBH – (acronym) Long-term buy and hold.
Decentralization – The transfer of control of an activity or organization to several local offices or authorities rather than one single one. (Oxford.) A centralized market is a financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset. (Investopedia)