📖 Glossary

500 money, math, and health terms explained in plain English — each with an example and a free calculator.

52 terms found in Investing Basics. Clear filters

A

Asset An asset is anything of economic value that a person or organization owns or controls and that is expected to… Asset Allocation Asset allocation is how an investment portfolio is divided among different asset classes, such as stocks…

B

Bear Market A bear market is a sustained period when stock prices are falling, commonly defined as a decline of 20% or… Bid-Ask Spread The bid-ask spread is the difference between the highest price a buyer is willing to pay for a security (the… Bitcoin Bitcoin is the first cryptocurrency, launched in 2009 by a person or group using the name Satoshi Nakamoto… Blockchain A blockchain is a shared digital ledger that records transactions in blocks linked together in chronological… Blue-Chip Stock A blue-chip stock is a share in a large, well-established, and financially stable company with a long track… Bond A bond is a loan made by an investor to a government, company, or other issuer, which promises to pay… Brokerage Account A brokerage account is an account with a licensed broker-dealer that allows the holder to buy and sell… Bull Market A bull market is a sustained period when stock prices are rising, commonly defined as a gain of 20% or more…

C

Call Option A call option is a contract that gives its buyer the right, but not the obligation, to buy an asset — such… Capital Gain A capital gain is the profit from selling an asset, such as a stock, bond, or property, for more than its… Compound Annual Growth Rate (CAGR) Compound annual growth rate (CAGR) is the constant yearly rate at which a value would have to grow to go from… Cryptocurrency Cryptocurrency is a digital asset that uses cryptography to secure transactions and typically runs on a…

D

Diversification Diversification is the practice of spreading money across different assets, industries, or regions so that… Dividend A dividend is a payment a company makes to its shareholders, usually in cash, from its profits. Dividends are… Dividend Reinvestment Plan (DRIP) A dividend reinvestment plan (DRIP) automatically uses cash dividends to buy additional shares, often… Dividend Yield Dividend yield is a company's annual dividend per share divided by its current share price, expressed as a… Dollar-Cost Averaging Dollar-cost averaging is the practice of investing a fixed amount at regular intervals, regardless of the…

E

Earnings Per Share (EPS) Earnings per share (EPS) is a company’s net profit divided by the number of its outstanding common shares… Exchange-Traded Fund (ETF) An exchange-traded fund (ETF) is a fund that holds a basket of assets, such as stocks, bonds, or commodities… Expense Ratio An expense ratio is the annual fee a mutual fund or ETF charges, expressed as a percentage of the assets…

F

Future Value Future value (FV) is the amount a sum of money will grow to at a given rate of return over a period. For a…

G

Growth Stock A growth stock is a share in a company expected to increase its revenue or earnings faster than the overall…

I

Index Fund An index fund is a mutual fund or ETF that aims to track the performance of a specific market index, such as… Inflation Inflation is the general rise in the prices of goods and services over time, which means a unit of currency…

L

Limit Order A limit order is an instruction to buy or sell a security only at a specified price or better. A buy limit… Liquidity Liquidity is how quickly and easily an asset can be converted into cash without significantly affecting its…

M

Market Capitalization Market capitalization, or market cap, is the total market value of a company’s outstanding shares… Market Order A market order is an instruction to buy or sell a security immediately at the best available current price… Municipal Bond A municipal bond, or muni, is a debt security issued by a US state, city, county, or other local government… Mutual Fund A mutual fund is an investment vehicle that pools money from many investors to buy a portfolio of securities…

O

Opportunity Cost Opportunity cost is the value of the next-best alternative given up when making a choice. Because money…

P

Present Value Present value (PV) is today's value of an amount of money to be received in the future, calculated by… Price-to-Earnings Ratio (P/E) The price-to-earnings ratio (P/E) compares a company's share price with its earnings per share. P/E = share… Purchasing Power Purchasing power is the quantity of goods and services that a unit of money can buy. When prices rise because… Put Option A put option is a contract that gives its buyer the right, but not the obligation, to sell an asset at a set…

R

Real Rate of Return The real rate of return is the return on an investment or savings after adjusting for inflation. It shows how… Rebalancing Rebalancing is the process of buying or selling assets to return a portfolio to its target asset allocation… REIT (Real Estate Investment Trust) A REIT (real estate investment trust) is a company that owns, operates, or finances income-producing real… Return on Investment (ROI) Return on investment (ROI) measures the gain or loss from an investment relative to its cost, expressed as a… Risk Tolerance Risk tolerance is the degree of variability in investment returns, including potential losses, that a person… Rule of 72 The rule of 72 is a quick way to estimate how many years it takes for a value to double at a given annual…

S

Short Selling Short selling is borrowing shares and selling them, with the plan of buying them back later at a lower price… Stock A stock is a security that represents partial ownership of a company. Each unit is called a share… Stock Split A stock split is when a company increases its number of shares by dividing each existing share into multiple… Stop-Loss Order A stop-loss order is an instruction to sell a security automatically once its price falls to a specified…

T

Time Value of Money The time value of money is the principle that a sum of money is worth more now than the same sum in the… Treasury Bond A Treasury bond is a long-term debt security issued by the US government, with a maturity of 20 or 30 years…

V

Value Stock A value stock is a share that appears to trade for less than its fundamentals suggest, often measured by a… Volatility Volatility is the degree to which an asset's price or return moves up and down over time. It is commonly…

Y

Yield to Maturity (YTM) Yield to maturity (YTM) is the total annual return an investor can expect from a bond if it is held until it…
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Definitions are for general educational purposes only and are not financial, tax, legal, or medical advice.