Investing glossary
The essential terms, explained without jargon.
54 terms · each in one line
54 terms
Topic
Letter
- Bear MarketA prolonged period of declining market prices, typically characterized by pessimism and significant asset devaluation.
- BenchmarkA standard or index against which the performance of an asset or investment fund can be measured.
- BondsLoans to governments or companies that pay you interest.
- Brokerage AccountA general account that holds your investments and lets money move in and out freely, under ordinary tax rules.
- Bull MarketA prolonged period of rising market prices, characterized by optimism and constant asset appreciation.
- Capital GainA profit from the sale of property or an investment.
- CashMoney you can reach quickly without much risk to its value.
- Cash FlowThe net amount of cash and cash-equivalents being transferred into and out of a business.
- CommoditiesBasic raw materials (e.g., gold, oil, wheat) standardized and traded on the global financial market.
- Compound InterestInterest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.
- CryptoA young, highly volatile category — only ever a very small, optional slice.
- Deposit GuaranteeA national scheme that protects bank deposits up to a set limit per person per bank if the bank fails.
- DiversificationA risk management strategy that mixes a wide variety of investments within a portfolio.
- DividendA portion of a company's net earnings distributed to its shareholders.
- Dollar-Cost AveragingInvesting a fixed amount at regular intervals regardless of price, which smooths the average entry price over time.
- Financial RegulatorThe official body that supervises financial firms and markets in a country; checking a firm is registered with it is a basic safety step.
- Fixed IncomeA type of investment in which real return rates or periodic income is received at regular intervals at reasonably predictable levels.
- InflationThe rate at which the general level of prices for goods and services is rising.
- Interest RateThe cost of borrowing money or the return on investment for lending money.
- Investment FundA supply of capital belonging to numerous investors used to collectively purchase securities.
- IPOThe process of offering shares of a private corporation to the public in a new stock issuance.
- P/E RatioThe ratio for valuing a company that measures its current share price relative to its per-share earnings.
- Ponzi SchemeA fraud that pays returns to earlier investors using money from new investors rather than real profit, and collapses when new money stops.
- PortfolioA collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents.
- RebalancingPeriodically restoring a portfolio to its target mix, because some asset classes grow faster than others and drift the weights.
- REITs & alternativesReal estate and other assets that don't always move in step with shares and bonds.
- Risk and RewardThe principle that higher potential returns generally come with greater risk — bigger swings and a greater chance of loss.
- Value InvestingAn investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value.
- Variable IncomeInvestments where the future return cannot be guaranteed or anticipated, such as stocks, being subject to market fluctuations.
- VolatilityA statistical measure of the dispersion of returns for a given security or market index.
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