Glossary of Common Investing Terms
Account Statement: Record of financial transactions in an account.
Active Management: Investment strategy involving frequent trades.
Aggressive Growth Fund: A fund aiming for rapid capital appreciation.
Alpha: Excess investment return over a benchmark.
Allocation: Distribution of investments across asset classes.
Alternative Investment: Non-traditional assets like real estate or commodities.
Annual Report: Yearly statement of company performance.
Annual Return: Profit or loss on investment annually.
Annuity: Contract offering a series of payments.
Arbitrage: Profiting from price differences in markets.
Ask Price: Price a seller is willing to accept.
Asset: Anything of value owned.
Asset Allocation: Investing across various asset categories.
Asset-Backed Security: Investment backed by pooled assets.
Asset Class: Group of similar investments, e.g., stocks.
Average Maturity: Mean maturity date of bond holdings.
Back-End Load: Fee paid on mutual fund share redemption.
Balance Sheet: Snapshot of company assets, liabilities, and equity.
Bear Market: Period of falling prices.
Benchmark: Standard to measure performance.
Beta: Volatility measure versus the market.
Bid Price: Price a buyer offers for a security.
Blue-Chip Stock: Share in well-established firm.
Bond: Debt security with periodic interest payments.
Book Value: Net asset value per share of a company.
Broker: Entity executing buy/sell orders for investors.
Bull Market: Market with rising prices.
Capital Gain: Profit from selling an asset.
Capital Loss: Loss from asset sale below cost.
Capital Market: Marketplace for stocks and bonds.
Capital Preservation: Strategy protecting principal investment.
Cash Equivalent: Highly liquid, low-risk investment.
Closed-End Fund: Fund issuing a fixed number of shares.
Collateral: Asset pledged against a loan.
Commercial Paper: Short-term corporate debt instrument.
Compound Growth: Reinvestment of earnings for additional growth.
Convertible Security: Security convertible into another form (e.g., bonds to shares).
Cost Basis: Amount paid to buy an investment.
Coupon: Interest paid by a bond.
Credit Quality: Rating of a bond issuer’s reliability.
Credit Risk: Risk a borrower won’t repay.
Current Yield: Annual income divided by current price.
Custodian: Institution holding securities for safekeeping.
Cyclical Stocks: Stocks affected by economic cycles.
Day Trading: Buying/selling securities within a day.
Default: Failure to repay a loan or bond.
Derivative: Security whose value is based on another asset.
Diversification: Spreading investments to reduce risk.
Dividend: Earnings distribution to shareholders.
Dollar-Cost Averaging: Investing regular amounts over time.
Dow Jones Industrial Average: 30 significant U.S. company stock index.
Duration: Sensitivity of bond price to interest-rate changes.
Earnings Per Share (EPS): Profit divided by outstanding shares.
Emerging Markets: Developing country investment arenas.
Equity: Ownership interest in a corporation.
ETF (Exchange-Traded Fund): Fund traded on an exchange.
Expense Ratio: Annual fee on fund assets.
Fiduciary: Entity legally obligated to act in investor’s interest.
Fixed Income: Investments paying fixed returns, e.g., bonds.
Front-End Load: Fund fee paid upfront on purchase.
Fund: Pooled investment vehicle holding various securities.
Fundamental Analysis: Evaluation using company financials and economics.
Futures: Contract to buy or sell asset later.
Growth Investing: Investing in companies expected to grow earnings.
Growth Stock: Stock in rapidly expanding business.
Index: Statistical measure of market segment performance.
Index Fund: Fund designed to track a market index.
Inflation: General rise in prices over time.
Initial Public Offering (IPO): First sale of shares to the public.
Interest Rate: Cost of borrowing expressed as a percentage.
IRA (Individual Retirement Account): Retirement saving account, tax-advantaged.
Large-Cap Stock: Company with large market valuation.
Leverage: Use of borrowed funds to increase returns.
Liquidity: Ability to quickly buy or sell an asset.
Load: Sales charge on mutual fund transactions.
Long Position: Owning securities hoping for price rise.
Management Fee: Fee paid for professional fund management.
Margin: Borrowed money for investment purchase.
Market Capitalization: Total value of company’s shares.
Market Risk: Potential for investment loss from market moves.
Maturity: Date bond principal is repaid.
Mid-Cap Stock: Firm with medium market capitalization.
Money Market Fund: Fund investing in short-term assets.
Morningstar Ratings: Fund rating system for performance.
Mutual Fund: Investment pool managed by pros.
NAV (Net Asset Value): Per-share fund value.
Options: Contract granting buy/sell rights at set price.
Passive Management: Hands-off strategy tracking the index.
P/E Ratio: Stock price relative to earnings.
Portfolio: Collection of investments owned.
Portfolio Manager: Person/firm responsible for asset selection.
Preferred Stock: Stock with fixed dividends, priority over common shares.
Premium: Price above face or market value.
Principal: Original sum invested or loaned.
Prospectus: Document detailing investment specifics.
Put Option: Right to sell asset at set price.
Real Estate Investment Trust (REIT): Company owning income-producing real estate.
Rebalancing: Adjusting portfolio mix to maintain targets.
Redemption: Selling back fund shares.
Return on Investment (ROI): Measure of investment performance.
Risk Tolerance: Willingness/ability to withstand losses.
Robo-Advisor: Automated financial/portfolio advice service.
Roth IRA: Retirement account with after-tax contributions.
Sector: Group of stocks in similar businesses.
Sharpe Ratio: Risk-adjusted return measure.
Short Selling: Selling borrowed securities, hoping to buy back cheaper when prices fall.
Small-Cap Stock: Company with small market value.
Spread: Difference between buying and selling price.
Stop-Loss Order: Automatic sell order at set price.
Stock: Share in corporation ownership.
Ticker Symbol: Identifier for traded securities.
Total Return: Sum of all investment gains.
Treasury Bond: Long-term U.S. government debt.
Volatility: Degree of price fluctuation.
Yield: Investment return expressed as a percentage.