Basic investment concepts, portfolio theory, asset allocation, stocks, bonds, mutual funds, and ETFs.
Master investment fundamentals with our progressive approach
Foundation terms you need to know first (65 terms)
A lump sum investment in real estate involves committing a single, large amount of capital upfront to acquire a property or fund a project, rather than making smaller, periodic contributions. It's a direct approach often used for full property purchases or significant down payments.
Real assets are physical, tangible investments such as real estate, commodities, and infrastructure, valued for their intrinsic properties and often used as an inflation hedge and portfolio diversifier.
Liabilities are financial obligations or debts that an individual or business owes to others, representing money that must be paid back in the future.
The percentage of your disposable income that you save rather than spend, a key metric for personal finance and crucial for building capital for real estate investments.
The fundamental resources—land, labor, capital, and entrepreneurship—used to produce goods and services, including real estate, and are crucial for understanding economic activity and investment potential.
Complex strategies and professional concepts (5 terms)
A Personal Financial Stress Test is a systematic evaluation of an individual's or household's financial resilience against adverse economic scenarios, crucial for real estate investors to safeguard their portfolios.
Indexed Universal Life (IUL) is a type of permanent life insurance that offers a death benefit and a cash value component, where the cash value growth is linked to the performance of a market index, such as the S&P 500, typically with a floor and a cap on returns.
The Sharpe Ratio is a measure of risk-adjusted return, indicating the average return earned in excess of the risk-free rate per unit of total risk (volatility or standard deviation). It helps investors understand the return of an investment compared to its risk.
The Securities and Exchange Commission (SEC) is an independent agency of the U.S. federal government responsible for protecting investors, maintaining fair and orderly functioning of securities markets, and facilitating capital formation. It regulates publicly traded securities, including those related to real estate.
Modern Portfolio Theory (MPT) is an investment framework that aims to maximize portfolio expected return for a given level of market risk, or equivalently, minimize risk for a given level of expected return, through diversification.
Personal Burn Rate refers to the rate at which an individual or household spends their cash reserves over a specific period, typically monthly. It's a critical metric for real estate investors to understand how long they can sustain themselves without active income.
Personal finances refer to the management of an individual's or family's money, including income, expenses, savings, investments, and debt, to achieve financial stability and goals.
A Personal Financial Stress Test is a systematic evaluation of an individual's or household's financial resilience against adverse economic scenarios, crucial for real estate investors to safeguard their portfolios.
Preferred stock is a hybrid security that combines features of both bonds and common stock, typically offering fixed dividend payments and priority over common stockholders in receiving dividends and assets upon liquidation.
Present Value (PV) is the current worth of a future sum of money or stream of cash flows, discounted at a specific rate of return. It helps investors understand how much future money is worth today.
The Present Value Factor (PVF) is a decimal figure used to discount a future cash flow to its current worth, based on a specific discount rate and period, essential for time value of money calculations.
Principal refers to the original amount of money borrowed for a real estate loan, or the remaining balance of that borrowed amount, excluding interest and fees. It is the core sum that directly reduces debt and builds equity.
Private Mortgage Insurance (PMI) is a type of insurance required by lenders for conventional loans when a borrower makes a down payment of less than 20%, protecting the lender in case of default.
The Quick Ratio, also known as the Acid-Test Ratio, measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory. It provides a more stringent view of liquidity than the Current Ratio.
Real assets are physical, tangible investments such as real estate, commodities, and infrastructure, valued for their intrinsic properties and often used as an inflation hedge and portfolio diversifier.
Real estate refers to land and any permanent physical structures or improvements attached to it, encompassing everything from residential homes to commercial buildings and undeveloped land. It is a tangible asset that can be bought, sold, or leased for various purposes, including living, business operations, and investment.
A realized gain or loss occurs when an asset, like a real estate property, is sold for a price different from its original cost, resulting in a profit or deficit that has been "locked in" by a completed transaction.
Explore complementary areas that build on investment fundamentals concepts
Personal budgeting, expense tracking, cash flow management, emergency funds, and savings strategies.
Credit scores, debt consolidation, loan management, credit repair, and debt payoff strategies.
Macroeconomic concepts, interest rates, inflation, Federal Reserve policy, and economic cycles.
Wills, trusts, estate taxes, succession planning, beneficiary planning, and wealth preservation.