Investment Dictionary

Alpha – The amount an investment outperforms or underperforms its benchmark after adjusting for risk. More
Asset – Anything of value that can be owned and potentially generate cash flow, such as stocks, bonds, or real estate.
Asset Allocation – The way an investor splits money among different asset classes like stocks, bonds, and cash.
Bear Market – A prolonged period when prices fall significantly and pessimism dominates the market. More
Bull Market – A prolonged period when prices rise significantly and optimism dominates the market. More
Benchmark – A standard index or portfolio used to compare an investment's performance. More
Beta – A measure of how much an investment's price moves relative to the overall market's movements. More
Bid Price – The highest price a buyer is currently willing to pay for a security.
Ask Price – The lowest price a seller is currently willing to accept for a security.
Bid‑Ask Spread – The difference between the bid and ask prices, often reflecting liquidity and trading costs. More
Blue‑Chip Stock – Shares of large, financially stable, well‑known companies with long records of reliable performance. More
Bond – A loan investors give to governments or companies in exchange for regular interest payments and repayment at maturity. More
Book Value – The net value of a company's assets minus its liabilities as recorded on the balance sheet. More
Broker – A licensed intermediary that executes buy and sell orders for investors, usually charging a fee or commission. More
Capital – Money or assets that can be used to invest, operate a business, or generate more money.
Capital Gain – The profit made when an asset is sold for more than its purchase price. More
Capital Loss – The loss incurred when an asset is sold for less than its purchase price. More
Capital Markets – Markets where long‑term securities like stocks and bonds are issued and traded. More
Cash Flow – The net amount of cash moving into and out of a business or investment over a period of time. More
Commission – A fee paid to a broker for executing a buy or sell order. More
Compound Interest – Interest earned on both the original principal and on previously accumulated interest. More
Correction – A temporary price decline of roughly ten percent or more from a recent high in a market or asset. More
Correlation – A statistical measure of how closely two investments move in relation to each other. More
Coupon (Bond) – The regular interest payment a bondholder receives, usually expressed as a percentage of the bond's face value. More
Current Ratio – A liquidity metric comparing a company's current assets to its current liabilities. More
Custodian – A financial institution that holds securities on behalf of investors for safekeeping. More
Day Trading – Buying and selling financial instruments within the same trading day to profit from short‑term price moves. More
Debt‑to‑Equity Ratio – A measure showing how much a company is financed by debt compared with shareholders' equity. More
Default – Failure of a borrower to make required interest or principal payments on time. More
Delta (Options) – A measure of how much an option's price changes when the underlying asset's price changes slightly. More
Derivatives – Financial contracts whose value is based on an underlying asset, index, rate, or event. More
Diversification – Spreading investments across different assets to reduce the impact of any single loss. More
Dividend – A cash or stock payment a company makes to its shareholders from profits or reserves. More
Dividend Yield – The annual dividends per share divided by the stock's current price, shown as a percentage. More
Drawdown – The percentage decline from a portfolio's or asset's peak value to its subsequent low point. More
Earnings – A company's profits after expenses, often reported each quarter and year. More
Earnings Per Share (EPS) – A company's profit divided by the number of outstanding shares. More
Emerging Markets – Developing countries' markets that offer faster growth but usually higher risk and volatility. More
Equities – Another term for stocks, representing ownership shares in a company. More
ETF (Exchange‑Traded Fund) – A fund that holds a basket of assets and trades on an exchange like a stock. More
Face Value (Par Value) – The amount a bond will pay back at maturity, or the nominal value printed on a security. More
Fiduciary – A person or firm legally obligated to act in the best financial interest of a client. More
Float – The number of a company's shares that are available for public trading. More
Fundamental Analysis – Evaluating investments by examining financial statements, business models, and economic factors. More
Futures Contract – A standardized agreement to buy or sell an asset at a set price on a future date. More
Growth Stock – A company share expected to grow earnings faster than the market average, often reinvesting profits instead of paying dividends. More
Hedge – An investment or strategy used to reduce or offset the risk of another position. More
Hedge Fund – A pooled investment vehicle that uses complex strategies and often leverage, typically for accredited investors. More
High‑Yield Bond (Junk Bond) – A bond with lower credit quality that pays higher interest to compensate for greater risk. More
Illiquid – Describes an asset that is hard to quickly buy or sell without significantly affecting its price. More
Index – A statistical measure that tracks the performance of a group of securities, like a market segment. More
Index Fund – A fund designed to replicate the performance of a specific market index. More
Inflation – The rate at which general prices for goods and services rise, eroding purchasing power over time. More
Initial Public Offering (IPO) – The first time a private company offers its shares to the public on a stock exchange. More
Intrinsic Value – An estimate of what an asset is truly worth based on fundamentals, regardless of its current market price. More
Leverage – Using borrowed money or derivatives to increase the potential return (and risk) of an investment. More
Liability – A financial obligation or debt a person or company owes to others. More
Limit Order – An order to buy or sell a security only at a specific price or better. More
Liquidity – How easily and quickly an asset can be converted into cash without major price impact. More
Margin – Borrowed money from a broker used to buy securities, with the securities themselves serving as collateral. More
Margin Call – A broker's demand for an investor to deposit more cash or securities to meet minimum equity requirements. More
Market Capitalization (Market Cap) – The total value of a company's outstanding shares, calculated as share price times share count. More
Market Maker – A firm that continuously quotes buy and sell prices and stands ready to trade, helping provide liquidity. More
Market Order – An order to buy or sell a security immediately at the best available current price. More
Market Volatility – The degree of variation in asset prices over time, often reflecting uncertainty or risk. More
Momentum – A strategy or concept where assets that have been rising or falling tend to continue in the same direction for a time. More
Mutual Fund – A pooled investment vehicle managed by professionals that buys a diversified portfolio of securities. More
Net Asset Value (NAV) – The value per share of a fund, calculated as total assets minus liabilities divided by shares outstanding. More
Over‑the‑Counter (OTC) – Trading securities directly between parties rather than through a centralized exchange. More
Overvalued – Describes an asset believed to be priced higher than its fundamental worth. More
Passive Investing – An approach that aims to match market returns, often by tracking indexes, instead of trying to beat them. More
Penny Stock – A very low‑priced, often thinly traded stock considered highly speculative and risky. More
Portfolio – The collection of all investments owned by an individual or institution. More
Price‑to‑Book Ratio (P/B) – A valuation measure comparing a stock's market price to its book value per share. More
Price‑to‑Earnings Ratio (P/E) – A valuation measure comparing a stock's current price to its earnings per share. More
Private Equity – Investments in private companies or buyouts of public companies, usually with active management involvement. More
Prospectus – A formal document describing an investment offering's details, risks, and terms. More
Quantitative Easing (QE) – A central bank policy of creating money to buy financial assets and stimulate the economy. More
Real Return – An investment's return after adjusting for the effects of inflation. More
Rebalancing – Adjusting a portfolio's holdings to bring asset weights back to desired target allocations. More
Return on Equity (ROE) – A profitability metric showing how effectively a company generates profit from shareholders' equity. More
Risk Tolerance – The amount of investment loss or volatility an investor is psychologically and financially able to accept. More
Risk‑Adjusted Return – A measure of how much return an investment generates relative to the risk taken. More
Russell 2000 – An index tracking small‑cap US companies, widely used as a benchmark for small‑cap performance. More
S&P 500 – An index that tracks 500 large‑cap US companies and serves as a broad market benchmark. More
Nasdaq – An index tracking primarily technology and growth companies, often used as a tech sector benchmark. More
Dow Jones Industrial Average – An index tracking 30 large‑cap blue‑chip US companies. More
Secondary Market – The market where existing securities are traded between investors after their initial issuance. More
Sector – A group of companies that operate in the same part of the economy, such as technology or healthcare. More
Sharpe Ratio – A metric that shows how much excess return an investment delivers per unit of risk or volatility. More
Short Selling (Shorting) – Borrowing a security to sell it now, hoping to buy it back later at a lower price for profit. More
Spread (Credit or Yield) – The difference in yield between two bonds or instruments, often indicating relative risk. More
Stop‑Loss Order – An order that automatically sells a security if its price falls to a specified level to limit losses. More
Style Drift – When a fund or manager deviates from its stated investment style or mandate.
Systematic Risk – Market‑wide risk that cannot be eliminated by diversification, such as recessions or interest‑rate shocks. More
Tail Risk – The risk of rare but extreme events that cause very large losses. More
Technical Analysis – Evaluating investments by analyzing price charts, patterns, and trading volume rather than fundamentals. More
Time Horizon – The length of time an investor expects to hold investments before needing the money. More
Total Return – The combination of price changes and income (like dividends or interest) from an investment. More
Treasuries – Debt securities issued by a national government, generally considered very low risk in that government's currency. More
Underperform – To earn a lower return than a benchmark or comparable investments. More
Undervalued – Describes an asset believed to be priced lower than its fundamental worth. More
Volatility – The degree of fluctuation in an asset's price over time, often used as a proxy for risk. More
Yield – The income an investment generates over a period, usually expressed as a percentage of its price or value. More
Yield Curve – A graph that shows interest rates for bonds of the same credit quality but different maturities. More
Zero‑Coupon Bond – A bond that pays no periodic interest and is issued at a discount, returning its full face value at maturity. More