What are we TALKING about? (glossary)
We know finance can seem like smoke and mirrors. We want to change it, to make it accessible to everyone. Here is a glossary we hope helps. Is there an important term we’ve left out? Unclear language? Let us know! info@justfutures.com
401(k) - Workplace retirement plan that employers can offer to workers. Allows pre-tax dollars to be invested and taxed upon withdrawal, or for post-tax dollars to be invested and then withdrawn tax-free. Employers often contribute to 401(k)s in addition to employee contributions. Generally, account holders are penalized if they withdraw funds before they reach age 59 ½.
403(b) - Workplace retirement plan that offers similar benefits to a 401(k) but is only available to nonprofit employers, public education systems, and healthcare cooperatives. Compared to a 401(k), there are small differences in how a 403(b) is set up and regulated.
Accredited Investor - Individual with an annual income of $200k ($300k with spouse or partner) or a net worth of $1m or above, excluding primary residence. Or an institution with at least $5m in assets. Alternatively, there are professional criteria that designate an individual, e.g., holding a qualifying license or title. Some investment opportunities require accreditation. Therefore, accredited investors have more opportunities to earn higher returns and diversify their portfolios.
Asset - Something that is owned and considered to hold economic value.
Asset Manager - Person or institution in the practice of buying, selling, and monitoring securities and/or other investment vehicles to generate a return for clients. BlackRock, Vanguard, UBS, and Fidelity are all asset managers.
BIPOC - Black, Indigenous, and people of color.
Bond - Type of security that allows governments and corporations to borrow money from investors for a specified duration and interest rate.
Community Development Financial Institution (CDFI) - Financial institution that services, builds wealth, and creates economic opportunity for low-income communities. Credit unions, loan funds, and other types of institutions can be certified as CDFIs.
Community Land Trust (CLT) - Nonprofit that holds land in trust for a social purpose. Typically, residents of a CLT own their homes but the CLT owns the land on which the house sits.
Community Loan Fund - Financial institution that provides loans to projects with a social mission serving a specific community.
Debt - An amount owed. Bonds and notes are forms of debt.
Defined Contribution Plan - A category of workplace retirement plans that employers can offer to workers. The defining feature is that unlike pensions (defined benefit plans), which guarantee a particular payout and are funded strictly by employers, defined contribution plans involve a portion of compensation contributed by an employee and, in some cases, additional dollars from an employer. 401(k)s and 403(b)s are defined contribution plans.
Equity - Type of security that represents a proportionate ownership in an issuing corporation.
ESG - Investment strategy that considers the environmental, social, and governance impacts and/or practices of companies. This is not a regulated construct and there are no universal standards for how to measure ESG factors.
Extractive - Exploitative relationship (between people or between people and the environment) in which wealth, value, or resources are taken from one party for the benefit of another. Inherently unsustainable, meaning whatever is being extracted is not allowed to replenish.
Fiduciary - As a noun, a fiduciary is a trusted entity. In the investment industry, a fiduciary is a person or institution that has a legal duty to manage its clients’ money wholly in their clients’ best interest. As an adjective, fiduciary describes the trusted relationship between a client or beneficiary and the entity they entrust to manage their assets.
Fund - Pooled capital that is used to invest in a number of different projects or products. Mutual funds pool money from multiple individuals to invest in stocks, bonds, and other investment products in a single vehicle.
Greenwashing - Misrepresenting the environmental impacts of a project, company, or product.
Impact Washing - Misrepresenting the positive social impact of a project, company, or product.
Individual Retirement Account (IRA) - Retirement account that individuals can establish for themselves. Allows pre-tax dollars to be invested and taxed upon withdrawal, or for post-tax dollars to be invested and then withdrawn tax-free. Generally, account holders are penalized if they withdraw funds before they reach age 59 ½.
Investment Chain - Various actors and relationships connecting people with money to invest with people looking for investment. Most financial transactions can be situated somewhere on an investment chain.
Just Transition - “Shift from an extractive to a regenerative economy… The transition itself must be just and equitable, redressing past harms and creating new relationships of power for the future through reparations.”
Liquidity - The speed and ease with which an actor can sell or trade an asset without the asset losing significant value. Cash is an example of a liquid asset while real estate, generally, is an example of an illiquid asset.
Note - Financial instrument that allows governments and corporations to borrow money from investors for a specified duration and interest rate. Typically shorter term than a bond. May not always be considered a security.
POC - People of color.
Private Equity - Type of investment that gives ownership or interest in companies that are not publicly traded or listed.
Proprietary Fund - A fund that a financial services provider creates, manages, and distributes. For example, let’s say, hypothetically, you have a 401(k) or an individual retirement account (IRA) with a firm called Company X. If they offer a fund with “Company X” in the name, it is probably proprietary to the firm. But sometimes a proprietary fund has a name that is different from the company that runs it.
Proxy Voting - Process where shareholders of an enterprise can vote on various topics that affect that enterprise, for example, who gets to be a board member and how much board members get paid.
Regenerative - Relationship (between people or between people and the environment) in which more is created than is extracted. Returned to an original or improved state. Fosters growth.
Restorative - Relationship (between people or between people and the environment) in which there is balance between what is taken and what is given. Sustainable, in that what is taken has time to replenish fully.
Security - Financial instrument, representing value, that can be traded or exchanged. Stocks, bonds, and mutual funds are securities.
Share - Piece of equity of a company.
Solidarity Economy - Collection of alternatives to capitalism, “where communities govern themselves through participatory democracy, cooperative and public ownership, and a culture of solidarity and respect for the earth.”
Stock - Piece of equity of a company.
Venture Capital (VC) - Investment that focuses on funding new or emerging projects or industries. Venture capital is a form of private equity.
Worker Cooperative - A company that is collectively owned and democratically governed by its workers.
This glossary comes from our report, Building a Social Justice Investment Chain.
Resources on this page:
Anand Jahi, Building a Social Justice Investment Chain. 2022.
Climate Justice Alliance, Just Transition: A Framework for Change. 2022.
New Economy Coalition, What is the Solidarity Economy? 2022.
If you don’t have retirement savings or your employer contracts with a different retirement plan administrator, we’d love to show you the advantages we at Just Futures can offer! You can reach us at info@justfutures.com.