Investing glossary

A–D

• Asset allocation — the mix of stocks, bonds, and other asset classes in your portfolio.
• Bear market — a decline of 20% or more in a broad market index from its recent peak.
• Bond — a loan you make to a government or company, in exchange for regular interest payments and return of principal at maturity.
• Bull market — a sustained rise in market prices, typically defined as 20%+ from a recent low.
• Capital gain — profit from selling an investment for more than you paid. Short-term (held ≤1 year) and long-term (held >1 year) are taxed differently.
• Diversification — spreading investments across many assets to reduce the impact of any single one performing poorly.
• Dividend — a cash payment from a company to shareholders, typically paid quarterly.
• Dollar-cost averaging (DCA) — investing a fixed amount at regular intervals regardless of price.

E–I

• ETF (Exchange-Traded Fund) — a basket of securities that trades on an exchange like a stock. Usually tracks an index.
• Expense ratio — the annual fee a fund charges, expressed as a percentage of assets under management.
• FIFO (First In, First Out) — an accounting method for determining which shares you sell first for tax purposes.
• Fundamental analysis — evaluating a stock based on the company's financials, earnings, and business model.
• Index — a benchmark that tracks a group of securities (e.g., S&P 500 tracks 500 large US companies).
• Index fund — a fund that simply holds all (or a representative sample of) the securities in an index. Low-cost and passive.

M–R

• Market cap (market capitalization) — the total value of all a company's shares. Share price × shares outstanding.
• Mutual fund — a pooled investment vehicle that buys securities on behalf of shareholders. Priced once daily.
• P/E ratio (price-to-earnings) — a stock's price divided by its earnings per share. A rough measure of how expensive a stock is.
• Portfolio — all of your investments considered together as one collection.
• Rebalancing — adjusting your portfolio back to your target asset allocation, usually by selling winners and buying underperformers.
• REIT (Real Estate Investment Trust) — a company that owns income-producing real estate and distributes 90%+ of profits as dividends.

S–Z

• Stock — a share of ownership in a company.
• Tax-loss harvesting — selling investments at a loss to offset capital gains and reduce taxes.
• Total return — the full return on an investment including price appreciation AND dividends/interest.
• Volatility — the degree to which an investment's price fluctuates. Higher volatility = more up-and-down movement.
• Wash-sale rule — IRS rule that disallows a capital loss if you repurchase a substantially identical security within 30 days.
• Yield — the income return on an investment, usually expressed as a percentage. For bonds, it's interest/price. For stocks, it's dividend/price.