Investment Terms Starting with “F”
1. Face Value
Face value is the original value of a bond or stock as stated by the issuer. For bonds, it is the amount repaid at maturity.
Illustration: A bond with a face value of $1,000 pays back $1,000 when it matures.
2. Fair Value
Fair value is the estimated true worth of an asset based on financial analysis and market conditions.
Illustration: Analysts estimate a stock’s fair value at $80 while it currently trades at $70.
3. Federal Funds Rate
The federal funds rate is the interest rate at which banks lend money to each other overnight. It influences borrowing costs and investments.
Illustration: When the central bank raises rates, loan costs and bond yields often increase.
4. Financial Asset
A financial asset is an investment that derives value from a contractual claim, such as stocks, bonds, or bank deposits.
Illustration: Shares of a company and government bonds are financial assets.
5. Financial Market
A financial market is where buyers and sellers trade financial assets like stocks, bonds, and currencies.
Illustration: Investors trade company shares on stock exchanges every business day.
6. Financial Statement
Financial statements summarize a company’s financial performance and position. They include the income statement, balance sheet, and cash flow statement.
Illustration: Investors review annual reports before deciding to invest.
7. Financial Ratio
A financial ratio compares different financial figures to evaluate a company’s performance.
Illustration: Investors use the P/E ratio to compare two companies in the same industry.
8. Fixed Income
Fixed income investments provide regular interest payments and return the principal at maturity.
Illustration: Government bonds paying 5% annually are fixed-income investments.
9. Fixed Deposit (FD)
A fixed deposit is a bank investment where money is deposited for a fixed period at a guaranteed interest rate.
Illustration: Depositing $10,000 for three years at 6% interest.
10. Floating Rate Bond
A floating rate bond pays interest that changes according to market interest rates.
Illustration: If benchmark rates rise, the bond’s interest payments also increase.
11. Fund Manager
A fund manager professionally manages investments on behalf of investors.
Illustration: Mutual fund managers decide which stocks and bonds to buy or sell.
12. Fund
A fund pools money from many investors to invest in a diversified portfolio.
Illustration: A mutual fund may own hundreds of different company shares.
13. Futures Contract
A futures contract is an agreement to buy or sell an asset at a predetermined price on a future date.
Illustration: Farmers use futures contracts to lock in crop prices before harvest.
14. Fundamental Analysis
Fundamental analysis evaluates a company’s financial health to determine its intrinsic value.
Illustration: Investors examine earnings, revenue, debt, and cash flow before buying shares.
15. Free Cash Flow (FCF)
Free cash flow is the cash remaining after a company pays operating expenses and capital expenditures.
Illustration: Companies with strong FCF often have more flexibility to pay dividends.
16. Foreign Exchange (Forex)
Forex is the global market where currencies are bought and sold.
Illustration: Investors trade the U.S. dollar against the euro in the forex market.
17. Foreign Direct Investment (FDI)
FDI occurs when a company or investor invests directly in businesses located in another country.
Illustration: A car manufacturer builds a new factory in another country.
18. Financial Leverage
Financial leverage means using borrowed money to increase potential investment returns.
Illustration: A property investor uses a mortgage to buy a larger property.
19. Forward Contract
A forward contract is a customized agreement to buy or sell an asset at a future date and price.
Illustration: An exporter locks in a currency exchange rate for a future payment.
20. Fiscal Policy
Fiscal policy refers to government decisions regarding taxation and public spending that affect the economy.
Illustration: Increased government infrastructure spending may stimulate economic growth.
21. Float
Float is the number of company shares available for public trading.
Illustration: Companies with a smaller float often experience larger price swings.
22. Full-Service Broker
A full-service broker provides investment advice, research, retirement planning, and trading services.
Illustration: Wealthy investors often use full-service brokerage firms.
23. Fiduciary
A fiduciary is legally required to act in the best interests of clients when providing financial advice.
Illustration: A financial advisor recommends investments that benefit the client rather than themselves.
24. Fund of Funds (FoF)
A Fund of Funds invests in multiple mutual funds instead of directly investing in securities.
Illustration: One FoF may invest in stock, bond, and international mutual funds.
25. Frontier Market
Frontier markets are smaller developing economies with high growth potential and higher investment risk than emerging markets.
Illustration: Investors may explore markets in Kenya or Bangladesh for long-term growth.
26. Financial Planning
Financial planning is the process of organizing income, savings, investments, and expenses to achieve financial goals.
Illustration: A family develops a plan for retirement, education, and emergency savings.
27. Forecast
A forecast is an estimate of future financial performance based on available information.
Illustration: Analysts forecast that company profits will grow by 12% next year.
28. Franchise Value
Franchise value represents the extra value a company earns because of its strong brand, reputation, or competitive advantage.
Illustration: A globally recognized brand can generate higher profits than competitors.
29. Financial Risk
Financial risk is the possibility of losing money because of poor investment decisions, debt, or market changes.
Illustration: Investing heavily in a volatile sector increases financial risk.
30. Follow-on Offering
A follow-on offering occurs when a publicly listed company issues additional shares after its initial public offering (IPO).
Illustration: A company raises extra capital by selling new shares to existing and new investors.