Investing
Putting money to work over time.
Investing is how money grows faster than it can sitting still. These terms demystify stocks, funds, and the ideas behind building wealth — the language of the market, in plain English.
All Investing terms(157)
- Actively Managed FundA fund where managers pick investments trying to beat the market, usually charging higher fees than index funds.
- AlphaThe extra return an investment earns above or below what its risk level and the market would predict.
- Annual ReportA yearly document in which a company shares its finances, results, and outlook with shareholders.
- Annualized ReturnAn investment's average yearly return expressed as a single rate, making different time periods comparable.
- Asset AllocationHow you split your money among stocks, bonds, and cash — the biggest driver of risk and growth.
- Asset ClassA group of investments that behave similarly, such as stocks, bonds, cash, or real estate.
- Asset LocationDeciding which accounts to hold each investment in to reduce taxes across your taxable and retirement accounts.
- Assets Under ManagementThe total value of investments a fund or advisor manages on behalf of its clients.
- Back-End LoadA sales fee charged when you sell shares of certain mutual funds, sometimes shrinking the longer you hold.
- Balance SheetA financial statement showing what a company owns, what it owes, and its net worth at a point in time.
- Bear MarketA period when investment prices fall 20 percent or more from recent highs and confidence tends to be low.
- BenchmarkA standard index used to compare how well your investments or a fund are performing.
- BetaA measure of how much an investment tends to move compared with the overall market.
- Bid-Ask SpreadThe gap between the highest price a buyer will pay and the lowest a seller will accept for an investment.
- Blue-Chip StockShares of large, well-established companies with a long track record of stable performance and reliability.
- BondA loan you make to a government or company that pays you interest and returns your money on a set date.
- Bond LadderA set of bonds with staggered maturity dates so a portion comes due at regular intervals for steady access to cash.
- BrokerA firm or person that carries out your orders to buy and sell investments, often for a fee or commission.
- Brokerage AccountAn account you open with an investment firm to buy and sell stocks, bonds, funds, and other investments.
- Bull MarketA stretch when investment prices are rising over time and investor confidence tends to be high.
- Buy and HoldA strategy of purchasing investments and keeping them for years, riding out short-term ups and downs.
- CAGR (Compound Annual Growth Rate)The steady yearly rate at which an investment would have grown to its final value over a period.
- Call OptionA contract giving you the right to buy an investment at a set price before it expires.
- Capital GainThe profit you make when you sell an investment for more than you paid for it.
- Capital LossThe loss you take when you sell an investment for less than you paid for it.
- Capital PreservationAn approach focused on protecting the money you have rather than chasing high returns.
- Cash AccountA brokerage account where you pay in full for investments and cannot borrow to trade.
- Cash EquivalentA safe, short-term investment that can be converted to cash quickly, such as a money market fund or Treasury bill.
- CD (Certificate of Deposit)A bank product where you lock up money for a set term in exchange for a fixed interest rate.
- Closed-End FundA fund with a fixed number of shares that trades on an exchange and can sell above or below its asset value.
- CommissionA fee a broker charges for buying or selling an investment on your behalf.
- Compound InterestInterest that earns interest — the engine behind long-term growth.
- CompoundingWhen your investment earnings themselves start earning returns, causing your money to grow faster over time.
- Concentration RiskThe danger of having too much of your money in one investment, sector, or type of asset.
- Corporate BondA loan you make to a company that pays interest and generally offers higher yields but more risk than government bonds.
- CorrelationA measure of how closely two investments move together, which helps you build a diversified mix.
- Cost BasisThe original amount you paid for an investment, used to figure out your taxable gain or loss when you sell.
- Coupon RateThe fixed annual interest a bond pays, shown as a percentage of its face value.
- Credit RatingA grade from rating agencies that signals how likely a bond issuer is to repay its debt.
- Current YieldA bond's annual interest payment divided by its current market price, showing income relative to today's cost.
- Day OrderA buy or sell instruction that expires at the end of the trading day if it hasn't filled.
- Default RiskThe chance that a bond issuer fails to make interest payments or repay the loan as promised.
- DiversificationSpreading your money across many different investments so a drop in any single one does less damage.
- DividendA portion of a company's profits paid out to shareholders, usually as cash on a regular schedule.
- Dividend AristocratA company that has raised its dividend every year for at least 25 years, prized for consistency.
- Dividend ReinvestmentAutomatically using the dividends you receive to buy more shares instead of taking the cash.
- Dividend StockShares of a company that regularly pays out part of its profits, often favored by income-focused investors.
- Dividend YieldA stock's yearly dividend divided by its share price, showing how much income you get relative to price.
- Dollar-Cost AveragingInvesting a fixed amount at regular intervals so you buy more shares when prices are low and fewer when high.
- Dow Jones Industrial AverageAn index tracking 30 large, well-known U.S. companies, often quoted in the news as a market gauge.
- DRIP (Dividend Reinvestment Plan)A program that automatically reinvests your dividends into more shares, often without trading fees.
- DurationA measure of how sensitive a bond's price is to changes in interest rates, shown in years.
- Earnings Per ShareA company's profit divided by its number of shares, showing how much it earns for each share owned.
- EquityOwnership in a company, most often held as shares of stock that represent a claim on its assets and profits.
- ETF (Exchange-Traded Fund)A basket of investments that trades like a single stock, letting you own many holdings at once with one purchase.
- Ex-Dividend DateThe cutoff day for owning a stock to receive its next dividend; buyers after this date miss that payment.
- Expense DragThe way ongoing fees quietly reduce your long-term returns as they compound against you over time.
- Expense RatioThe yearly fee a fund charges, shown as a percentage of your investment, that covers its operating costs.
- Expiration DateThe deadline by which an option contract must be used or it becomes worthless.
- Face ValueThe amount a bond issuer promises to repay when the bond matures, also called par value.
- Fractional SharesPortions of a single share, letting you invest a small dollar amount in stocks with high prices.
- Front-End LoadA sales fee charged upfront when you first buy shares of certain mutual funds.
- Fundamental AnalysisStudying a company's finances, industry, and management to judge whether its stock is fairly priced.
- Glide PathThe preset schedule a target-date fund follows as it shifts from stocks toward bonds over time.
- Government BondA loan to a national government, generally seen as low risk because it is backed by the government's ability to tax.
- Growth StockShares of a company expected to grow faster than average, usually reinvesting profits instead of paying dividends.
- Holding PeriodHow long you own an investment before selling, which determines whether gains are taxed as short or long term.
- Index FundA fund that owns a broad slice of the market at low cost — the backbone of most investing.
- Index InvestingA strategy of buying funds that track a whole market index rather than trying to pick individual winners.
- Interest Rate RiskThe risk that rising interest rates push down the value of bonds you already own.
- Investment GradeA quality tier for bonds from issuers considered financially strong and likely to repay their debt.
- IPO (Initial Public Offering)The first time a private company sells shares to the public and begins trading on an exchange.
- Junk BondA bond from a lower-rated issuer that pays higher interest to make up for a greater chance of default.
- Large-CapA company with a large total market value, typically established and less volatile than smaller firms.
- LeverageUsing borrowed money to increase the size of an investment, raising both potential returns and potential losses.
- Limit OrderAn instruction to buy or sell only at a specific price or better, giving you control over the price you get.
- LiquidityHow quickly and easily you can turn an investment into cash without moving its price much.
- Load FundA mutual fund that charges a sales fee when you buy or sell, reducing the amount that goes to work for you.
- Long-Term Capital GainProfit on an investment held longer than a year, usually taxed at lower rates than short-term gains.
- Lump-Sum InvestingPutting a large amount of money into the market all at once rather than spreading it out over time.
- Management FeeThe charge a fund or advisor collects for managing your investments, often a yearly percentage of your balance.
- Margin AccountA brokerage account that lets you borrow money to invest, which can boost gains but also magnify losses.
- Margin CallA demand from your broker to add money or sell holdings when borrowed-investment losses grow too large.
- Market CapitalizationThe total value of a company's shares, found by multiplying the share price by the number of shares outstanding.
- Market CorrectionA drop of about 10 percent or more from a recent market high, often shorter and milder than a bear market.
- Market CycleThe recurring pattern of markets rising and falling over time through periods of growth and decline.
- Market OrderAn instruction to buy or sell an investment right away at the best price currently available.
- Market TimingTrying to buy and sell based on predicting market moves, a strategy that is difficult to get right consistently.
- Mid-CapA company with a medium market value, often balancing the growth potential and stability of larger and smaller firms.
- Money Market FundA low-risk fund that invests in short-term, high-quality debt and aims to keep a stable share price.
- Moving AverageA line that smooths out an investment's price over a set period to reveal its underlying trend.
- Municipal BondA loan to a state or local government whose interest is often free from federal income tax.
- Mutual FundA pooled investment where many people's money is combined and managed together to buy a mix of stocks or bonds.
- NasdaqA major U.S. stock exchange and index known for listing many technology and growth-focused companies.
- NAV (Net Asset Value)The per-share value of a fund, calculated by dividing its total holdings' value by the number of shares.
- No-Load FundA mutual fund that does not charge a sales commission when you buy or sell shares.
- OptionsContracts that give you the right, but not the obligation, to buy or sell an investment at a set price by a deadline.
- Payout RatioThe share of a company's earnings paid out as dividends, hinting at how sustainable those payments are.
- Penny StockA very low-priced stock from a small company that tends to be highly volatile and risky.
- PortfolioThe full collection of investments you own, such as stocks, bonds, and funds held across your accounts.
- Premium and DiscountWhen an investment trades above or below its underlying value, common with funds and bonds.
- Price-to-Earnings RatioA stock's price divided by its earnings per share, used to gauge whether it looks expensive or cheap.
- ProspectusA required document that describes a fund or investment's goals, costs, risks, and holdings before you buy.
- Proxy VoteA shareholder's vote on company matters, cast by mail or online instead of in person.
- PullbackA short, modest drop in an investment's price during an otherwise rising trend.
- Put OptionA contract giving you the right to sell an investment at a set price before it expires.
- Quarterly EarningsA company's profit report released every three months, closely watched for signs of its financial health.
- QuoteThe current price and related trading details for an investment at a given moment.
- RallyA stretch when investment prices rise strongly over a short period of time.
- RebalancingPeriodically adjusting your investments back to your target mix after market moves push them out of balance.
- RecessionA broad slowdown in the economy that often weighs on company profits and stock prices.
- Record DateThe day a company checks its books to see who owns shares and is entitled to the upcoming dividend.
- Reinvestment RiskThe chance that when a bond or CD matures, you can only reinvest the proceeds at a lower interest rate.
- REIT (Real Estate Investment Trust)A company that owns income-producing real estate and lets you invest in property without buying buildings yourself.
- Risk ToleranceHow much investment ups and downs you can handle emotionally and financially without changing your plan.
- Risk-Adjusted ReturnA way of measuring investment gains that accounts for how much risk was taken to achieve them.
- Robo-AdvisorAn online service that builds and manages a diversified portfolio for you automatically using software.
- Russell 2000An index tracking about 2,000 smaller U.S. companies, used as a benchmark for small-company stocks.
- S&P 500An index tracking about 500 of the largest U.S. companies, widely used as a snapshot of the overall market.
- SEC (Securities and Exchange Commission)The U.S. agency that regulates securities markets and works to protect investors from fraud.
- SectorA group of companies in the same part of the economy, such as technology, healthcare, or energy.
- Sector FundA fund that concentrates on one part of the economy, offering focused exposure with less diversification.
- Settlement PeriodThe short window after a trade during which money and shares officially change hands.
- ShareA single unit of ownership in a company; owning shares means you own a piece of that business.
- ShareholderAnyone who owns shares in a company and holds a stake in its ownership, profits, and voting decisions.
- Sharpe RatioA number comparing an investment's return to its risk, helping you judge if the reward justified the ups and downs.
- Short SellingBetting an investment's price will fall by borrowing shares, selling them, and hoping to rebuy cheaper later.
- Short-Term Capital GainProfit on an investment held a year or less, generally taxed at your ordinary income rate.
- Small-CapA company with a smaller market value that may offer more growth potential along with more risk and volatility.
- Standard DeviationA statistic showing how widely an investment's returns swing around their average, used to gauge risk.
- StockA share of ownership in a company that you can buy and sell, giving you a small stake in its profits and growth.
- Stock ExchangeAn organized marketplace, such as the NYSE or Nasdaq, where stocks and other securities are traded.
- Stock MarketThe network of exchanges where shares of public companies are bought and sold by investors.
- Stock Market IndexA measure that tracks a group of stocks to show how a part of the market is performing overall.
- Stop OrderAn order that turns into a market order once an investment hits a set trigger price, often used to limit losses.
- Stop-Limit OrderAn order combining a trigger price with a price limit, giving you more control than a plain stop order.
- Strike PriceThe set price at which an option lets you buy or sell the underlying investment.
- Support and ResistancePrice levels where an investment has historically tended to stop falling or stop rising on charts.
- Tax-ExemptIncome or an investment, such as certain municipal bonds, that is free from some or all taxes.
- Tax-Loss HarvestingSelling investments at a loss on purpose to offset taxable gains and lower your tax bill for the year.
- Taxable AccountA standard investment account with no special tax breaks, where gains and dividends are taxed each year.
- Technical AnalysisStudying past price and volume patterns on charts to try to predict where an investment might move next.
- Ticker SymbolA short set of letters that identifies a stock or fund on an exchange, like a name tag for trading.
- Time HorizonHow long you plan to keep money invested before you need it, which shapes how much risk makes sense.
- Total ReturnThe full gain on an investment, combining price changes with any dividends or interest it paid.
- Tracking ErrorHow far an index fund's returns drift from the index it is built to copy.
- Trading VolumeThe number of shares of an investment that change hands during a period, signaling how actively it trades.
- Treasury BillA short-term government loan that matures in a year or less and is sold at a discount to its face value.
- Treasury BondA long-term loan to the U.S. government that pays fixed interest and is considered very low risk.
- Treasury NoteA U.S. government loan that matures in two to ten years and pays interest every six months.
- ValuationAn estimate of what a company or investment is worth, used to judge whether its price is reasonable.
- Value StockShares that appear priced below what the company seems worth, which some investors buy hoping for a rebound.
- VIX (Volatility Index)A market index that tracks expected volatility, often called the market's fear gauge.
- VolatilityHow sharply and often an investment's price swings up and down over a given period.
- Wash SaleSelling an investment at a loss and rebuying it within 30 days, which cancels the tax benefit of that loss.
- YieldThe income an investment pays you each year, shown as a percentage of its current price.
- Yield to MaturityThe total return you would earn on a bond if you held it until it matures and reinvested all interest.