Financial Literacy - Financial tuneup
Investment glossary of terms

47. Risk -- The probability that the return will be less than expected.

48. Risk tolerance -- An investor's ability to psychologically endure the possibility of losing money.

49. S&P 500 -- Standard and Poor's 500 index is a leading indicator of large cap U.S. equities made up of 500 stocks chosen by the S&P Index Committee. Stocks are chosen based on their representation of industries in the economy and liquidity. There is also an index for small-cap companies, the S&P 600, and an index of midcap companies, the S&P 400.

50. Sector -- A group of companies in the same line of business, for example technology, telecommunications or pharmaceutical.

51. Small cap -- A stock with a market capitalization between $300 million and $2 billion.

52. Standard deviation -- A measure of the volatility of an investment or a portfolio that shows how much it differs from its annual return or its expected return. For example, a mutual fund with a standard deviation of 10 means that about two-thirds of the time, it will be within 10 percent of its average price. Such a fund has greater volatility than one with a lower standard deviation.

53. Value fund -- A mutual fund that invests mainly in value stocks or stocks that are underpriced according to fundamental analysis. Such metrics as the price-to-earnings ratio are used to gauge value.

54. Value stocks -- Stocks that are not current investor favorites, which may have a price/earnings ratio lower than the S&P 500. Sometimes called "undervalued" stocks because the price is lower than the company's financial situation, earnings outlook or reputation would normally dictate.

55. Yield curve -- A curve that shows the relationship between yields and maturity dates for a set of similar bonds, usually Treasuries, , at a given point in time.

56. Yield spread -- The differences in yields on different types of debt securities, a function of supply and demand, credit rating and anticipated interest rate changes.


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