Allocation
How capital is distributed across different assets or strategies.
Glossary
Plain-English financial terms.
Browse clear explanations for terms that commonly create confusion in markets and risk discussions.
90 terms shown
Alpha
Return above or below a benchmark after adjusting for risk.
Annual Percentage Rate
The yearly cost of borrowing or return on saving, including certain fees.
Arbitrage
Buying and selling the same asset in different markets to profit from price differences.
Ask Price
The lowest price a seller is willing to accept for an asset.
Asset
Anything with economic value that can be owned or controlled, such as cash, stocks, or property.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific date.
Bear Market
A prolonged market decline, often defined as a drop of 20 percent or more from highs.
Bid Price
The highest price a buyer is willing to pay for an asset.
Bond
A debt instrument where an investor lends money to an issuer in exchange for interest payments.
Budget
A plan for expected income and expenses over a period of time.
Bull Market
A sustained market uptrend with rising prices and positive sentiment.
Capital Gain
Profit made when an asset is sold for more than its purchase price.
Cash Flow
Movement of money in and out of a household, business, or investment.
CFD
Contract for Difference, a derivative where gains or losses come from price changes without owning the underlying asset.
Collateral
An asset pledged to secure a loan or credit exposure.
Commodity
A basic tradable good such as gold, oil, wheat, or natural gas.
Compound Interest
Interest earned on both principal and previously earned interest.
Correlation
A measure of how two assets move in relation to each other.
Credit Score
A numerical estimate of creditworthiness used by lenders.
Debt-to-Income Ratio
A metric comparing monthly debt obligations to monthly income.
Default
Failure to meet repayment obligations on debt.
Deflation
A broad decline in prices across an economy over time.
Derivative
A financial contract whose value is based on an underlying asset, rate, or index.
Diversifiable Risk
Risk specific to an asset or sector that can be reduced through diversification.
Diversification
Spreading capital across assets to reduce concentration risk.
Dividend
A payment from a company to shareholders, typically from profits.
Dollar-Cost Averaging
Investing fixed amounts at regular intervals to reduce timing risk.
Drawdown
The decline from a portfolio peak to a subsequent trough.
Drawup
The rise from a portfolio trough to a subsequent peak.
Earnings
A company's profit after expenses for a reporting period.
Emergency Fund
Accessible savings set aside for unexpected expenses.
Equity
Ownership value in a company or residual value after liabilities are deducted.
ETF
Exchange-Traded Fund, a basket of assets traded on an exchange like a stock.
Exchange Rate
The price of one currency relative to another.
Expense Ratio
Annual management cost of a fund as a percentage of assets.
Federal Funds Rate
A benchmark short-term interest rate used in US monetary policy.
Fiscal Policy
Government spending and taxation decisions used to influence the economy.
Fixed Income
Asset class providing regular interest payments, such as bonds.
Floating Rate
An interest rate that changes based on a benchmark.
FOMO
Fear of Missing Out, an emotional bias that can lead to rushed decisions.
Forex
Foreign exchange market where currencies are bought and sold.
Fundamental Analysis
Evaluating assets using economic, financial, and qualitative factors.
GDP
Gross Domestic Product, the total value of goods and services produced in an economy.
Growth Investing
Investing approach focused on companies expected to grow faster than average.
Hedging
Using positions to offset potential losses in another investment.
Inflation
A sustained increase in the general price level over time.
Interest Rate
The cost of borrowing or reward for lending money.
Leverage
Using borrowed capital to increase position size and potential returns or losses.
Liability
A financial obligation such as debt, payables, or accrued expenses.
Liquidity
How quickly an asset can be converted to cash without major price impact.
Lot Size
Standardized trade quantity used in some markets, especially forex.
Margin
Capital required to open and maintain leveraged positions.
Market Capitalization
Company value calculated as share price multiplied by shares outstanding.
Monetary Policy
Central bank actions that influence money supply and interest rates.
Mutual Fund
A pooled investment vehicle managed by professionals.
Net Worth
Total assets minus total liabilities.
Opportunity Cost
The value of the best alternative forgone when making a decision.
Option
A contract giving the right, but not the obligation, to buy or sell at a set price.
Overbought
A condition where price may have risen too far too quickly relative to indicators.
Oversold
A condition where price may have fallen too far too quickly relative to indicators.
PIP
A standard unit of price movement in currency pairs.
Portfolio
A collection of investments held by an individual or institution.
Position Sizing
Determining trade or investment size based on risk parameters.
Price Action
Analysis based on raw market price movement without heavy indicator dependency.
Principal
Original amount of money invested, borrowed, or lent.
Profit and Loss
The net financial result of gains and losses over a period.
Quantitative Easing
Central bank asset purchases to inject liquidity into the financial system.
Quantitative Tightening
Central bank reduction of balance sheet assets to withdraw liquidity.
Rebalancing
Adjusting portfolio weights back to target allocations.
Resistance
A price level where upward movement may face selling pressure.
Return on Investment
A performance metric comparing gain or loss relative to invested capital.
Risk Profile
An assessment of risk tolerance, objectives, and financial capacity.
Risk-Reward Ratio
Comparison of potential loss to potential gain in a position.
Savings Rate
Percentage of income saved rather than spent.
Sharpe Ratio
Risk-adjusted return metric using excess return divided by volatility.
Slippage
Difference between expected execution price and actual executed price.
Spread
Difference between bid and ask prices.
Stop Loss
A predefined level to exit a position and limit downside risk.
Support
A price level where downward movement may find buying interest.
Swap
A contract to exchange cash flows, rates, or other financial variables.
Systematic Risk
Market-wide risk that cannot be eliminated through diversification.
Technical Analysis
Evaluating markets using charts, patterns, and statistical indicators.
Time Horizon
Planned length of time an investment or strategy is expected to be held.
Trailing Stop
A stop level that moves with favorable price action to lock in gains.
Trend
General direction of price movement over a period.
Value Investing
Approach focused on assets trading below estimated intrinsic value.
Volatility
Degree of price fluctuation over time.
Yield
Income return from an investment, often shown as a percentage.
Yield Curve
Graph showing interest rates across different bond maturities.