Accredited Investor: An individual or entity who meets certain financial criteria outlined by securities regulators, such as income or net worth thresholds, qualifying them to invest in certain types of higher-risk investments, including private placements.
Asset Allocation: An investment strategy aiming to balance risk and reward by dividing a portfolio’s assets according to the individual’s goals, risk tolerance, and investment horizon, typically involving a mix of stocks, bonds, and cash.
Asset Management: The process of managing a client’s investments by a financial services company, often involving both the buying and selling of stocks, bonds, real estate, and other assets to meet specified investment goals.
Automatic Reinvestment: A service allowing dividends or capital gains from investments, like mutual funds or stocks, to be automatically used to purchase additional shares, facilitating the compounding of returns.
Balanced Portfolio: An investment portfolio that combines a mix of assets, such as stocks, bonds, and cash equivalents, in a proportion aiming to reduce risk through diversification while targeting a moderate return level.
Broker-Dealer: A person or firm in the financial industry who buys and sells securities on their own account or on behalf of clients, playing a pivotal role in stock trades, underwriting securities, and providing investment advice.
Capital Gains: The profit earned from selling an asset like stocks, bonds, or real estate, often taxed at different rates than regular income.
Commercial Real Estate (CRE): Property used solely for business purposes, such as office spaces, shopping malls, and hotels, as opposed to residential real estate.
Direct Participation Program (DPP): In oil and gas investments, a business structure allowing investors direct cash flow and tax benefits from the underlying asset, often through a limited partnership.
Diversification: A risk management strategy involving a mix of various investments within a portfolio to yield higher average returns and lower risk.
ESG (Environmental, Social, and Governance): Factors used to measure the sustainability and ethical impact of an investment in a company, assessing its long-term financial performance.
Equity: In real estate, the difference between the current market value of a property and the amount owed on the mortgage.
Fiduciary Duty: A legal obligation requiring one party, like a financial advisor, to act in the best interests of another, such as a client.
Hedge Funds: Investment funds employing various strategies to earn active returns, typically more aggressively managed and accessible mainly to accredited investors.
Illiquid Assets: Assets that cannot be quickly sold or converted into cash without significant loss in value, with real estate being a prime example.
Joint Venture (JV): A business arrangement where parties pool resources for a specific task, such as a real estate project, whether a new venture or other business activity.
Leverage: Using borrowed capital (debt) to increase potential investment returns, commonly seen in real estate through mortgage financing.
Market Risk: The risk of losses in investments due to factors affecting the overall financial market performance, not mitigable through diversification.
Multifamily Real Estate: Residential real estate consisting of multiple housing units within one building or complex.
Net Operating Income (NOI): A profitability metric for income-generating real estate investments, calculated as all property revenue minus necessary operating expenses.
Opportunity Zone: A program encouraging long-term investments in low-income urban and rural communities by offering tax advantages to investors.
Passive Income: Income requiring minimal labor to earn and maintain, typically from sources like rental properties, dividends, or interests.
Private Equity: Capital invested in private companies or used in buyouts of public companies not listed on public exchanges.
Real Estate Investment Trust (REIT): Companies that own, operate, or finance income-generating real estate, offering individual investors income shares without direct property management.
Risk Management: The process of identifying, evaluating, and prioritizing risks in an investment portfolio, followed by resource application to minimize, monitor, and control potential adverse events.
Securitization: The financial process of converting an illiquid asset or group of assets into a tradable security, commonly applied to mortgage-backed securities.
Tax Credits: Direct reductions in tax liability offered for specific investments, renovations, or activities meeting predetermined criteria.
Venture Capital: A type of private equity financing for startups and small businesses with perceived long-term growth potential sourced from wealthy investors, investment banks, and financial institutions.