This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Dictionary of Financial Terms

Dictionary of Financial Terms

How to Invest: Investing Basics

Words have power. No more so than in the world of finance. You are what you say and what you understand. The better you grasp the meaning of financial terms, the better you can communicate and the more transparent becomes the vast, exciting and potentially profitable world of money.

By the same token, words can obfuscate. They can fool smart people. Once formidable financial houses --- Lehman Brothers, Bear Stearns, Washington Mutual among them -- collapsed because investors misunderstood (or chose to ignore) the explosive risk hidden within packages of securities given such benign labels as Credit Default Swaps (CDSs) and Collateralized Debt Obligations (CDOs).

This dictionary is not meant to be comprehensive. It is meant to be useful and accessible. It's based on common usage as practiced by financial professionals and was compiled over more than a decade by editors of The Street. It was designed to help you strip away the layers of patina applied by the industry so you can see the real picture beneath. That word restoration can be fun.

For example, did you ever wonder why oil was measured in barrels instead of gallons or tons? Turns out the first oil wells were drilled in Pennsylvania in the late 1850s, and the most readily available containers happened to be empty whisky barrels, which the thirsty roughnecks obligingly kept in plentiful supply.

And what about a MOB spread? It's not what the hapless hoods did on Saint Valentine's Day in Southside Chicago in 1929. Rather it's the difference in price between municipal bond futures and Treasury bond futures. MOB means nothing more than "municipal over bond."

And what about hedge funds? To be sure, there are as many definitions as there are funds. I should know. I ran a hedge fund for many years and know the complexities of the business. But my definition is quite simple:

"It is a fund that can go long or short stocks, hence the hedge connotation. But it's different from a regular fund in the way its managers are compensated. Regular money managers get a percentage of the assets. Hedge fund managers get a percentage of the assets and take 20% of the gains, both realized and unrealized."

So, while I know a thing or two about stocks and markets, I learned a ton from reading this little book. You can too.

So use it. Enjoy it. Keep it handy as protection.

Next time some tall-talking financial artist bombards you with words and terms he thinks you don't understand, tell him to raise his hands and spread his MOB.

You know better.

--Jim Cramer, founder of TheStreet and host of Mad Money on CNBC.

Definitions of Financial Terms

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%
Top Rated Stocks Top Rated Funds Top Rated ETFs