I wanted to (finally) give you a money dictionary that doesn’t require a dictionary to understand the word’s definition. That doesn’t exist . . . so I made my own. You know how you explain a term to a friend who doesn’t “get” it? That’s the way it’s written here. Let this glossary be your go-to guide for definitions with a practical perspective whenever you need a little cheat-sheet. Some stuff changes over the years, but these basics never go out of style.
Valuation: A valuation measures how much something is worth, now or in the future. There are different ways to value companies. Some are tied to profits, while some are tied to other metrics like users. In the tech world, you often see companies like Facebook or Twitter valued in the billions of dollars with no profits because their valuation is based on a strong user base.
Value Stocks -
Value Stocks: These are stocks that don’t have great earnings growth potential, but that trade at low valuations (low P/Es, for example). Value stocks tend to be more mature, settled, old-school companies like Coca-Cola or General Electric with steady earnings. They also tend to pay dividends.
Variable Annuity -
Variable Annuity: This is a type of insurance product generally sold to those who are preparing for retirement or are in retirement. An investor buys an annuity at a set price and then holds it without taking payments (though she can make additional investments) during a period known as the “accumulation stage.” Money is invested in open-ended mutual funds offered within the annuity and grows on a tax-deferred basis. After the accumulation stage, the holder of the variable annuity is able to withdraw money from the annuity or to “annuitize” it, in which case the insurance company sends the investor monthly income for life. For this reason VAs (as they’re sometimes called) are generally used for those seeking retirement income. The size and scope of these annuitized payments depend on the performance of the portfolio in which the variable annuity is invested, as well as the age of the investor and the current level of interest rates. (See also: Annuity)
Variable Costs -
These are the costs that change over time, like the price of gas or your monthly utility bill. (See also: Fixed costs)
Venture Attorney -
A lawyer who specializes in the ins and outs of getting a new business, or “venture,” off the ground. This person will help your budding business with things like incorporating and fund- raising.
Venture Capital -
Venture Capital: This comes after seed money. And if you need it, you will have to give up some control of your idea and company to the venture capitalist (VC) or a venture capital firm giving you the money. The VC will give you the money you need only if they think you have potential (i.e., ability to make them money). (See also: Seed Money)
Refers to a category of business. On my show, Hatched, each episode is a different product “vertical”: one week it’s pet food, one week it’s cosmetics, one week it’s food products, etc.
A schedule that a company gives you, for stock or matching funds in your 401(k), that you don’t see the benefits of all at once but rather accumulate them over a period of time. If you leave the company before that period, say five years, is up, you may only get a portion of the money you would have gotten if you’d stayed the whole five years and became fully “vested.”