Investment Terms

A Giffen good is a low-income, non-luxury product that defies standard economic and consumer demand theory. Demand for Giffen goods rises when the price rises and falls when the price falls. In econometrics, this results in an upward-sloping demand curve, contrary to the fundamental laws of demand which create a downward-sloping demand curve.
The term "Giffen goods" was coined in the late 1800s, named after noted Scottish economist, statistician, and journalist Sir Robert Giffen.
The concept of Giffen goods focuses on low-income, non-luxury products that have very few close substitutes.
Giffen goods can be compared to Veblen goods which similarly defy standard economic and consumer demand theory but focus on luxury goods.

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The Chartered Financial Analyst designation is regarded by most to be the key certification for investment professionals, especially in the areas of research and portfolio management. It is, however, just one of many designations used today. This can cause some confusion, as investors and professionals alike puzzle out what each designation means and which is best.
Professionals with the designation stand out to employers and may receive higher salaries than those without it.
Candidates are required to pass three levels of exams to become chaterholders.
CFA charter holders often work at institutional investment firms, broker-dealers, insurance companies, pension funds, banks, and universities.


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An endowment is a donation of money or property to a nonprofit organization, which uses the resulting investment income for a specific purpose. An endowment can also refer to the total of a nonprofit institution’s investable assets, also known as its “principal” or “corpus,” which is meant to be used for operations or programs that are consistent with the wishes of the donor(s). Most endowments are designed to keep the principal amount intact while using the investment income for charitable efforts.
Endowments are typically organized as a trust, private foundation, or public charity. Many endowments are administered by educational institutions, such as colleges and universities. Others are overseen by cultural institutions, such as art museums, libraries, religious organizations, private secondary schools, and service-oriented organizations, such as retirement homes or hospitals

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Alpha is a term used in investing to describe an investment strategy's ability to beat the market, or its "edge." Alpha is thus also often referred to as “excess return” or the “abnormal rate of return” about a benchmark, when adjusted for risk. Alpha is often used in conjunction with beta , which measures the broad market's overall volatility or risk, known as systematic market risk.
Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return or other benchmark over some period. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.

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Berkshire Hathaway is a holding company for a multitude of businesses, including GEICO and Fruit of the Loom. It's run by chair and CEO Warren Buffett.
Berkshire Hathaway is headquartered in Omaha, Nebraska. Originally, it was a company comprised of a group of textile milling plants. Buffett assumed control of the struggling New England company in 1965.
Since that time, Berkshire has grown to be one of the largest companies in the world, based on market capitalization. Today, it is one of the world's largest companies by market capitalization.
As of May 2023, Berkshire Hathaway had a market capitalization of over $715 billion, making it one of the largest publicly traded companies worldwide.


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Junk bonds are bonds that carry a higher risk of default than most bonds issued by corporations and governments. A bond is a debt or promises to pay investors interest payments along with the return of invested principal in exchange for buying the bond. Junk bonds represent bonds issued by companies that are financially struggling and have a high risk of defaulting or not paying their interest payments or repaying the principal to investors.
Junk bonds are also called high-yield bonds since the higher yield is needed to help offset any risk of default.
A high-yield, or "junk" bond is very similar to regular corporate bonds. Both represent debt issued by a firm with the promise to pay interest and to return the principal at maturity. Junk bonds differ because of their issuers' poorer credit quality

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Creative destruction is the dismantling of long-standing practices in order to make way for innovation and is seen as a driving force of capitalism.
Creative destruction is most often used to describe disruptive technologies such as the railroads or, in our own time, the internet.
The term was coined in the early 1940s by economist Joseph Schumpeter, who observed real-life examples of creative destruction, such as Henry Ford’s assembly line.
Creative destruction can be seen across many different industries such as technology, retail, and finance.
Creative destruction often has unintended consequences such as temporary losses of jobs, environmental issues, or inequity.

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Business cycles are a type of fluctuation found in the aggregate economic activity of a nation -- a cycle that consists of expansions occurring at about the same time in many economic activities, followed by similarly general contractions (recessions).
This sequence of changes is recurrent but not periodic.
Business cycles are comprised of concerted cyclical upswings and downswings in the broad measures of economic activity—output, employment, income, and sales.
The alternating phases of the business cycle are expansions and contractions (also called recessions).
Business cycles are marked by the alternation of the phases of expansion and contraction in aggregate economic activity, and the movement among economic variables in each phase of the cycle.
Aggregate economic activity is represented by not only real GDP but also the aggregate measures of industrial production, employment, income, and sales, which are the key coincident economic indicators used for the official determination of U.S. business cycle peak and trough dates.

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An amalgamation is a combination of two or more companies into a new entity. Amalgamation is distinct from a merger because neither company involved survives as a legal entity. Instead, a completely new entity is formed to house the combined assets and liabilities of both companies.
The term amalgamation has generally fallen out of popular use in the United States, being replaced with the terms merger or consolidation even when a new entity is formed. But it is still commonly used in countries such as India.
Amalgamation is a way to acquire cash resources, eliminate competition, save on taxes, or influence the economies of large-scale operations. Amalgamation may also increase shareholder value, reduce risk by diversification, improve managerial effectiveness, and help achieve company growth and financial gain.
On the other hand, if too much competition is cut out, amalgamation may lead to a monopoly, which can be troublesome for consumers and the marketplace.

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Adverse selection refers generally to a situation in which sellers have information that buyers do not have, or vice versa, about some aspect of product quality. In other words, it is a case where asymmetric information is exploited.
Asymmetric information, also called information failure, happens when one party to a transaction has greater material knowledge than the other party.
Typically, the more knowledgeable party is the seller. Symmetric information is when both parties have equal knowledge.
In the case of insurance, adverse selection is the tendency of those in dangerous jobs or high-risk lifestyles to purchase products like life insurance. In these cases, it is the buyer who actually has more knowledge.
To fight adverse selection, insurance companies reduce exposure to large claims by limiting coverage or raising premiums.

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