Asset Allocation
Asset allocation is how you split your money across asset classes like stocks, bonds, and cash.
Also known as: allocation mix, portfolio allocation
Read definitionBeginner Investing Glossary
Learn key finance terms in plain language. Each definition includes why it matters, a simple example, and a practical next step.
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34 terms
A
2 terms
Asset Class
An asset class is a group of investments with similar behavior, such as stocks, bonds, or cash.
Also known as: asset type
Read definitionB
3 terms
Bear Market
A bear market is a sustained period of falling prices and negative investor sentiment.
Also known as: down market, falling market
Read definitionBond
A bond is a loan you make to a government or company in exchange for interest payments.
Also known as: fixed income bond, debt security
Read definitionBull Market
A bull market is a long period when prices generally trend upward.
Also known as: up market, rising market
Read definitionC
2 terms
Capital Gain
A capital gain is the profit when you sell an asset for more than you paid.
Also known as: price gain, unrealized gain, realized gain
Read definitionCompound Interest
Compound interest means your returns are earned on both your original money and on past returns. Over long periods, this creates accelerating growth.
Also known as: compounding
Read definitionD
7 terms
Diversification
Diversification means spreading investments so one bad outcome does not sink your whole portfolio.
Also known as: diversified portfolio
Read definitionDividend
A dividend is a cash payment some companies or funds make to investors.
Also known as: cash dividend, distribution
Read definitionDividend Reinvestment Plan (DRIP)
A DRIP automatically uses your cash dividends to buy more shares of the same investment.
Also known as: drip, dividend reinvestment plan
Read definitionDividend Snowball
A dividend snowball happens when dividends are reinvested to buy more shares, which then pay more dividends in the future.
Also known as: drip-snowball
Read definitionDividend Yield
Dividend yield is annual dividends divided by the current price, shown as a percentage.
Also known as: yield, income yield
Read definitionDollar-Cost Averaging (DCA)
DCA means investing a fixed amount on a regular schedule (for example monthly), instead of trying to pick one perfect entry date.
Also known as: dollar-cost-averaging
Read definitionDrawdown
A drawdown is the drop from a portfolio’s previous high to a later low.
Also known as: portfolio drawdown, peak-to-trough decline
Read definitionE
2 terms
Exchange-Traded Fund (ETF)
An ETF is a basket of investments that trades on an exchange like a stock.
Also known as: etf, exchange traded fund, exchange-traded fund
Read definitionExpense Ratio
Expense ratio is the yearly percentage fee a fund charges to operate and manage the fund.
Also known as: fund expense ratio, annual fund fee
Read definitionF
1 term
FOMO
FOMO means “fear of missing out.” In investing, it is the pressure to buy quickly because other people seem to be making money.
Also known as: fear-of-missing-out
Read definitionI
2 terms
Index Fund
An index fund aims to match the performance of a market index instead of trying to beat it.
Also known as: passive index fund, index tracking fund
Read definitionInflation
Inflation is the general rise in prices over time, which reduces what your money can buy.
Also known as: rising prices, cost of living inflation
Read definitionL
3 terms
Limit Order
A limit order executes only at your chosen price or better.
Also known as: price limit order, limit buy, limit sell
Read definitionLiquidity
Liquidity is how quickly you can sell an asset for close to its current market price.
Also known as: liquid investment, easy to sell
Read definitionLump Sum Investing
Lump sum investing means investing a large amount at once instead of spreading it over time.
Also known as: lump sum, lump-sum investing, one-time investing
Read definitionM
3 terms
Management Expense Ratio (MER)
MER is the annual fee charged by a fund, shown as a percentage of your invested balance.
Also known as: mer, management expense ratio, expense ratio
Read definitionMarket Order
A market order buys or sells immediately at the best available current price.
Also known as: buy at market, sell at market
Read definitionMutual Fund
A mutual fund pools money from many investors and invests it according to a stated strategy.
Also known as: pooled fund, open-end fund
Read definitionO
1 term
Opportunity Cost
Opportunity cost is what you give up by choosing one option instead of another.
Also known as: cost of not choosing, missed alternative return
Read definitionP
2 terms
Panic Selling
Panic selling is dumping investments during market stress out of fear, not strategy.
Also known as: emotional selling, sell in panic
Read definitionPortfolio
A portfolio is the full collection of your investments, such as stocks, bonds, funds, and cash.
Also known as: investment portfolio
Read definitionR
3 terms
Real Return
Real return is your investment return after subtracting inflation.
Also known as: inflation-adjusted return, real rate of return
Read definitionRebalancing
Rebalancing means adjusting your portfolio back to your target asset allocation.
Also known as: portfolio rebalancing, rebalance
Read definitionRisk Tolerance
Risk tolerance is how much short-term loss and volatility you can handle without abandoning your plan.
Also known as: investor risk tolerance, risk appetite
Read definitionS
1 term
Stock
A stock is a share of ownership in a company.
Also known as: share, equity
Read definitionT
1 term
Time Horizon
Time horizon is how long your money can stay invested before you need to use it.
Also known as: investment horizon, holding period
Read definitionV
1 term
Volatility
Volatility is how much prices move up and down over time.
Also known as: price swings, market volatility
Read definition