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 sole proprietorship is the simplest business structure where an individual owns and runs an unincorporated business, making no legal distinction between the owner and the business itself.
A financial statement that details the changes in a company's equity over a specific accounting period, reflecting owner contributions, distributions, net income, and other comprehensive income.
Stock options grant the holder the right, but not the obligation, to buy or sell a company's stock at a predetermined price within a specific timeframe. For real estate investors, they can be a source of capital or a component of a diversified financial portfolio.
A tangible asset is a physical item you can touch, see, and feel, like real estate, vehicles, or equipment, which holds value and can be used for investment.
Target asset allocation in real estate investing defines the desired mix of different property types, geographic locations, and investment strategies within an investor's portfolio to align with their financial goals and risk tolerance. It's a strategic blueprint for portfolio construction.
A financial strategy where investment earnings, such as capital gains or interest, are not taxed until a later date, typically when the funds are withdrawn.
Term life insurance provides coverage for a specific period, or 'term,' and pays a death benefit to your beneficiaries if you pass away during that time, offering financial protection without a cash value component.
The concept that a sum of money is worth more now than the same sum will be at a future date due to its potential earning capacity. It's a fundamental principle in finance and real estate investing.
Total assets represent the sum of all economic resources owned by an individual or business, including cash, property, equipment, and investments, providing a snapshot of overall financial strength.
Wealth accumulation is the process of increasing one's net worth over time through consistent saving, strategic investing, and growing assets, often with a focus on achieving long-term financial security and freedom.
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