Basic investment concepts, portfolio theory, asset allocation, stocks, bonds, mutual funds, and ETFs.
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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.
A Registered Investment Advisor (RIA) is a financial professional or firm that provides investment advice and manages portfolios for clients, operating under a strict fiduciary duty to act in the client's best interest at all times.
Retirement income refers to the money an individual receives to cover living expenses after they have stopped working full-time, ensuring financial security in their later years.
A retirement portfolio is a collection of investments specifically designed to generate income and growth to support an individual financially during their retirement years.
Risk tolerance is an individual's psychological willingness and financial ability to take on risk in pursuit of investment returns, dictating comfortable levels of market fluctuation and potential loss.
A financial strategy involving moving pre-tax retirement funds from a traditional IRA or 401(k) into a Roth IRA. This conversion incurs taxes on the converted amount in the year of conversion, but allows for tax-free withdrawals in retirement, provided certain conditions are met.
Roth IRA tax-free withdrawals allow eligible individuals to access their contributions and earnings completely free of federal income tax in retirement, provided specific age and holding period requirements are met. This makes them a powerful tool for tax-efficient wealth accumulation, especially for real estate investors.
A deposit account held at a bank or financial institution that provides a secure place to store money while earning a small amount of interest, typically used for short-term savings goals or emergency funds.
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 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.
Self-Employment Tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves, such as independent contractors, freelancers, and real estate investors operating as sole proprietors or partners.
Shares outstanding represent the total number of a company's shares currently held by all its shareholders, including institutional investors and the general public. This figure is crucial for calculating per-share metrics like earnings per share and dividends.
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.
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