Library Explore the library Investing basics—in plain English. Updated Sep 28, 2021 Robinhood Learn What is a crypto wallet? Crypto wallets provide you with secure access to your crypto for managing, spending, and sending. Updated Sep 15, 2021 Robinhood Learn What is an Inheritance Tax? A company may be willing to give you their e-book for free, but there’s a catch — You have to give them your email address. Similarly, you’re welcome to keep the inheritance you received as long as you pay the tax authorities what they require. Updated Sep 14, 2021 Robinhood Learn What is a Recession? Economies are generally in a constant state of growth, but there are moments when this growth reverses. This reversal is relatively healthy , but if it goes on for too long, it creates adverse effects for everyone involved. Updated Sep 14, 2021 Robinhood Learn What is Net Profit Margin? The net profit margin is like a snapshot of a company’s profits. It captures a company’s financial health in one number — and that number reflects profitability. Updated Sep 04, 2021 Robinhood Learn What is Real Estate? Investing in real estate is like investing in a business. If you devote the proper resources to it, it’s likely to grow in value. But if you neglect it, it’s likely to fall apart. And in both cases, its value can be influenced by outside factors. Updated Sep 04, 2021 Robinhood Learn What is an Annuity? Annuities are like a freezer full of ice cream. There are many flavors of ice cream, and each tastes different, but it is all still ice cream made from milk and sugar. The freezer keeps the ice cream cold and lets you save it for another day. Updated Sep 04, 2021 Robinhood Learn What is Outsourcing? Companies outsource work because they benefit in some way. It could save them money in wages, free up resources for more core functions such as research and development, or expose them to highly skilled specialists. Updated Sep 02, 2021 Robinhood Learn What is Capital Gains Tax? Capital gains tax is a tax on the profit made from the sale of an asset (e.g., stock, property). Updated Aug 31, 2021 Robinhood Learn What is Arbitrage? Arbitrage trading requires finding unique circumstances in different markets (for example, a foreign market) that cause the same goods to be priced differently. Updated Aug 30, 2021 Robinhood Learn What is Surety? Say you enter into a contract, and the original deal falls through. Often, this means you’re out of luck. But if you’ve entered into a surety agreement with the other party and a guarantor, you have someone else to fall back on. Updated Aug 25, 2021 Robinhood Learn What is Supply Chain Management (SCM)? Supply chain management is like a restaurant meal coming together. A restaurant is a compact supply chain. Raw materials are transformed into a dining experience. The goal is to satisfy the customer in the most efficient and profitable way possible. Updated Aug 25, 2021 Robinhood Learn What is an Ex-Dividend Date The ex-dividend date is like a train taking off from the station... It’s a cut off point that defines if an investor buying a stock (that offers dividends) will be eligible or not to receive them. Updated Aug 25, 2021 Robinhood Learn What is the Compound Interest Formula? Compound interest is kind of like a snowball rolling downhill, gathering more snow as it speeds down... The compound interest formula is the math that tells you how big that will be when it gets to the bottom. Updated Aug 25, 2021 Robinhood Learn What is a Security? Picture securities as different vegetables you can plant in your garden... They’re available in many varieties, such as stocks, bonds, ETFs, and mutual funds, but there’s a risk they don’t grow. Updated Aug 25, 2021 Robinhood Learn What is Depreciation? Understanding a company’s depreciation method is like understanding a company’s language. It allows you to read between the lines, helping you analyze the strength of a stock’s earnings. Updated Aug 25, 2021 Robinhood Learn What is a Stock Option? Some characteristics of stock options are like growing fruit. You hope the seeds planted will grow into fruit that is ripe at harvest, so you have the option to pull it off the tree. But if the fruit is inedible, you lose the cost of the seeds. Updated Aug 25, 2021 Robinhood Learn What is Relative Strength Index (RSI)? Using the RSI is like trying to predict the next sale at your favorite clothing store. If you’ve been following recent price changes for that sweater you’re eyeing, you may do a better job of predicting how much it will cost in the future. Updated Aug 24, 2021 Robinhood Learn What is Certificate of Deposit (CD)? A CD is like a bank vault. You put your money in the vault and give someone the key. They agree to come back on a specific day with the key. If you wait, you’ll get your money plus interest. If not, they'll charge you an early withdrawal penalty. Updated Aug 17, 2021 Robinhood Learn What is a Margin Call? Margin is the deposit you’ve put up against the borrowings you’ve made to finance your position. If your position is losing money, then you’ll need to put up additional deposits if your account goes below a certain minimum equity. Updated Aug 17, 2021 Robinhood Learn What is a Health Maintenance Organization (HMO)? An HMO is like an umbrella. As long as you visit a doctor or hospital that falls under the umbrella, you’re generally fine. If they're not covered, you’ll probably have to pay more out of pocket — and you may get soaked with high medical bills. Updated Aug 17, 2021 Robinhood Learn What is a Hedge? A hedge is like an insurance policy. When you own a car, you usually purchase insurance to cover losses from potential accidents. If the car is totaled, you expect to gain value from the insurance company covering the damage. Updated Aug 16, 2021 Robinhood Learn What is Liquidity? To understand liquidity, think about water. Water is a liquid that’s ready to drink. But you can’t drink an ice cube as it is. You have to wait for it to melt. Similarly, cash is liquid but if you own a house, you need to sell it to have cash. Updated Aug 13, 2021 Robinhood Learn What is a Call? A call is like a bid. The term can be used in different contexts. Sometimes putting in a bid is only gives you the option to follow through and buy something; sometimes it commits you to the sale. Updated Aug 13, 2021 Robinhood Learn What is a Bid? A bid is like haggling in the world’s biggest flea market… You finally found that one of a kind rug that’s gonna look great in your living room. The price you offer to pay is your bid. The seller may accept or reject your bid. Updated Aug 13, 2021 Robinhood Learn What is Short Selling? Short selling is kind of like Opposite Day. Instead of buying first, you borrow shares, sell them first, and buy them back later, hopefully at a lower price. Once you buy them back, you can return them to the place you borrowed them from. Updated Aug 10, 2021 Robinhood Learn What is a Buy Limit Order? A buy limit order is like setting a strict household budget, but for buying stocks. You have a fixed amount of money to spend every month, so you can only buy things that fit within that budget. Updated Aug 08, 2021 Robinhood Learn What is a Command Economy? If a command economy were a puppet show, the government would be the puppeteer. In a command economy, the government makes all the major economic decisions. It controls all means of production in a country. Updated Aug 08, 2021 Robinhood Learn What is Human Capital? Human capital is like a trained chef in a kitchen. You can give anyone access to a fully stocked kitchen, but you need a chef with training, knowledge, and experience to turn that food and those tools into an exceptional culinary experience. Updated Aug 08, 2021 Robinhood Learn What is a Market Economy? A market economy is like a minimally tended garden. Flowers and weeds will grow or perish according to the laws of nature — It may be beautiful, but it could also get unruly. Updated Aug 08, 2021 Robinhood Learn What is Inventory? Inventory is like everything you bring to a yard sale. All the items you’re selling are part of it. Once someone purchases an item, it’s no longer your inventory. Furniture used to display wares isn’t for sale, so its not considered inventory. Updated Aug 08, 2021 Robinhood Learn What is Annual Percentage Rate (APR)? An APR can help you gauge how much a loan or credit product might cost. But you’ll need more information to estimate the true cost, such as how fast you intend to pay it off, whether additional costs are excluded, or the effect of compound interest. Updated Aug 08, 2021 Robinhood Learn What is a Credit Union? A credit union is like a community garden. A group of people own a small plot of land (the credit union), and everyone brings seeds (cash deposits). Membership in the garden is restricted to a certain group—people who live in the neighborhood. Updated Aug 08, 2021 Robinhood Learn What is a Trust? A trust is like a safety deposit box that someone else holds the keys for. The deposit box holds something valuable, but you don’t have the key to open the box to get what's inside. Instead, you have to ask the trustee to open the box for you. Updated Aug 08, 2021 Robinhood Learn What is Encroachment? Encroachment is like an offside penalty in a football game. Each team has the right to stand anywhere they’d like on their side of the line of scrimmage. If a player crosses into the other team’s area, they’re encroaching on that team’s property. Updated Aug 08, 2021 Robinhood Learn What is Customer Service? Customer service is like a waiter at a restaurant. Waiters take orders, serve food, and stand ready to assist. Their primary job is to help the customers and ensure that they have a positive experience — increasing the chances that they will return. Updated Aug 08, 2021 Robinhood Learn What is an Externality? An externality is like your neighbors playing music at high volume. If it’s keeping you up or you don’t enjoy it, that’s a negative externality. If it happens to be your favorite song and you feel like dancing, that’s a positive one. Updated Aug 08, 2021 Robinhood Learn What is an Automated Clearing House (ACH)? The Automated Clearing House (ACH) Network is like email for money. Instead of paper checks moving around the country, like paper mail used to, it's the electronic equivalent. It's cheaper, faster, and more reliable, but the basic logic is the same. Updated Aug 08, 2021 Robinhood Learn What is Forex? Foreign exchange is the language of money… Not everyone speaks the same language. Not everyone wants the same money. The foreign exchange market is where translations happen from one currency to another. Updated Aug 08, 2021 Robinhood Learn What is Indemnity? A misfortune like your house burning down — or being sued for professional negligence — could wipe you out financially. But sometimes you can get out of this type of jam if you’ve paid an insurance company to indemnify you against such losses. Updated Aug 08, 2021 Robinhood Learn What is Scarcity? Scarcity is like having two sandwiches for four people. You may have to get creative, cutting the two sandwiches in half for four people. Or, you might sell the sandwiches to the two highest bidders, in which case the price of a sandwich will go up. Updated Aug 08, 2021 Robinhood Learn What is Opportunity Cost? Imagine a balancing scale... Every choice comes with some kind of trade-off — aka opportunity cost. It’s important to factor that cost into your decision-making process to avoid major losses. Updated Aug 08, 2021 Robinhood Learn What is a Limited Liability Company (LLC)? Setting up an LLC is like getting a flu shot for your finances... It helps protect your personal finances against liabilities that might hit your company in the future. And—just like a flu shot—the protection isn't absolute, but it usually helps. Updated Aug 08, 2021 Robinhood Learn What is an Iron Condor? An iron condor is like the large bird it’s named after. It can glide along smoothly if the market skies stay calm, providing investors with a welcome return. Or it can swoop in unexpected ways if the market ends up more turbulent than expected. Updated Aug 08, 2021 Robinhood Learn What is a Ledger? A general ledger is a bit like a filing cabinet filled with folders full of receipts and bills. The general ledger (the filing cabinet) holds the information from lots of accounts (the file folders) inside and organizes that information. Updated Aug 08, 2021 Robinhood Learn What is Venture Capital? Securing venture capital funding can prove to be a fortune for a new, inexperienced business. But venture capitalists are not buying into the risk and uncertainty for nothing. In exchange for funding, VCs are likely to ask for equity. Updated Aug 08, 2021 Robinhood Learn What are Treasury Bills? A Treasury bill, or T-bill, is a bit like an IOU from a friend who’s short on cash for lunch. Your friend promises to pay you $10 next week if you pay for his $8.50 hamburger today. Updated Aug 08, 2021 Robinhood Learn What is a Corporation? A corporation is kind of like a landmark. Like Seattle’s Space Needle, many landmarks begin as an idea of one or a few people. But over time, landmarks take on a life of their own, independent of its original creators or even the city it exists in. Updated Aug 08, 2021 Robinhood Learn What is Capex? Think of a new car. The vehicle itself is a capital expenditure because it’s a physical asset that you’ll enjoy in the future. But the gasoline is an operational expenditure, or an "Opex" because you don't see the benefit month after month. Updated Aug 08, 2021 Robinhood Learn What is Gross Margin? Think of a one-person food cart… Your gross margin is simply the difference between your sales and the costs of those ingredients. You’d compare the amount of money that you made to the amount you spent on buying hot dogs and buns. Updated Aug 08, 2021 Robinhood Learn What is Inflation? Inflation is like a leak in your money bucket. If the inflation rate is low, the leak is smaller. If the inflation rate is high, the leak is bigger. The more leakage there is, the less your money is worth. Updated Aug 08, 2021 Robinhood Learn What is the Old-Age, Survivors, and Disability Insurance (OASDI) Program? Over the years, you contribute money to OASDI through your taxes and your money is waiting for you when you’re ready to take it out. You can only take out funds once you’re at least 67 or become disabled, and you can’t get them all at once. Updated Aug 08, 2021 Robinhood Learn What is a W-2 Form? A W-2 form is kind of like a scrapbook. Instead of recording the memories of last year’s family vacations, it documents all the money you made and all the money you paid in taxes that year. Updated Aug 08, 2021 Robinhood Learn What is a Reverse Mortgage? Think of your home as a piggy bank. With a traditional mortgage, you’re slowly putting money into the piggy bank. When you take out a reverse mortgage, your piggy bank is turned upside down and begin to take money out. Updated Aug 08, 2021 Robinhood Learn What is a Health Savings Account (HSA)? Think of an HSA as a combination of health insurance and a savings account. You’re essentially self-insuring against a future medical emergency. The list of expenses eligible for your HSA covers even more than most health insurance plans. Updated Aug 08, 2021 Robinhood Learn What is Internal Rate of Return (IRR)? Calculating the IRR is like guessing about how far your jump over a stream. If it takes you far enough, you’ll make it to the other side (lots of profit); if it falls short, you’ll get all wet (i.e., lose money by making a suboptimal investment). Updated Aug 03, 2021 Robinhood Learn How to start investing for as little as 1 dollar Investing in the stock market doesn’t mean you need to have thousands, or even hundreds of dollars to get started. Even if you have just one extra dollar, fractional shares (which are offered on Robinhood) can help you build your portfolio. Updated Aug 03, 2021 Robinhood Learn How can I start budgeting? Learn how to spend, save, and invest Before you can save or invest, you probably have to cover the basics: food, housing, healthcare, transportation, and insurance. If you’re able to, it’s helpful to spend less money than you earn. It’s one of the keys to building wealth. Updated Apr 27, 2021 Robinhood Learn What is an Initial Public Offering (IPO)? With great excitement comes great responsibility… When a company IPOs, its stock becomes listed on the public investing menu for the first time. These stocks can be tempting to purchase because there’s often hype surrounding the event. Updated Mar 24, 2021 Robinhood Learn What is the Standard Deduction? If you take the standard deduction on your 1040, you don't need to claim most of your deductions. Standard deduction allows you to get the benefit of reducing your income in the same way as claiming your deductions, but without the extra paperwork. Updated Mar 23, 2021 Robinhood Learn How to read an S-1 If a company wants to go public in the US, it must file a Form S-1 with the Securities and Exchange Commission. Also called a registration statement, the form includes details on the company’s business, managers, future plans, and finances. Updated Mar 22, 2021 Robinhood Learn What is an Itemized Deduction? Itemized deductions are like mailing in for a rebate. You give the government an itemized list of what you spent money on. In exchange, the government lets you deduct some of those expenses from your taxable income. Updated Mar 19, 2021 Robinhood Learn What is the Stock Market? The world’s stock markets are complex, but are all based upon one simple concept… Connecting stock buyers with stock sellers to trade under an agreed upon set of rules. This is the key role of every stock market, from New York to Hong Kong. Updated Mar 19, 2021 Robinhood Learn What are Bull and Bear Markets? Bull and bear markets are like the emojis of investing… They’re simplified labels to describe market movements up or down over time. You’ll notice the words’ meanings have expanded to capture the general sentiment of stocks, markets, or industries. Updated Mar 19, 2021 Robinhood Learn What is a Broker? Online brokers are like professional matchmakers. They offer a fast and efficient way to place trades and connect with people on the other side of a transaction. Some OG firms charge a commission for the service. Updated Mar 19, 2021 Robinhood Learn What is an Index Fund? An index fund acts like a mime... It tries its very best to replicate the makeup of stock indexes, such as the S&P 500, and seeks to move just like the stock market index does. Updated Mar 16, 2021 Robinhood Learn What is a Portfolio? A portfolio is your investment pie. Each asset represents a slice of the pie, whether it be stocks, bonds, mutual funds, exchange-traded funds (ETFs), cash, etc. The size of each slice is proportionate to how much you own. Updated Mar 16, 2021 Robinhood Learn What is the Nasdaq? Picture your one tech-obsessed buddy (everyone’s got one)… She learned to code before she could text. That’s like Nasdaq. Born out of tech innovation, it is known for attracting tech companies to list their shares for IPOs. Updated Mar 16, 2021 Robinhood Learn What is the S&P 500? The S&P 500 is like a stock scoreboard… When you want a helpful snapshot of what stocks are up to, go to the S&P 500. Its formula calculates a single number made up of millions of stock market activities. Updated Mar 16, 2021 Robinhood Learn What is the Dow? Getting selected to the Dow is an honor… The Dow’s 30 companies are some of the most prestigious and well-known brands in the United States. Investors look to the Dow to learn how markets are doing in general. Updated Mar 12, 2021 Robinhood Learn What is the Rule of 72? The rule of 72 is like measuring a room by walking across it. You’re making an estimate. You should probably get out a tape measure (or do a more sophisticated calculation) before you start knocking down walls (making your investment decision). Updated Mar 12, 2021 Robinhood Learn What is a Debt Ratio? Historically, when a canary passed away in a coal mine, the miners would know it was time to make a fast exit. The bird served as a measure of risk. Likewise, the debt ratio indicates the level of financial risk from a company to firm stakeholders. Updated Mar 12, 2021 Robinhood Learn What is CAGR? Compound annual growth rate is kind of like the average historical performance of a sports player over multiple seasons of their career… It measures the performance of an investment over a set amount of time, assuming it was compounding. Updated Mar 12, 2021 Robinhood Learn What is Beta? Beta's a tool to measure a stock's volatility... Beta compares the movement of a stock to the broader moves of the market. The more volatile a stock or other traded investment is, the higher its beta tends to be. Updated Mar 12, 2021 Robinhood Learn What is Dividend Payout Ratio? Dividend payout ratios are like slicing a pie… The company’s income is the pie, and the slice that you receive is the dividend that the company pays. The larger the dividend, the larger the slice that you receive. Updated Mar 11, 2021 Robinhood Learn What is the Sharpe Ratio? The Sharpe ratio is like online reviews for skydiving companies. You want the fun (return on investment) that comes with skydiving, but you want to have that fun with the least amount of risk possible. It’s the same with investing. Updated Mar 11, 2021 Robinhood Learn What is Alpha? Alpha is a measure that tells you about the performance of an investment in relation to its “peers.” Updated Mar 11, 2021 Robinhood Learn What is a Bond Yield? A bond yield is like comparing a pizza slice to the size of the whole pizza. If a slice from a small pizza is the same size as a slice from a large pizza — it represents a different percentage of each pizza. Updated Mar 11, 2021 Robinhood Learn What is a Bond? It’s an IOU you can trade — but it's not guaranteed… A bond forms a borrower/lender relationship. The borrower is the company issuing a bond, the lender is the investor who buys a bond. Borrowers get cash, lenders usually get interest payments. Updated Mar 11, 2021 Robinhood Learn What is the CBOE Volatility Index (VIX)? If rain concerns you, you can check the weather report. The VIX is similar. If you're concerned about when to invest, you could check the VIX to see what other investors think the stock-market weather will look like in the near term. Updated Mar 11, 2021 Robinhood Learn What is a Call Option? Call options, are like a grocery store coupon. They give you the right to buy a specific item, for a certain price, before the coupon expires. However, if you find the same item at another grocery store for cheaper, you probably won’t use the coupon. Updated Mar 11, 2021 Robinhood Learn What is a Put Option? Buying a put option means that you have the right, but are not required, to sell a security at a specified price for a set time. Updated Mar 11, 2021 Robinhood Learn What is a COO? Remember the vice principal at your high school. He managed assemblies, coordinated activities, and made sure things ran smoothly. A COO usually handles logistics and the day-to-day, freeing up the chief executive to focus on the big picture. Updated Mar 11, 2021 Robinhood Learn What are Consumer Packaged Goods (CPG)? Consumer packaged goods are like camping essentials. You wouldn’t want to go into the woods without toilet paper, deodorant, packaged food, or water. You use them often enough that you’d want them when you’re out in the middle of nowhere. Updated Mar 11, 2021 Robinhood Learn What is an Investment Company? An investment company is like an investment club at a much bigger scale. Investment clubs pool money to invest primarily in the stock market. Investment companies pool more money, face more regulation, and can sell retail products to investors. Updated Mar 11, 2021 Robinhood Learn What is an Investment Banker? Investment bankers can help companies get the money they need by connecting them with potential investors. To do that, the investment banker has to convince the investors that your business is worth the risk of them investing their cash. Updated Mar 11, 2021 Robinhood Learn What is Dividend Yield? Dividend yield is like a stock’s bang for your buck… It’s a ratio comparing the income an investor gets from holding a stock (that pays dividends) to the price of that stock, shown as a percentage. Updated Mar 11, 2021 Robinhood Learn What is Tax Withholding? Your landlord wants to be paid every month that you live in their building, not just in a lump sum at the end of the year. Likewise, the IRS wants to be paid taxes on your income as you’re earning it, not after the fact. Updated Mar 01, 2021 Robinhood Learn What is an Investment? An investment is an asset bought by an individual or organization with the expectation that it will generate some future income or profit. Updated Mar 01, 2021 Robinhood Learn What is the Federal Unemployment Tax Act (FUTA)? When you put money into your emergency fund, you’re saving money for a financial emergency. The federal unemployment tax works kind of the same way, except employers contribute to one big emergency fund that workers can use if they lose their job. Updated Mar 01, 2021 Robinhood Learn What is an Exempt Employee? An exempt employee is like a monthly music subscription. You pay the exempt employee more money (a monthly salary), but you don’t pay extra the more work you give them. Updated Mar 01, 2021 Robinhood Learn What is Deferred Compensation When you participate in a deferred compensation plan, you can have money taken out of your paycheck and put into an account for the future. Then, when a rainy day comes along, you can begin to withdraw the money. Published Feb 24, 2021 Robinhood Learn What is dogecoin? Created in 2013, dogecoin is an open-source, peer-to-peer digital currency, which features a Shiba Inu dog (aka “Doge”) as its mascot. Dogecoin was created to help make cryptocurrency more fun and accessible to the broader online community. Updated Feb 23, 2021 Robinhood Learn What are Employee Stock Options (ESOs)? Employee stock options are like a coupon. Both set a predetermined price and have an expiration date. Like a coupon, you don’t have to use your stock options. If the stock prices are higher than the price set in your ESO, it might produce a profit. Updated Feb 23, 2021 Robinhood Learn What is an Exchange-Traded Fund (ETF)? An ETF is like an investment smoothie… Similar to a smoothie, it’s one thing you can invest in that’s made up of a mix of ingredients, available in different asset flavors (i.e., industries, sectors, etc.). Updated Feb 23, 2021 Robinhood Learn What is a Fractional Share? A fractional share is like a slice of a gem… If a share in a company is like a gem, a fractional share is like a slice of that jewel. Not everybody wants (or can afford) an entire gem, but these jewels can be broken into smaller pieces. Updated Feb 23, 2021 Robinhood Learn What is a Dividend? A dividend is like a ripe coconut falling from a tree... When a coconut falls from a tree, it’s as if the tree is a company, distributing some of its fruit back to you. As an investor, you have a choice of keeping the coconut or planting it. Updated Feb 23, 2021 Robinhood Learn What is Common Stock? Common stock is like general admission at a concert, while preferred shares are the VIP passes… Both types of stocks are slices of ownership in a company, and typically come with voting rights, or even perks like income paid back to shareholders. Updated Feb 23, 2021 Robinhood Learn What is a Stock Split Yogi Berra nailed it... "Cut my pizza into 4 slices — I’m not hungry enough to eat 8." But it doesn’t matter how you cut it, the pizza is still the same size! Updated Feb 22, 2021 Robinhood Learn What is Insider Trading? Insider trading is like seeing the test a day before taking it. While all the other students must study all of the material, you have inside information about what you need to know and which areas to focus on. Updated Feb 22, 2021 Robinhood Learn What is a Stock? A stock is a unit of ownership in a company — If you own a stock, that makes you a shareholder, meaning that you may be eligible to receive dividends if the company succeeds and you may have a vote in some company decisions. Updated Feb 22, 2021 Robinhood Learn What is the Money Market? The money market is like a weekend getaway. It’s easy and quick because it’s not a long-term commitment. You can usually pull your investments out at any time without too many repercussions or transaction fees. Updated Feb 22, 2021 Robinhood Learn What is Appreciation? Appreciation is like a tree you planted and forgot about. The environment represents the market conditions (like inflation or increased demand) that happened to work in its favor. Over time, the tree increased in value without you doing anything. Updated Feb 22, 2021 Robinhood Learn What is an Asset? Assets are like magic beans. Jack traded his cow for a bag of magic beans. His mother got upset, but Jack believed that the magic beans would lead to something valuable. Likewise, companies hold on to assets believing that those resources have worth. Updated Feb 22, 2021 Robinhood Learn What is the American Dream? The American Dream is like planting a tree in fertile, well-watered land. Ideally, the tree (any American) should be able to reach its maximum potential without hindrance from oppressive conditions. Updated Feb 22, 2021 Robinhood Learn What is Medicaid? Medicaid is there for low-income people who can’t afford to purchase insurance coverage another way. We all pay into the program through our tax dollars, and qualifying participants have access to affordable medical care when they need it. Updated Feb 22, 2021 Robinhood Learn What is a Roth IRA? A Roth IRA is like a Redwood tree. You pay for sapling and the supplies to grow it. You put in a bit of effort over time to make sure that the tree is maturing. And when you’re ready to retire, you won’t have to pay more money to enjoy its shade. Updated Feb 22, 2021 Robinhood Learn What is a Beneficiary? The beneficiary of something like a trust or insurance policy will receive benefits from the people who established those policies or trusts and named them as beneficiary. Updated Feb 22, 2021 Robinhood Learn What is Retirement Planning? Retirement planning is like planting a tree. Like growing a tree from a sapling, retirement planning can’t be done overnight. It takes a long time of careful planning and effort to grow a strong retirement that you can enjoy. Updated Feb 22, 2021 Robinhood Learn What is a Pension? A pension plan is like your employer planting a garden for you. While you work, your employer plants seeds. They hope the seeds will grow enough food for your retirement. If the garden doesn’t provide enough, they’ll buy you food. Updated Feb 19, 2021 Robinhood Learn What is a Holding Company? When you put on a backpack, you can hold many different things. One pocket might have some books. Another pocket holds the clothing you’ll need for your trip. In the same way, a holding company can hold many different businesses. Updated Feb 09, 2021 Robinhood Learn What is Probate? Probate is like a referee reviewing a play during a football game. Like the process of a referee reviewing a play, probate is meant to keep things fair and legal, and make sure everyone gets what they’re due. Updated Feb 08, 2021 Robinhood Learn What is Laissez-Faire? Laissez-faire is like riding a bike without no hands. The government keeps pedaling the bike by making sure all the conditions to sustain a free market are in place. It doesn't interfere with the market unless individual rights are in jeopardy. Updated Feb 08, 2021 Robinhood Learn What is a Fiscal Year? You learned when you were a kid that the year starts in January and ends in December. But did you know that there are other kinds of years? Fiscal year is one of them - a period that defines their "year" that doesn't coincide with the calendar. Updated Feb 02, 2021 Robinhood Learn Welcome: Investing 101 Ready to invest, but don't know where to start? Updated Jan 30, 2021 Robinhood Learn The stock market has been super volatile – How can I make sense of it? Volatility is like turbulence during a flight. You don’t know when it’ll strike or how severe it'll be. Many investors use standard deviation as a proxy for volatility, estimating the degree to which a stock fluctuates from its average price. Updated Jan 29, 2021 Robinhood Learn What is Macroeconomics? Similar to the way a national weather report looks at how conditions could result in above or below average temperatures throughout the country, macroeconomics looks at how market forces are shifting at a large scale. Updated Jan 29, 2021 Robinhood Learn What are Checks and Balances? Like with speed limits, the checks and balances in government protect everyone from one branch of government moving too fast and putting our government and country at risk. Updated Jan 29, 2021 Robinhood Learn What is Self-Employment? Being self-employed is like adulting. You get to choose when you work and when you play, but you’re also responsible for making sure the bills (aka taxes) get paid. Updated Jan 29, 2021 Robinhood Learn What is Demand? Demand is an expression of a customer’s willingness and ability to purchase a good or service. When that willingness goes up, so does demand, and vice versa. Updated Jan 29, 2021 Robinhood Learn What is Diminishing Marginal Utility? The law of diminishing marginal utility is like playing the same board game. The first time you play, you have fun. The more you play it, however, the more familiar you become with the rules and strategies. Each time the game becomes less exciting. Updated Jan 29, 2021 Robinhood Learn What is Brexit? The process of Britain and the EU untangling their political and economic affairs is much more complicated than combining them was. Disagreements over who pays for what and how they will interact in the future may drag on for years — even decades. Updated Jan 29, 2021 Robinhood Learn What are Factors of Production? Factors of production are like everything that goes into baking a cake. Someone used innovation and imagination to come up with the recipe, and you put in the effort to bring the other factors of production together (entrepreneurship). Updated Jan 29, 2021 Robinhood Learn What is Expropriation? Expropriation is like buying something that isn’t for sale. The owner doesn't want to sell, but the government has deemed the sale more important. That’s how expropriation works, they’re forcing the sale of land for vital public use. Updated Jan 16, 2021 Robinhood Learn What is Market Capitalization? Calculating the value of oranges by multiplying the number of oranges by the cost per fruit is like calculating the market capitalization of a company… It’s the value of all of the shares people own. Updated Jan 15, 2021 Robinhood Learn What’s the purpose of a diversified portfolio? A diversified portfolio is kind of like a nutritious diet... The better you spread your investments across different assets, the less likely they are to all experience a loss. Or in other words, your aggregate losses will likely be less severe. Updated Jan 15, 2021 Robinhood Learn Picking an investment: How to approach analyzing a stock Investing is like shopping for a car, but more consequential. You start with your personal needs, style, and objectives. Consider different makes and models, and compare choices based on key metrics. Then, make a decision that works for you. Updated Jan 15, 2021 Robinhood Learn What is Diversification? Diversification involves owning assets that are not closely connected or affected by the market in the same way. By splitting up your investments, you limit your exposure to risk. Updated Jan 15, 2021 Robinhood Learn What can I invest in? An overview of assets Investing is the act of purchasing an asset in the hope that it will deliver some profit, potentially through appreciation, dividends, or interest. Examples of investments include stocks, bonds, ETFs, and real estate. Updated Jan 07, 2021 Robinhood Learn What is a PE Ratio? How much does one dollar of profitability cost?… That’s the P/E ratio. It’s a tool to help investors understand how expensive a stock is by pegging it to a dollar of profitability. Updated Jan 07, 2021 Robinhood Learn What is an Option? An option is like an umbrella... It could be valuable for you, or it could end up having no value at all. The beauty with an option, and with an umbrella, is that you don’t have to use it. It’s your option whether to exercise it or not. Updated Jan 07, 2021 Robinhood Learn Does a market “selloff” mean long-term investors should sell? Long-term investing is like seeking cover during an earthquake. Basic preparedness, like staying away from windows and heavy furniture, can help you stay strong during a difficult time. Likewise, long-term investing usually requires calm and caution. Updated Jan 07, 2021 Robinhood Learn Interest rates are at their lowest since 2008 — What does that mean? Adjusting the fed funds rate is like training as a weight lifter. The Fed raises interest rates (adds weight) to make loans more expensive, helping to manage inflation. To boost the economy, it lowers rates (removes weight) to make borrowing cheaper. Updated Jan 07, 2021 Robinhood Learn We’re in a bear market — So, what does that mean? Investing in a bear market is kind of like bungee jumping. History indicates that the stock market bounces back from its declines. However, you must be aware, the bottom could fall out, leaving the economy and your investments in freefall. Updated Jan 07, 2021 Robinhood Learn Three charts that help explain this year’s stock market volatility The stock market’s reaction to COVID-19 has been, well, vicious. Here, we reflect on how the 2020 decline compares to other historic drops, what investors are paying for bonds, and how the Fed’s interest rate policy compares to recent history. Updated Jan 07, 2021 Robinhood Learn What is a Balance Sheet? A balance sheet is like taking a financial portrait of a company with a polaroid camera... It’s a snapshot, taken at one point in time, that helps capture a company’s health by showing the value of its assets, liabilities, and shareholders’ equity. Updated Jan 07, 2021 Robinhood Learn What is an Income Statement? An income statement is kind of like a video reel... It calculates a company’s net profit, by adding total revenue and subtracting total costs over a specific period of time. It’s one of the most widely cited financial statements. Updated Jan 07, 2021 Robinhood Learn What is EPS? EPS is one tool to help investors get to know a stock… Earnings per share shows what part of a company’s total profits is “owned” by each individual share. Tracking a company’s EPS over time helps you assess the stock’s change in value over time. Updated Jan 07, 2021 Robinhood Learn What is Profit? Profit is like the honey produced from a company’s beehive… It’s how much a company is earning or losing, based on the difference between the money it brings in (revenue) and what goes out (costs). Updated Dec 29, 2020 Robinhood Learn What is a Bitcoin Fork? Reaching a Bitcoin fork is like a “kayaker hitting different branches in a river.” One branch, the soft fork, has calmer waters. The other branch, the hard fork, has more turbulent waters, and only kayakers wearing specialized equipment can enter. Updated Dec 21, 2020 Robinhood Learn What is a 401(k) Plan? Sort of like a cake, a 401(k) is made up of a variety of ingredients, that bake over time. The level of retirement fund you ultimately develop in a 401(k) will depend on the kinds of ingredients and length of time it bakes, among other things. Updated Dec 21, 2020 Robinhood Learn Why should I think about investing? Like planting a tomato patch, investing requires time and patience. Often, there are challenges along the way. But with care and consistency, you give yourself the chance to build a rich harvest. So, let’s see that green thumb. Updated Dec 19, 2020 Robinhood Learn What is Disposable Income Whenever you go to the doctor’s office, the nurse or doctor takes your blood pressure. They use that as an indicator of your overall health. Your disposable personal income is an indicator of your family’s financial health. Updated Dec 15, 2020 Robinhood Learn What is a Tariff? A tariff is like a tollbooth on international commerce… If a country raises the toll to get in, the products going through the tollbooth will be more expensive. Updated Dec 11, 2020 Robinhood Learn What is a Fund? A fund is like a bucket of water… What it’s used for depends on who owns it and what he or she wants to do with it. An individual might want to drink from it now or store it for later. Updated Dec 11, 2020 Robinhood Learn What is Interest? People don’t always like to share. Especially, when there are no guarantees they’ll get their stuff back. Interest gives the lender the confidence they need to part with their money for a while and take on all the risks that entails. Updated Dec 11, 2020 Robinhood Learn What are Capital Gains? Remember trading baseball cards as a child. Capital gain is the profit you earn on the sale of that one card in the deck you knew you were going to trade because it could sell for more money than you paid for it. Updated Dec 11, 2020 Robinhood Learn What is an Exchange Rate? The exchange rate is a price for money. It’s the price of one type of money expressed in one other type of money — The price of this country’s money in the money of this other country. Updated Dec 11, 2020 Robinhood Learn What is a Restricted Stock Unit? Restricted stock units are like IOUs with fine print. RSUs have no value until they vest, but if you stay with the company for an agreed-upon amount of time and/or meet performance milestones, you will be rewarded with company stock. Updated Dec 11, 2020 Robinhood Learn What is the Dodd-Frank Act? Before the 2008 crisis, financial institutions were like unruly teenagers running around without much oversight. But then the parents had to set ground rules. And the parents wanted to make clear they might not bail the kids out next time. Updated Dec 11, 2020 Robinhood Learn What are U.S. Government Bonds? A U.S. government bond is kind of like lending $20 to your parents when they forgot their wallet. You’re not going to get rich, but — unless they go bankrupt — you’ll get your money back. Updated Dec 11, 2020 Robinhood Learn What is Revenue? Revenue is like the pool into which companies pour all their gains. Unlike profit, revenue stays in the pool for accounting purposes even if a company spends it, and has no relationship with a business’s expenses. Updated Dec 11, 2020 Robinhood Learn What is Income? Think of income for business as the pot at the end of the rainbow. While individuals can income at the top line, businesses must go across several layers before reaching “profits.” Updated Dec 11, 2020 Robinhood Learn What is an Acquisition? An acquisition is like adopting a child. Parents are looking to grow their family and gain benefits, like an increase of joy and love. Similarly, a company may hope to gain advantages from another company, but it can run into pitfalls along the way. Updated Dec 11, 2020 Robinhood Learn What is Gross Profit Margin? Gross profit margin is like leftover pizza. Once everyone has finished eating, the portion leftover is what you get to keep for tomorrow. If you put 3 out of 8 slices in the fridge, your leftovers (gross profit margin) is 37.5% (3 pieces / 8 pieces). Updated Dec 11, 2020 Robinhood Learn What is Fixed Income? Investing in fixed income securities is like investing with a timer. Every time the timer goes off, you receive periodic interest payments. But nothing is risk-free. There is a chance the timer goes off, and you don’t receive the payment. Updated Dec 11, 2020 Robinhood Learn What is a REIT? Houses can be complicated. REITs try to simplify that. By bundling properties together and packaging them into a single investment, REITs allow investors access to the real estate market that can be more complicated to take on alone. Updated Dec 11, 2020 Robinhood Learn What is a Financial Index? Indices are like the stock market’s thermometer. They offer a temperature check that helps investors know if we’re in a bull or bear market. Indices can also help assess the relative performance of professional financial advisors and money managers. Updated Dec 11, 2020 Robinhood Learn What is Profit Margin? Calculating profit margin is like taking a snapshot of a company. It’s a single number representing how well the company is doing considering both what it makes and what it spends. Updated Dec 11, 2020 Robinhood Learn What is a Unicorn? Imagine randomly finding a unicorn. You’d definitely jump right on and wait for it to take you away to a magical land where all your dreams will come true. Unicorn companies are like that. Updated Dec 10, 2020 Robinhood Learn What are Liquid Assets? Picture an empty swimming pool that you want to fill with coins and dollar bills in the next few days. Your liquid assets include all the cash that’s already in the pool, plus anything else that will sell quickly so you can fill the pool even more. Updated Dec 10, 2020 Robinhood Learn What is an Annual Report? Annual reports are like a diary – if diaries came with bar graphs, pie charts, a balance sheet, and income statements. But unlike a diary, businesses know people will be reading their annual reports. Updated Dec 09, 2020 Robinhood Learn What is the Cost of Goods Sold? There’s no way around it. COGS is often seen in calculations for gross margin, which is net sales minus COGS. Gross margin doesn’t account for “fixed costs,” but it does account for the direct costs of making the product. Updated Dec 09, 2020 Robinhood Learn What is Working Capital? Working capital captures a moment but doesn’t tell the whole story of a company. For example, a newspaper photo of a car being repossessed doesn’t tell you why the car was repossessed, or the difficulty level of getting that car back later. Updated Dec 09, 2020 Robinhood Learn What is the Debt to Equity Ratio? Debt is a bit like some sugar in your coffee... It’s fine to have little in the cup to increase the level of sweet — but overusing it can leave you not feeling great. Updated Dec 09, 2020 Robinhood Learn What is Free Cash Flow? You open your wallet and there is no cash. You have no Free Cash Flow. You have two options: use your credit card and go into debt (negative cash flow) or wait until your next paycheck (positive cash flow) clears. Updated Dec 09, 2020 Robinhood Learn What is a Limit Order? Limit orders are just one tool in an investor’s toolkit. Investors can place max bids for what they're willing to pay for a stock. If you’re a seller, a limit order lets you pick the minimum price you're willing to sell a stock for. Updated Dec 09, 2020 Robinhood Learn What are Accounts Receivable? Accounts Receivable is like a collection of IOUs from customers. Companies list them as assets in their financial statements because they’re expecting the cash soon. Updated Dec 08, 2020 Robinhood Learn What is a Derivative? Derivatives trading is like an escalator compared to the staircase of the traditional markets. Derivatives can offer investors more opportunity for speculation and increased gains. But this opportunity also exposes traders to escalated losses. Updated Nov 25, 2020 Robinhood Learn Bitcoin’s mining reward is about to be cut in half — What investors should know about the “Halvening” Every 210,000 blocks, the reward for mining bitcoin gets cut in half, a process that’s designed to repeat until 21 million units have been created. Based on current activity, the “block reward” is expected to drop to 6.25 bitcoins on May 11, 2020. Updated Nov 25, 2020 Robinhood Learn Three things to do before you start investing Your investment plan starts with a few key questions: Where are you now? And where do you want to be in the future? You can prepare to invest by reflecting on your goals, paying off high-interest debt, and creating an emergency fund. Updated Nov 25, 2020 Robinhood Learn How much should I save for retirement? Saving for retirement is like preparing for a long vacation. While you can’t pinpoint the exact cost of the entire trip, you’ll need to save enough so you hopefully don’t run out of money along the way. Updated Nov 25, 2020 Robinhood Learn Investing during times of uncertainty Everything about 2020 has been unprecedented, from COVID-19 to the US presidential race. This year, millions of new investors experienced the stock market’s highs and lows, a reflection of the uncertainty that gripped our nation. Updated Oct 21, 2020 Robinhood Learn What is a Null Hypothesis? The null hypothesis can test whether there is a statistically significant relationship between two things by positing first that there is not such a relationship. Updated Oct 21, 2020 Robinhood Learn What is Capital? Capital is like yeast. You need capital in order to put labor to work. Combine the raw ingredients (labor) and the yeast (capital), and a business can operate. When you invest in a company, you are helping it raise the capital it needs. Updated Oct 13, 2020 Robinhood Learn What is Yield? Think of yield as a way to measure your harvest. If you plant 100 seeds on one plot of land and get 10,000 plants, and you plant 100 different seeds on another equivalent plot and get 50,000 plants, the second variety has a higher yield. Updated Oct 01, 2020 Robinhood Learn What is Tenancy In Common (TIC)? Tenancy in common slices ownership in a property into multiple, but not necessarily equal, pieces. Updated Sep 30, 2020 Robinhood Learn What is Financial Technology (Fintech) Technology has transformed the financial services industry in significant ways. Fintech, or financial technology, is made up of the software or other technology that both businesses and consumers use in nearly every subset of financial services. Updated Sep 30, 2020 Robinhood Learn What is Brick and Mortar? Brick-and-mortar businesses are like dating the old-fashioned way. A growing number of people are using online dating apps to meet their significant others. But plenty of people still prefer to meet someone in person. Updated Sep 28, 2020 Robinhood Learn What is Marginal Cost of Production? The marginal cost of production is like measuring snowfall. When you get up in the morning, and the ground is covered, you might wonder how much it snowed last night. To find out, you need to subtract what was already there when you went to bed. Updated Sep 28, 2020 Robinhood Learn What is a Lien? A lien is like a first right of refusal. If you make payments on property such as a house or car, you get to keep the asset. But if you stop, or try to sell the asset, whoever has a lien on it has the first right to the property. Updated Sep 28, 2020 Robinhood Learn What are Statistics? Statistical methods are useful to analyze, evaluate, and summarize large volumes of data and also have several applications in financial analysis and investing. Updated Sep 23, 2020 Robinhood Learn What is an Intangible Asset? An intangible asset lacks physical existence, but a company recognizes that it provides a valuable benefit. Updated Sep 23, 2020 Robinhood Learn What is the Internal Revenue Service (IRS)? The IRS is like a secretary managing the office’s filing system. When you file your taxes, the IRS takes your tax return and files it into the correct recordkeeping areas. If any of the filings need an action taken, the IRS manages the transaction. Updated Sep 23, 2020 Robinhood Learn What is Inelastic? Demand for an inelastic good can change, but the change is considerably smaller than that of an elastic product, which works more like a rubber band. Updated Sep 23, 2020 Robinhood Learn What is an Inheritance? An inheritance is like a gift. You may or may not know what your parent, grandparent, or other loved one plans to give you — The gift they leave as an inheritance may be unexpected, though it’s something you may cherish as a lasting legacy from them. Updated Sep 23, 2020 Robinhood Learn What is an Inferior Good? An inferior good is like a high school friend. As you get older, you find new things and friends to occupy your time. But your improving situation — and seeing your old friends less — doesn’t mean they were a worse friend than your new ones. Updated Sep 23, 2020 Robinhood Learn What is Homeowners Insurance? Homeowners insurance is like a shield for your money. If you have a homeowners insurance policy, and something happens to your house, you generally won’t have to pay for the damages yourself, and your finances won’t take a major hit. Updated Sep 23, 2020 Robinhood Learn What is a FICO score? Your FICO score is like your report card for how you’ve handled debt in the past, based on things like your payment history, current debt balance, and the number of loans you have. Your maximum grade is 850 - the closer to that, the better. Updated Sep 23, 2020 Robinhood Learn What is a Book Value? Book value is an estimate of how much an asset is worth today, although it doesn’t guarantee someone will pay that much for it. Updated Sep 23, 2020 Robinhood Learn What is Comparative Advantage? A comparative advantage exists when you can produce something at a lower opportunity cost than someone else. Updated Sep 22, 2020 Robinhood Learn What is Pre-Foreclosure? Pre-foreclosure is like a smoke alarm warning that something is wrong. It could be a big fire, a little fire, or just smoke, but you have to investigate and respond. If you can’t stop the fire, the house may burn down (enter foreclosure). Updated Sep 22, 2020 Robinhood Learn What are Environmental, Social, and Governance (ESG) Criteria? ESG investing is like picking your tribe. You probably hang out and encourage people who have the same interests and values as you. Likewise, some investors choose companies to invest in based on similar environmental, social, and governance values. Updated Sep 22, 2020 Robinhood Learn Understanding the US National Debt US national debt is a running total of how much money the US government owes to everyone that loaned it money. As the government makes payments, the debt balance goes down. But every time the government borrows more, the debt goes up. Updated Sep 22, 2020 Robinhood Learn What is the Environmental Protection Agency (EPA)? The government has tasked the EPA with overseeing the safety of the environment, just as a parent tasks a babysitter with overseeing the safety of their child. Updated Sep 22, 2020 Robinhood Learn What is Enterprise Value (EV)? Enterprise value is like the offer price on a used car. Once you put it in your name, you might get to keep the spare change in the ashtray and maybe even a stray $20 under the seat. Updated Sep 22, 2020 Robinhood Learn What is Umbrella Insurance? Umbrella insurance is kind of like a home alarm system. You hope you’ll never have to use it, but you also sleep better at night knowing it’s there. If you find yourself with a substantial liability, umbrella insurance will have you covered. Updated Sep 22, 2020 Robinhood Learn What is Enterprise Resource Planning (ERP)? Enterprise Resource Planning (ERP) is kind of like urban planning. When you plan a city, you need to make sure all the facilities are connected to each other and have easy access to all the important city information. Updated Sep 22, 2020 Robinhood Learn What is Disbursement? A disbursement is like sending someone money with a peer-to-peer payment app. When you use a peer-to-peer payment app, you send cash directly from your bank account to another person’s, disbursing funds from your account to theirs. Updated Sep 22, 2020 Robinhood Learn What is Cyclical Unemployment? Cyclical unemployment is like a computer update. To get things running correctly you need to shut down and reset (a recession). No work gets done (cyclical unemployment) but once you reboot (find a new job), things typically run better than before. Updated Sep 22, 2020 Robinhood Learn What is Demonetization? Demonetization is sort of like a rotary telephone. If phones were money, that process of retiring rotary telephones and switching to new forms of communication would be called demonetization. Updated Sep 22, 2020 Robinhood Learn What is a Credit Privacy Number (CPN) When you’re wearing a good costume, your mask and outfit conceal your real identity, and no one knows who you really are. Similarly, a CPN purports to mask your identity and credit history. Unfortunately, you can’t use your CPN in the real world. Updated Sep 22, 2020 Robinhood Learn What is a Contingent Beneficiary Your primary beneficiary is Plan A. When you die, your primary beneficiary is the person you most want to receive your life insurance benefit. Most often, this person is an immediate family member like a spouse, parent, or adult child. Updated Sep 22, 2020 Robinhood Learn What is an Invisible Hand? The invisible hand in human economies is like instinct in the animal kingdom. Neither can be seen, but both are responsible for survival. The animals are guided by self-interest. That’s similar to free market economies. Updated Sep 22, 2020 Robinhood Learn What are Futures? Futures contracts were born out of our need to eat. Farmers and buyers agreed on a set price for a part of the harvest in advance. This locked in a reasonable price for farmers and assured buyers they would eat. Updated Sep 22, 2020 Robinhood Learn What is a Simple Random Sample? A simple random sample is like a bag of jelly beans. Out of the millions of jelly beans made at the candy factory, a couple of dozen end up together in a bag. They are chosen at random and are representative of all the jelly beans that were made. Updated Sep 21, 2020 Robinhood Learn What is Commercial Real Estate (CRE)? Commercial real estate is like setting up a lemonade stand in your driveway. That site is commercial real estate, because its purpose is business - to sell lemonade. But your home itself is residential - its purpose is to be lived in. Updated Sep 21, 2020 Robinhood Learn What is a Certified Check? A certified check is like collateral on a loan. When you enter into a financial agreement with another party, they want to know they'll get the money you promised. In the case of a check, the payee might have your bank certify the check. Updated Sep 21, 2020 Robinhood Learn What is Cash? Cash is almost anything that you could give your friend to pay them back when they cover your meal at a restaurant. You might hand her a $20 bill, but you could just as easily use an app to send an electronic transfer from your bank account. Updated Sep 21, 2020 Robinhood Learn What is a Budget Deficit? A budget deficit is like not bringing enough food on a trip. If you go for a long hike and camp in the woods, but run out of food, your body will enter a calorie deficit, which is like going into debt or dipping into your savings. Updated Sep 21, 2020 Robinhood Learn What is Asset Management? Asset management is like hiring a personal trainer for your finances. They have expertise that can help you get your finances in shape better like a personal trainer does for your body. Updated Sep 21, 2020 Robinhood Learn What are Articles of Incorporation? Filing your articles of incorporation tells your state everything they need to know about you and gives you the right to do business in your state. Updated Sep 21, 2020 Robinhood Learn What is Accrual Accounting? Accrual accounting keeps track of every move a business makes, even if no cash is exchanged. Updated Sep 21, 2020 Robinhood Learn What is a Bridge Loan? A bridge loan is like using your credit card for a large purchase right before payday. The money isn’t in your checking account just yet, but you know it will be in a few days. Updated Sep 18, 2020 Robinhood Learn What is a Prospectus? A prospectus is like a sales brochure. A sales brochure tells you the important features of a product and how to make use of it. A prospectus tells you about the investment product a company is selling and why you may want to invest in it. Updated Sep 18, 2020 Robinhood Learn What is the C-Suite? The C-suite team in an organization is like the foundation of a house. C-suite executives offer stability and support to a company in the same way that a foundation provides the base for a house that’s being built. Updated Sep 18, 2020 Robinhood Learn What is the Clayton Antitrust Act? The Clayton Antitrust Act is a law that makes it difficult for businesses to limit their competition unfairly. It was signed into law in October of 1914. Updated Sep 18, 2020 Robinhood Learn What is Common Law? Common law's purpose is to offer a solution when statutory law doesn't — or when relevant statutory law does not exist. It's kind of like when you are lost in the woods, and your phone is dead, so you need to find another tool to help you get out. Updated Sep 18, 2020 Robinhood Learn What is a subsidiary? A subsidiary is like a tool in a Swiss Army knife. It serves a specific purpose for its parent company, making that parent company more valuable. Updated Sep 18, 2020 Robinhood Learn What is a General Ledger? When the company wants to examine its financial position, it can look at its general ledger just like a student looking at their transcript to determine scholarship eligibility or check their GPA. Updated Sep 18, 2020 Robinhood Learn What is a Nonprofit Organization (NPO)? A nonprofit organization is like a Good Samaritan. When someone is in need, bystanders often offer assistance. Similarly, nonprofit organizations exist for a purpose other than profit. Updated Sep 18, 2020 Robinhood Learn What is Underwriting Underwriting is like deciding whether to loan your friend money. Before lending to your friend, you’ll weigh the risks involved. Similarly, underwriters consider the risks before deciding whether to enter into a financial arrangement. Updated Sep 18, 2020 Robinhood Learn What is Globalization? The less globalized economy of the 20th century may have felt more secure to some people, but globalization in the 21st century has opened up a tremendous engine of economic progress and innovation — though not without risks. Updated Sep 18, 2020 Robinhood Learn What is Residual Income? Residual income is like getting a bonus check at work. The cash you have from the bonus is above and beyond what your minimum required earnings are, so it’s residual income. Updated Sep 18, 2020 Robinhood Learn What is Aggregate Demand? Aggregate demand first measures the market for each particular good or service in an economy then finds the sum of those demands. Updated Sep 17, 2020 Robinhood Learn What is a Work-in-Progress (WIP)? A work-in-progress tells investors how much the company has currently in production in relation to the number of finished goods they have on hand, as well as in relation to the costs of goods sold each period. Updated Sep 17, 2020 Robinhood Learn What is Escrow? Escrow is something given by one person and intended for another, but it’s set aside and isn’t delivered until certain conditions are satisfied. That’s like a Christmas gift that can’t be opened until it’s Christmas. Updated Sep 17, 2020 Robinhood Learn What is the Weighted Average? A weighted average can be more useful than a regular average because it offers more nuance. It reduces the weight of data that is less important, allowing more material data to have a more significant effect on the result. Updated Sep 17, 2020 Robinhood Learn What is Conflict Theory? Conflict theory describes humans in a continuous power struggle for limited resources. The oppressors acquire more of the resources by exploiting the oppressed. Updated Sep 17, 2020 Robinhood Learn What is Cum Laude? When you graduate cum laude, you receive the acknowledgment that you’re one of the top students. But you aren’t at the very top. Those who graduate summa cum laude and magna cum laude did better than you. Updated Sep 17, 2020 Robinhood Learn What is a Joint Venture (JV)? A joint venture is like a group project in school. Members of the group are all responsible for the project’s outcome and receive a joint grade. But outside of this one assignment, the students are still individuals who work for their own grades. Updated Sep 17, 2020 Robinhood Learn What is a Bureaucracy? Bureaucracies move slower than many people would prefer, but often the rules have a purpose. Of course, too many roadblocks — and too much bureaucracy — can be inefficient. Updated Sep 17, 2020 Robinhood Learn What is a Cost-Benefit Analysis? Anytime businesses are considering a big decision, they want to use cost-benefit analysis to make sure that whatever choice they make is expected to result in more money for the company in the long-run. Updated Sep 17, 2020 Robinhood Learn What is Due Diligence? In finance, due diligence involves gathering research to increase the odds of making the right financial decision. Updated Sep 17, 2020 Robinhood Learn What is Reconciliation? Reconciliation is like checking your homework against an answer sheet. If there are inconsistencies, either you or the answer sheet has an error. To understand the material, you will have to reconcile the different answers until the results match. Updated Sep 17, 2020 Robinhood Learn What is Structural Unemployment? Structural unemployment is like a river changing course. It might flow in the same path for decades. But one day, the river breaks through an oxbow and charts a new path. All of a sudden, the river is structurally different than it was. Updated Sep 17, 2020 Robinhood Learn What is Collateral? Just like you hope you never have to use your insurance for an emergency, your lender hopes they don’t have to seize your collateral. But at least they know it’s there to help reduce their losses if they need it. Updated Sep 17, 2020 Robinhood Learn What is a Code of Ethics? Companies want to operate in specific ways based on the leadership’s personal beliefs or industry norms and standards. Creating a code of ethics gives people in that company a checklist they can follow when making decisions. Updated Sep 16, 2020 Robinhood Learn What is Weighted Average Cost of Capital (WACC)? WACC sets the lowest bar (rate of return) an investor needs to get over in order to make a positive return on their investment. Anything below this bar means you should probably be putting your money elsewhere. Updated Sep 16, 2020 Robinhood Learn What is a Chief Financial Officer (CFO)? A CFO is ultimately responsible for making sure money is coming in and going out in such a manner as to benefit the long-term financial health of the organization. Updated Sep 16, 2020 Robinhood Learn What is a Balance Transfer? With a balance transfer card, the cardholder is looking to reduce their payment and interest rate so they can get control of their debt. Updated Sep 16, 2020 Robinhood Learn What is Accruing? When a business sells its goods or services, its customers may promise to pay at a later time. An accrual is like recording those promises on the company’s books. It lets everyone know the commitments have been made, regardless of when they’re due. Updated Sep 16, 2020 Robinhood Learn What is a Mortgage? Having a mortgage is kind of like renting your own house. Even though you own the home, you did it with borrowed money. If you stop paying, the bank can seize the house. So for a certain number of years, you’re basically paying rent to the bank. Updated Sep 16, 2020 Robinhood Learn What is a net operating loss (NOL)? A net operating loss is a credit you can use down the line. If your business has a less-than-stellar tax year, you can apply the credit at a more profitable time. Updated Sep 16, 2020 Robinhood Learn What is Over-The-Counter (OTC)? Over-the-counter (OTC) trades are like selling your car on your own. You don’t get the advantage of the system designed to bring buyers and sellers together. But you also don’t have to pay a listing fee or follow the rules of the exchange. Published Sep 01, 2020 Robinhood Learn What is a Present Value? Present value is like a time machine for money. By understanding present value, you see what your future money is worth today. And it also helps you know what the money you have today could be worth in the future. Updated Aug 28, 2020 Robinhood Learn What is an Appraisal? An appraisal is like an Olympic judge's opinion. The audience may love an athlete's performance, but it's the judges' scores that matter. If an appraiser determines a home's worth is under market value, it's less likely to get a loan for more. Updated Aug 28, 2020 Robinhood Learn What is a Certificate of Insurance (COI)? A COI is kind of like a driver’s license. By carrying your driver’s license, you can show law enforcement that you’re allowed to drive. Similarly, your certificate of insurance allows you to prove to clients that you or your business are insured. Updated Aug 04, 2020 Robinhood Learn What is a Deposit? When you put money in a piggy bank, you’re making a deposit. A piggy bank is just one place where you can deposit your money so you can use it later. But putting money into a bank account is safer than putting money in a piggy bank. Updated Jul 27, 2020 Robinhood Learn What is a Non-Exempt Employee? A non-exempt employee is like a babysitter, while an exempt employee is like a parent. Employers have to pay their non-exempt employees for every hour they work. Exempt employees might be on duty all the time without getting any extra pay. Updated Jul 27, 2020 Robinhood Learn What is a Progressive Tax? A progressive tax system is like an airplane. The better (or worse) the seat you have on the plane, the higher (or lower) the cost you’ll have to pay for your ticket. Similarly, the better your income, the more you have to pay in taxes. Updated Jul 27, 2020 Robinhood Learn What is an Original Equipment Manufacturer (OEM)? The original equipment manufacturer produces the first step in someone else’s final product. You can’t get the final product without the purchase from the OEM, but there’s still more work to be done. Updated Jul 24, 2020 Robinhood Learn What is Free Enterprise? Free enterprise is like children playing at recess. They can play their own games by their own rules. The teacher (the government) will only step in if someone’s in danger of serious harm. Updated Jul 24, 2020 Robinhood Learn What is Frictional Unemployment? Frictional unemployment is like a swimmer taking a breath. We all understand it’s just part of the process. Likewise, we don’t expect a person to keep the same job they get at 16 until they retire. It’s normal to look for new opportunities. Updated Jul 24, 2020 Robinhood Learn What is London InterBank Offered Rate (LIBOR)? LIBOR is like a thermostat. Every morning, the Intercontinental Exchange (ICE) sets the thermostat (LIBOR) at a number they determine based on several different factors. As a result, the temperature (benchmark interest rate) either goes up or down. Updated Jul 24, 2020 Robinhood Learn What is Modified Adjusted Gross Income (MAGI)? Modified adjusted gross income is like an airline size limit for your luggage. You’ll need to put your income (your bag) on the scale (through a series of calculations). If it’s too big, you may have to check your bag and pay more in fees (taxes). Updated Jul 24, 2020 Robinhood Learn What is Ex-Dividend? Buying a stock ex-dividend is like waiting in line for a rollercoaster. Everyone behind a certain point has to wait for the next trip (the next dividend). If you counted the people before you and the no. of seats, you can determine the cut-off point. Updated Jul 24, 2020 Robinhood Learn What is Next of Kin? Finding a person’s next of kin is like looking for the next branch to reach for when climbing a tree. When you’re looking for a person’s next of kin, you examine the person’s family tree, moving to find their closest living relation. Updated Jul 23, 2020 Robinhood Learn What is a Smart Contract? A smart contract is like a vending machine. You put in a dollar, then press the button that matches your favorite chocolate bar. The rules of a transaction are pre-programmed into the vending machine. If the amount is right, your product is ejected. Updated Jul 14, 2020 Robinhood Learn I’m in my 20s — How should I approach investing? At Robinhood, we’ve got a BOMB acronym to help you think about your financial life. So, here are four tips on how to Budget, Organize, Maximize, and Balance your finances to help tee up your investing journey. Updated Jul 03, 2020 Robinhood Learn What is EBITDA? EBITDA helps capture a company’s true profit. Once you add back in taxes, interest, depreciation, and amortization expense, you get a more rounded picture of the profitability of a company within the reported period. Updated Jun 30, 2020 Robinhood Learn What is a Federal Housing Administration (FHA) loan? FHA loans are like a parent getting friends to lend you money for a house. The government—like a parent—wants you to raise your family in a house. Dad takes on some of the risk of securing a loan, but asks you to chip in insurance to show good faith. Updated Jun 26, 2020 Robinhood Learn What is Tax Exempt? The government gives some types of income and some organizations a pass on being subject to taxes. But it usually has a reason; it thinks the tax exemption will incentivize behavior it wishes to encourage. Updated Jun 19, 2020 Robinhood Learn What is Forbearance? Forbearance allows you to take a short-term break from paying your debt, but eventually, you’ll have to start making payments again to finish paying off that loan. Updated Jun 19, 2020 Robinhood Learn What is Financial Literacy? Everyone should have basic financial literacy before becoming an adult and being responsible for their own finances. If they don’t, they’re likely to face costly consequences at some point. Updated Jun 19, 2020 Robinhood Learn What is Year to Date _ (YTD)?_ YTD is like your car’s odometer. The dometer represents the number of miles you’ve driven since the beginning of a certain period. Likewise, YTD represents the passage of days since the beginning of a certain period. Updated Jun 19, 2020 Robinhood Learn What is Term Life Insurance? Term life insurance covers you until the contract expires. If you die during the contract, you’re covered. But if you outlive the contract, you either have to renew it or lose the benefits. Updated Jun 19, 2020 Robinhood Learn What is Insurance? Insurance is like an emergency fund. You pay an insurance premium every month. If disaster strikes, you’ve got insurance to help protect you from financial loss. Updated Jun 19, 2020 Robinhood Learn What is Perfect Competition? Economists think it would be great if every market was perfectly competitive, and you could get identical products for the same price everywhere. But at the end of the day, it’s a scenario that just doesn’t exist. Updated Jun 19, 2020 Robinhood Learn What is Risk Averse? Risk-averse investments might not get you a huge profit, and some people won’t think they’re that much fun. But in the end, you’ll almost certainly get your money back with interest. Updated Jun 19, 2020 Robinhood Learn What is an Excise Tax? Governments often use excise taxes to try to turn people away from unhealthy or costly activities like smoking. Updated Jun 19, 2020 Robinhood Learn What is Bankruptcy? When you’ve done something on a computer you don’t want to do and you want to start over, you click “undo.” Bankruptcy is like doing that financially. Updated Jun 19, 2020 Robinhood Learn What is Industrialization? Industrialization usually involves significant societal changes, including a move toward free labor markets in which workers have more power to choose their employers. Updated Jun 19, 2020 Robinhood Learn What is a Foreclosure? Foreclosure is like your parents taking away your car privileges because you didn’t live up to the arrangements. Similarly, when a homeowner doesn’t make mortgage payments, the bank takes control of the home. Updated Jun 18, 2020 Robinhood Learn What is a Debenture? Investors lend money to companies and governments through debentures, trusting they’ll get the funds back. Updated Jun 18, 2020 Robinhood Learn What is a Collection Agency? Creditors who feel they can’t or don’t want to collect debts on their own can hire a collection agency to do it for them, in return for a fee. Creditors can also sell the debt directly to the collection agency at a discount. Updated Jun 18, 2020 Robinhood Learn What is Cash Flow? Cash flow is essential because it provides the money that companies must spend in order to stay afloat. A company brings in cash flow by selling its goods and services. Updated Jun 18, 2020 Robinhood Learn What is Elasticity? The more elastic a good is, the more easily its demand will change based on the slightest change in price. However, the more inelastic the good, the more resistant the demand will be to change based on a shift in price. Updated Jun 18, 2020 Robinhood Learn What is the Law of Supply and Demand? As production goes up and demand stays the same, prices for a good should fall. If the number of orders goes up and supply remains the same, the cost of a good should rise. As supply and demand change in price, an equilibrium is created over time. Updated Jun 18, 2020 Robinhood Learn What is Attrition? Attrition is like a dieter trying to lose weight. Just as a dieter cuts calories by reducing portion size, attrition occurs when a company cuts expenses by not filling open positions. Updated Jun 18, 2020 Robinhood Learn What is Infrastructure? Society requires a solid infrastructure as a base to ensure that the economy functions. A crack in the foundation can lead to systemic problems that spread to all areas of the house (or the economy) if it’s not repaired. Updated Jun 18, 2020 Robinhood Learn What is a Home Equity Line of Credit (HELOC)? A home equity line of credit (HELOC) is like a credit card. Your credit card has a spending limit and you can spend any amount up to that limit. A HELOC lets you use a portion of the equity in your home as a credit limit and spend within that limit. Updated Jun 18, 2020 Robinhood Learn What is the Gold Standard? The gold standard for countries is like individuals storing actual gold bars in the bank instead of cash. The gold may make you feel more secure, but it’s going to make day-to-day business much more difficult. Updated Jun 18, 2020 Robinhood Learn What is an Endowment? An endowment is like a high-interest savings account. There’s a catch, though. You can’t spend the money you put into your savings account. Instead, you can only spend the money you have earned in interest. Updated Jun 18, 2020 Robinhood Learn What is a Stock Keeping Unit (SKU)? A SKU is like a nickname. Your family might have a nickname they use to identify you, but they’re the only ones who call you that. Likewise, a SKU is a special code that businesses use internally to identify their products. Updated Jun 18, 2020 Robinhood Learn What is Economics? Economics can give you a sense of how efficiently goods and services are moving to their desired locations. It can pinpoint specific problems in the market and create an economic forecast that will show when those problems will be resolved. Updated Jun 18, 2020 Robinhood Learn What is an ATM? By using an ATM, you can add to your bank account, or you can deduct from it. You can perform these banking procedures without anyone’s help and at a time that’s convenient for you. Updated Jun 18, 2020 Robinhood Learn What is a Variable Cost? When you drive your car, you have to fill up the tank. The amount you spend on fuel is directly related to how much you use your car. Similarly, how much a business spends on variable costs is directly connected to how many items it produces. Updated Jun 18, 2020 Robinhood Learn What is Pro Forma? A pro forma is like a caricature. It’s a good representation of a company’s financial situation, but not as accurate as a photograph. The company uses the pro forma financial statement to highlight certain aspects to draw the attention of investors. Updated Jun 18, 2020 Robinhood Learn What is Price Elasticity? There is usually some wiggle room in the price people will pay. You can probably stretch that price a bit without losing customers. Price elasticity measures how much stretch room there is and how close to the breaking point consumers might be. Updated Jun 18, 2020 Robinhood Learn What is Copay? A copay is like eating at a buffet. At a buffet, the cost is the same no matter what you eat. But you can’t eat if you don’t pay. With a copay, the amount you have to pay is the same no matter what, but you have to pay the copay to get medical care. Updated Jun 18, 2020 Robinhood Learn What is Stagflation? Stagflation is like a house that is burning and flooding simultaneously. Usually, you’d want to put a fire out by using water. But if your home is also flooding, adding more water makes things worse. This leaves you with no clear solution. Updated Jun 18, 2020 Robinhood Learn What is Keynesian Economics? While a market economy can regulate itself most of the time, sometimes it can’t heal itself. Keynes introduced temporary fixes for when economies get stuck in a recession. He argued government spending could help hold a market economy together. Updated Jun 18, 2020 Robinhood Learn What is Property Management? A property manager is like a babysitter. Many people want to have children, but they have full-time jobs. Similarly, not all property owners can manage the daily tasks associated with rental properties, so they hire someone to help out. Updated Jun 18, 2020 Robinhood Learn What is an American Depository Receipt (ADR)? If you have a deed to a piece of real estate, you may never see the property, but it’s still yours. Similarly, an ADR represents your ownership of shares in a foreign company. Updated Jun 18, 2020 Robinhood Learn What is a Collateralized Loan Obligation (CLO)? A collateralized loan obligation is like sorting a bag of skittles by color. It'd be nice if a company could do it for you, right? That's what a CLO does. It takes hundreds of somewhat risky loans, sorts them by degree of risk, and repackages them. Updated Jun 18, 2020 Robinhood Learn What is Fiat Money? Fiat money is a paper created by the government that has value because everyone involved agrees that it means something. If nobody believed in what was printed on the paper, it would not have any value at all. Updated Jun 18, 2020 Robinhood Learn What is Deflation? Deflation is like a bad cough… A cough is a symptom of a disease, but it’s not the disease itself. Likewise, deflation is a sign of a more significant problem in the economy. Deflation is a symptom of a disease, but it’s not the disease itself. Updated Jun 18, 2020 Robinhood Learn What is a White Paper? White papers inform an audience about a company’s products, services, or technology without overtly selling. Instead, they give consumers information to help them make informed buying decisions and reach the destination on their own. Updated Jun 18, 2020 Robinhood Learn What is an Audit? Auditors help companies confirm their financial reporting is accurate, which helps them avoid penalties and maintain the public’s trust. Updated Jun 18, 2020 Robinhood Learn What is a Quick Ratio? The quick ratio doesn’t give you a complete account of the overall health of a company. But it’s a fast and handy indication of how financially healthy a company is on a short-term basis. Updated Jun 18, 2020 Robinhood Learn What is Stagnation? Stagnation is like working a dead-end job. Your pay doesn't increase — or increases slowly. To escape this, you need to take action. Similarly, a country in stagnation may try to revive its economy through government intervention. Updated Jun 18, 2020 Robinhood Learn What is a Ceteris Paribus? Ceteris paribus is like a weather balloon. Meteorologists try to predict the weather. But in real life, the weather is often too dynamic to predict even over the medium term. The economy is also unpredictable and made up of many random events. Updated Jun 18, 2020 Robinhood Learn What is a Real Estate Broker? Brokers house-hunt for prospective homeowners and find potential buyers for people selling their homes. Once they find a match, they represent you in the exchange. If they successfully complete the transaction, they charge a commission. Updated Jun 18, 2020 Robinhood Learn What is an Angel Investor? Angel investors are like angels. They help you out by giving you the money you need to launch your business. Then they watch over you and the company, sometimes becoming advocates and helping you make business decisions. Updated Jun 18, 2020 Robinhood Learn What is Pro Rata? If you’ve got one pie and plan to share it with five of your friends, you have to divide the pie up six ways. Each person’s pro rata share of the dessert is equal to one-sixth of the pie. Updated Jun 18, 2020 Robinhood Learn What is an Encumbrance? An encumbrance may restrict homeowners from using the property in some way, affect a house’s marketability, or even allow a creditor to seize the property. Like an anchor, they can weigh a house down until the homeowner settles the claims. Updated Jun 18, 2020 Robinhood Learn What is Net Worth? Net worth is what you have left after accounting for all your debts. To build your net worth, you’ll need to either increase your assets (like cash or equity in a business) or decrease your debts (pay off your student loans or credit card bills). Updated Jun 18, 2020 Robinhood Learn What is the FICA Tax? The FICA tax is like being forced to save retirement funds. You pay a percentage of each check you recieve to the government. When you retire, you get Medicare and Social Security based on several factors, like the amount of FICA taxes you paid. Updated Jun 18, 2020 Robinhood Learn What is the Social Security Tax? Everyone pays a Social Security tax to fund the Social Security program. Then, when an individual retires or becomes disabled, they are paid a monthly check out of the savings account. Updated Jun 18, 2020 Robinhood Learn What is a Homestead Exemption? A homestead exemption is like an insurance policy for homeowners. Just like most insurance policies, you hope you’ll never have to use it. But if you need it, it can protect you from more significant loss — In this case, from the loss of your home. Updated Jun 18, 2020 Robinhood Learn What are Arrears? If you have a payment in arrears, even if you’ve paid on time for subsequent months, you still have to make up that missed payment. Updated Jun 18, 2020 Robinhood Learn What is a Conglomerate? The ingredients you need to bake a cake are all different, but when you combine them they work well together. Likewise, companies that make up a conglomerate may be different, but the owners’ hope is that the companies will be stronger together. Updated Jun 18, 2020 Robinhood Learn What is an Entrepreneur? Just as a farmer chooses what to plant, where to plant it, and then works to make it grow, an entrepreneur comes up with an idea, gives it shape, and then works to build it into something big. Updated Jun 18, 2020 Robinhood Learn What is Austerity? Just as austerity in the personal realm might mean cutting back on non-essential purchases and trying to save more money, governments have to do the same thing when they get overextended financially. Updated Jun 18, 2020 Robinhood Learn What is Overhead? Overhead is like the engine in a car. An engine doesn’t physically drive you from one place to another, but it’s necessary for the car to run. Similarly, overhead doesn’t directly contribute to revenue but pays for things needed to run your business. Updated Jun 18, 2020 Robinhood Learn What is Creative Destruction? Your home’s basic layout will always be the same unless you’re willing to knock down a wall or two and completely alter the way your home looks. In the same way, creative destruction knocks down existing practices to replace them with something new. Updated Jun 18, 2020 Robinhood Learn What is an Ad Valorem Tax? In addition to paying off the balance on a credit card, you also have to pay a finance charge - similar to an ad valorem tax. That amount goes to the credit card company, just as an ad valorem tax goes to the town or state that imposes it Updated Jun 18, 2020 Robinhood Learn What is the Social Security Administration (SSA)? The Social Security Administration is like a payroll firm for the retired and disabled. It doesn’t employ you, but it’s responsible for cutting you your monthly check. Updated Jun 18, 2020 Robinhood Learn What is a Custodian? A safe keeps your valuables secure, just like a custodian bank does with your electronic and physical investments. You can get to your assets when you need to, but the custodian acts as an intermediary and keeps them safe in the meantime. Updated Jun 18, 2020 Robinhood Learn What is a Trustee? A trustee is like a trusted family member holding a key to your safe deposit box. They have the key so that if you’re incapacitated — or deceased — they can take control of the valuable things inside and see that they are handled with care. Updated Jun 18, 2020 Robinhood Learn What is a Short Sale Property? A short sale is like buying a house on clearance. The bank believes it can’t make back all the money it lent to the borrower, so it accepts a loss. The buyer gets a discount, but it may come with downsides, such as getting the house “as is.” Updated Jun 18, 2020 Robinhood Learn What is Vertical Integration? Vertical integration is like a ladder. Each business in the supply chain is a rung. Goods move from rung to rung up and down the ladder. When a company owns two or more businesses next to each other on the ladder, it is vertically integrated. Updated Jun 18, 2020 Robinhood Learn What is a Duration? Duration is like a pressure gauge. Just as a pressure gauge tells you something about how the fluid or gas inside a tank may respond to external conditions, duration helps you understand how sensitive your investment is to interest rate fluctuations. Updated Jun 18, 2020 Robinhood Learn What is the Current Ratio? The current ratio is like a business’ credit score. Just as your credit score is an indicator of your ability to pay off personal debts, a current ratio is a single number that quickly gives a sense of a company’s ability to meet its obligations. Updated Jun 18, 2020 Robinhood Learn What is a Remittance? Just as a government benefit check may help a struggling family survive, for many people around the world, the remittance received from family overseas is a significant part of their household income. Updated Jun 18, 2020 Robinhood Learn What is a Liability? A liability is money that a company owes and has promised to pay in the future, whether it be to a bank who lent them money or to employees who have worked for them. Companies use these IOUs in the course of their normal business operations. Updated Jun 18, 2020 Robinhood Learn What is Earnest Money? Earnest money is like using your credit card to make a reservation. If you flake, they’ll charge you. Similarly, the seller of a house or other large asset wants you to show your offer is serious — And they want compensation if you change your mind. Updated Jun 18, 2020 Robinhood Learn What is Monetary Policy? Monetary policy is like balancing a scale. Just as the two sides of a scale are out of balance if one side is heavier than the other, monetary policy generally seeks to balance high employment and low inflation. Updated Jun 18, 2020 Robinhood Learn What is an Oligopoly? Think of three siblings fighting. They can continue to fight and get grounded, or they could get along and all benefit. Oligopolies work the same way. Three companies can try to fight a price war, or they can avoid it and all enjoy higher profits. Updated Jun 18, 2020 Robinhood Learn What is Impairment? Impairment is like an ice cream cart that’s moved from the desert to Antarctica - The ice cream may be just as good as it was in the desert, but the cart is not going to sell as much ice cream, and its value will be far lower. Updated Jun 18, 2020 Robinhood Learn What is Correlation? Correlation is like fish moving about in an ocean. Some fish move in a school, all moving in unison with coordinated movements (high correlation). Some move independently and in different directions (low correlation). Updated Jun 18, 2020 Robinhood Learn What is Sustainability? If you own chickens to harvest fresh eggs, you know you can't eat all the chickens - it's not sustainable. The same holds true for our planet: If we consume every resource, we’ll run out of resources one day. Sustainability helps prevent this. Updated Jun 18, 2020 Robinhood Learn What are Economies of Scale? If you can afford to buy groceries in bulk, you can create your own economy of scale. Similarly, larger companies that can afford to buy materials in bulk or invest in better machinery can produce more products for less over the long-run. Updated Jun 18, 2020 Robinhood Learn What is a Subsidy? When the government wants to discourage an activity — say, smoking — it often taxes it. A subsidy is the opposite. It either gives people or companies money to engage in an activity — or it removes some of their taxes if they engage in that activity. Updated Jun 18, 2020 Robinhood Learn What is a Chief Executive Officer (CEO)? A CEO is like a baseball coach. A team usually has owners (board of directors and shareholders) that set expectations and decide if the coach stays or goes. The coach set strategy and organizes the team to win, like a CEO in a company. Updated Jun 18, 2020 Robinhood Learn What is Fiscal Policy? The government can use one type of fiscal policy (the brake pedal) to slow economic growth when it’s moving too quickly. It can use the other type (the gas pedal) to give the economy a boost when it’s flagging. Updated Jun 18, 2020 Robinhood Learn What is Gross Domestic Product (GDP)? Gross Domestic Product is like a report card. Every year, most countries record and report their GDP. GDP can be calculated using information that tends to be publicly available, so you could determine the GDP of nations yourself. Updated Jun 17, 2020 Robinhood Learn What is a Z-Score? The Altman Z-score is like cholesterol. It’s one among several indicators of your risk of heart disease, along with a variety of other factors, like blood pressure and family history. Updated Jun 17, 2020 Robinhood Learn What is Corporate Social Responsibility? Corporate social responsibility involves companies helping to improve your community. Companies can sponsor small initiatives like a local clean-up, but they can also use their economic resources to effect more significant changes. Updated Jun 17, 2020 Robinhood Learn What is Adjusted Gross Income? Adjusted gross income is similar to an expertly tailored pair of slacks. A tailor measures and adjusts the length and the side seams of the slacks so they fit. Updated Jun 17, 2020 Robinhood Learn What is Equity? Equity is like a pie that you bought with a friend. Neither of you owns the entire pie, and each of you is only entitled to eat a portion of the pie equal to the percentage of the pie that you paid for. Updated Jun 17, 2020 Robinhood Learn What is Return on Investment (ROI)? Getting a return on investment is like growing potatoes. By choosing to plant one potato rather than eating it, you are hoping it will grow into more than one. If your spud (investment) grows into five, your patience is rewarded with a 400% ROI. Updated Jun 17, 2020 Robinhood Learn What is Operating Margin? Each month you get a paycheck and have to use some of the money to pay essential bills. You’re free to use the money that is left over for unusual expenses, like going on vacation — or to save it for the future. That's operating margin. Updated Jun 17, 2020 Robinhood Learn What is Net Income? Your net income is like the delicious fruit that’s left over after you peel away the skin, remove the pith, and take out the seeds. Updated Mar 31, 2020 Robinhood Learn What is an Irrevocable Trust? When you put a message in a bottle and throw it out to sea, you can’t make any changes. Similarly, when you set up an irrevocable trust, you typically can’t make any changes to it, even if you later realize that you made a mistake. The 3-minute newsletter with fresh takes on the financial news you need to start your day. Subscribe Stocks & Funds Options Gold Cash Management Crypto Learn Support Snacks About us Careers Affiliates Blog Investor Relations Check the background of the firm on FINRA’s BrokerCheck Brokerage Customer Relationship Summary Robinhood Terms & Conditions Disclosure Library Privacy © 2021 Robinhood. All rights reserved. This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. 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