The strategy of spreading investments across a number of different securities to reduce the risk of putting all your eggs in one basket.

Exchange-Traded Fund

An exchange-traded fund (ETF) is a more diversified investment that trades like a stock but pools the money of many investors to purchase a group of assets such as stocks, bonds, foreign currency or commodities. Some of the most popular ETFs offer a type of index investment, where the manager seeks to track the performance of a specific index such as the Dow Jones or S&P 500.

Index Fund

This is a collection of securities designed to track or match a section of the market, such as the S&P 500.

Liquid Assets

This includes cash in bank accounts, stocks, bonds and other assets that are easily converted into cash.

Margin Call

A margin call occurs when a security loses value beyond the limit set by the broker and you’re required to pay the difference or sell securities to cover the losses.

No-Load Mutual Fund

This type of mutual fund doesn’t charge a fee, or load, for its purchase or sale.


The spread is the difference between the bid and the ask of an investment. The difference between the bid and the ask is the cost of investment for the trader.

Tax Efficiency

An attempt to minimize tax liability when given many different financial decisions.

A financial decision is said to be tax efficient if the tax outcome is lower than an alternative financial structure that achieves the same end.

Underlying Asset

This is the security or value on which a specific option’s value is based. The underlying asset may be shares of a stock, shares of an ETF or the value of an index.