Glossary
Stock market terminology
A plain-English glossary of the terms you'll actually encounter — from P/E ratio and ETF to moat and volatility. Every entry opens a full explainer with examples and FAQs.
Start with the essentials
These sixteen terms carry most of the weight in everyday money decisions. Each one has a full explainer with worked numbers, common mistakes and FAQs.
Browse by topic
Investing terms
The vocabulary of owning assets: valuation ratios, funds, risk measures and the numbers on a company's filings. Start with P/E ratio, EPS and free cash flow if you're learning to read a stock.
Accrual accounting, Alpha, Asset allocation, Asset class, Balance sheet, Beta, Bitcoin, Blockchain and 79 more below.
Market and economy terms
How the wider market is described and measured — cycles, inflation, rates and the indicators reported in the news each week.
Arbitrage, Ask, Bear market, Bid, Bid-ask spread, Bull market, Commodity, CPI (Consumer Price Index) and 29 more below.
Credit terms
What lenders look at and what it costs to borrow. Credit score, credit utilization and APR do most of the work in deciding the rate you're offered.
Amortisation, Annual Percentage Rate (APR), APR (annual percentage rate), Bankruptcy, Collateral, Credit card, Credit score, Credit utilisation and 7 more below.
Debt terms
Loans, balances and payoff mechanics — the language you need to compare debt and decide what to clear first.
Amortization, Avalanche method, Debt-to-income (DTI) ratio, Minimum payment, Mortgage, Refinancing, Snowball method
Budgeting terms
The building blocks of a monthly plan: income, fixed and variable spending, and the ratios people use to keep a budget honest.
50/30/20 rule, Budget, Sinking fund, Sinking fund vs emergency fund, Zero-based budget, Zero-based budgeting
Saving terms
Where cash lives and how it grows — interest, yields, emergency funds and the maths of compounding.
Annual Percentage Yield (APY), APY (annual percentage yield), Certificate of deposit (CD), Compound interest, Emergency fund, High-yield savings account, High-yield savings account (HYSA), Money market fund and 1 more below.
Retirement terms
Accounts, contribution rules and withdrawal strategies for money you won't touch for decades.
4% rule, 401(k), Annuity, FIRE (Financial Independence, Retire Early), HSA (health savings account), IRA (individual retirement account), Pension, Required minimum distribution (RMD) and 5 more below.
Tax terms
Brackets, deductions and the treatment of investment gains — general educational definitions, not tax advice.
Capital gain, Capital gains, Capital loss, Cost basis, FSA (flexible spending account), Gross income, Marginal tax rate, Tax bracket and 4 more below.
Money habit terms
The behavioural side of finance: biases, rules of thumb and the habits that decide whether a plan survives contact with real life.
Assets, Cash flow, Coast FIRE, FIRE movement, Inflation, Liabilities, Net worth, Opportunity cost and 4 more below.
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- 4% rule
- A guideline suggesting you can withdraw 4% of a diversified portfolio in year one of retirement and adjust for inflation each year with a high chance of lasting 30 years. Read more →
- 401(k)
- A US employer-sponsored retirement plan with tax advantages. Read more →
- 50/30/20 rule
- A simple budget framework: 50% needs, 30% wants, 20% saving and debt payoff. Read more →
A
- Accrual accounting
- Recognising revenues and expenses when earned or incurred, regardless of cash movement. Read more →
- Alpha
- The excess return of an investment above what its risk (beta) would predict. Read more →
- Amortisation
- Spreading loan payments over time so principal and interest are gradually paid off. Read more →
- Amortization
- The process of paying off a loan through scheduled principal and interest payments over time. Read more →
- Annual Percentage Rate (APR)
- The yearly cost of borrowing, including interest and certain fees. Read more →
- Annual Percentage Yield (APY)
- The effective annual rate of return, accounting for compounding. Read more →
- Annuity
- An insurance product that converts a lump sum into a stream of income payments. Read more →
- APR (annual percentage rate)
- The yearly cost of borrowing, including interest and most fees, expressed as a percentage. Read more →
- APY (annual percentage yield)
- The yearly return on savings after compounding is factored in, expressed as a percentage. Read more →
- Arbitrage
- Simultaneously buying and selling equivalent assets in different markets to profit from price differences. Read more →
- Ask
- The lowest price a seller is currently willing to accept for a share. Read more →
- Asset allocation
- How you split your portfolio across broad asset classes — stocks, bonds, cash, and alternatives. Read more →
- Asset class
- A group of investments with similar characteristics — stocks, bonds, real estate, commodities, cash. Read more →
- Assets
- Anything of financial value you own. Read more →
- Avalanche method
- Paying off debts in order of highest interest rate first while making minimum payments on the rest. Read more →
B
- Balance sheet
- A snapshot of a company's assets, liabilities, and equity at a point in time. Read more →
- Bankruptcy
- A legal process for individuals or businesses that can't repay their debts. Read more →
- Bear market
- A period when a major index falls 20% or more from a recent high. Read more →
- Beta
- A measure of how much a stock moves relative to the broader market. Read more →
- Bid
- The highest price a buyer is currently willing to pay for a share. Read more →
- Bid-ask spread
- The gap between the highest bid and lowest ask price for a security. Read more →
- Bitcoin
- The first and largest cryptocurrency, capped at 21 million coins. Read more →
- Blockchain
- A shared, append-only ledger secured cryptographically and validated by a distributed network. Read more →
- Blue-chip stock
- A large, financially sound company with a long history of reliable earnings. Read more →
- Bond
- A loan you make to a company or government in exchange for regular interest payments. Read more →
- Book value
- A company's assets minus its liabilities — what would theoretically remain if it liquidated today. Read more →
- Budget
- A plan for how you'll spend and save money over a given period. Read more →
- Bull market
- A sustained period of rising prices, often 20% or more above a recent low. Read more →
C
- CAGR (compound annual growth rate)
- The smoothed annual growth rate that would take a starting value to an ending value. Read more →
- Call option
- A contract giving the buyer the right to purchase an asset at a set strike price by expiry. Read more →
- Capital expenditures (CapEx)
- Spending on long-lived assets like property, plants, or equipment. Read more →
- Capital gain
- The profit made when you sell an investment for more than you paid. Read more →
- Capital gains
- Profit from selling an asset for more than its purchase price. Read more →
- Capital loss
- The loss from selling an investment for less than you paid, used to offset capital gains. Read more →
- Cash flow
- The difference between money coming in and money going out over a given period. Read more →
- Cash flow statement
- A financial statement tracking cash movement across operating, investing, and financing activities. Read more →
- Certificate of deposit (CD)
- A savings product that locks money at a fixed rate for a set term. Read more →
- Coast FIRE
- Having enough invested that compounding alone can fund traditional retirement — without further contributions. Read more →
- Collateral
- An asset pledged to secure a loan. Read more →
- Commodity
- A raw material or primary agricultural product like oil, gold, or wheat. Read more →
- Compound interest
- Interest earned on both your original investment and the interest it has already generated. Read more →
- Corporate bond
- A bond issued by a company to raise capital. Read more →
- Cost basis
- The original amount you paid for an investment, used to calculate capital gains at sale. Read more →
- CPI (Consumer Price Index)
- A widely-followed measure of consumer inflation based on a basket of goods and services. Read more →
- Credit card
- A short-term loan you can draw on repeatedly, up to a set limit, repaid monthly. Read more →
- Credit score
- A three-digit number that estimates how reliably you repay borrowed money. Read more →
- Credit utilisation
- The percentage of available revolving credit you're currently using. Read more →
- Credit utilization
- The percentage of your available credit that you're currently using. Read more →
- Cryptocurrency
- Digital assets secured by cryptography and (usually) issued on a decentralised blockchain. Read more →
D
- Debt
- Money owed to another party. Read more →
- Debt-to-income (DTI) ratio
- The percentage of gross monthly income spent servicing debt. Read more →
- Dilution
- A reduction in existing shareholders' ownership percentage. Read more →
- Discounted cash flow (DCF)
- A valuation method that discounts future cash flows back to their present value. Read more →
- Diversification
- Spreading investments across many assets so one bad outcome doesn't sink the portfolio. Read more →
- Dividend
- A cash payment a company sends to shareholders, usually quarterly, from its profits. Read more →
- Dividend reinvestment plan (DRIP)
- An automated setup that reinvests dividend payments into more shares of the same stock or fund. Read more →
- Dividend yield
- Annual dividend divided by share price, expressed as a percentage. Read more →
- Dollar-cost averaging (DCA)
- Investing a fixed amount on a regular schedule regardless of price. Read more →
- Drawdown
- The peak-to-trough decline of an investment before a new peak. Read more →
- Duration
- A bond's sensitivity to interest-rate changes, expressed in years. Read more →
E
- EBITDA
- Earnings before interest, taxes, depreciation, and amortisation — a proxy for cash-like operating profit. Read more →
- Emergency fund
- Cash set aside to cover surprise expenses without touching investments or taking on debt. Read more →
- Enterprise value
- Market cap + debt − cash: the theoretical price to acquire the entire business. Read more →
- EPS (earnings per share)
- A company's profit divided by the number of shares outstanding. Read more →
- Escrow
- Funds held by a third party pending completion of a transaction. Read more →
- ETF (exchange-traded fund)
- A fund holding many stocks or bonds that trades like a single share. Read more →
- Exchange rate
- The price of one currency expressed in another. Read more →
- Expense ratio
- The annual fee a fund charges, expressed as a percentage of assets. Read more →
F
- Federal Reserve
- The US central bank, responsible for monetary policy and financial stability. Read more →
- FICO score
- The most widely-used US credit scoring model, ranging from 300 to 850. Read more →
- FIRE (Financial Independence, Retire Early)
- A movement focused on saving aggressively enough to make paid work optional decades before traditional retirement. Read more →
- FIRE movement
- Financial Independence, Retire Early — an approach centred on high savings rates and index investing. Read more →
- First-in, first-out (FIFO)
- An accounting method that assumes the oldest shares are sold first. Read more →
- Forex (foreign exchange)
- The global market for trading currencies against one another. Read more →
- Free cash flow (FCF)
- Cash a business generates after paying to run and grow itself. Read more →
- FSA (flexible spending account)
- A US employer-sponsored pre-tax account for medical or dependent-care expenses. Read more →
- Fundamental analysis
- Studying a company's financials and business to estimate what its shares are actually worth. Read more →
- Futures contract
- A standardised agreement to buy or sell an asset at a future date and price. Read more →
G
- Gold (as an asset)
- A precious metal often held as an inflation hedge or safe-haven asset. Read more →
- Gross domestic product (GDP)
- Total value of goods and services produced by an economy. Read more →
- Gross income
- Total earnings before taxes, deductions, or other withholdings. Read more →
- Gross margin
- Revenue minus cost of goods sold, divided by revenue. Read more →
- Growth investing
- Focus on companies expected to grow revenue and profit faster than average. Read more →
H
- Hard inquiry
- A credit check triggered when you apply for new credit, which slightly lowers your score temporarily. Read more →
- Hedge
- A trade designed to offset the risk of another position. Read more →
- High-yield savings account
- A savings account that pays significantly higher interest than a traditional bank account. Read more →
- High-yield savings account (HYSA)
- A deposit account that pays significantly higher interest than a traditional savings account. Read more →
- HSA (health savings account)
- A US tax-advantaged account for medical expenses, paired with a high-deductible health plan. Read more →
I
- Implied volatility (IV)
- The market's expectation of future volatility, derived from option prices. Read more →
- Index
- A basket of stocks used to measure a market or segment. Read more →
- Index fund
- A fund that mirrors an index rather than trying to beat it. Read more →
- Inflation
- The general rise in prices over time, which reduces what a unit of currency can buy. Read more →
- Inflation hedge
- An asset expected to maintain value when general prices rise. Read more →
- Insider trading
- Buying or selling securities based on material non-public information. Read more →
- Interest rates
- The cost of borrowing money, usually expressed as an annual percentage. Read more →
- IPO (initial public offering)
- The first time a private company sells shares to the public. Read more →
- IRA (individual retirement account)
- A US tax-advantaged retirement account you open on your own, separate from an employer plan. Read more →
L
- Large-cap
- Companies with market capitalisation of $10B or more in the US. Read more →
- Leverage
- The use of borrowed money to amplify potential returns — and losses. Read more →
- Liabilities
- Financial obligations you owe. Read more →
- Limit order
- An order to buy or sell only at a specified price or better. Read more →
- Liquidity
- How easily an asset can be bought or sold without significantly moving its price. Read more →
M
- Margin
- Borrowed money from a broker used to buy more securities than cash on hand. Read more →
- Marginal tax rate
- The tax rate applied to your next dollar of income. Read more →
- Market capitalization
- Share price multiplied by the number of shares outstanding. Read more →
- Market correction
- A decline of 10–20% from recent highs. Read more →
- Market order
- An order to buy or sell immediately at the best available price. Read more →
- Minimum payment
- The smallest amount you can pay on a credit card or loan without triggering a late fee. Read more →
- Money market fund
- A low-risk mutual fund that invests in short-term, high-quality debt. Read more →
- Mortgage
- A long-term loan secured by real estate, usually repaid over 15–30 years. Read more →
- Mutual fund
- A pooled investment vehicle managed by a fund company, priced once daily. Read more →
N
- Net income
- A company's bottom-line profit after all expenses, interest, and taxes. Read more →
- Net margin
- Net income divided by revenue. Read more →
- Net worth
- Total assets minus total liabilities. Read more →
O
- Operating cash flow
- Cash generated by a company's core business activities. Read more →
- Operating expenses (OpEx)
- Day-to-day costs of running the business — salaries, rent, marketing. Read more →
- Operating margin
- Operating profit divided by revenue. Read more →
- Opportunity cost
- The value of the next-best alternative you gave up. Read more →
- Options
- Contracts giving the right (but not obligation) to buy or sell an asset at a set price by an expiry date. Read more →
- Order book
- The live list of all outstanding buy and sell orders for a security. Read more →
P
- P/E ratio (price-to-earnings)
- Share price divided by earnings per share. Read more →
- Passive income
- Income earned with limited ongoing effort — dividends, interest, rental income, royalties. Read more →
- Payout ratio
- The share of earnings a company pays out as dividends. Read more →
- PEG ratio
- P/E divided by expected earnings growth — a growth-adjusted valuation measure. Read more →
- Pension
- An employer-funded retirement plan that pays a defined income in retirement based on tenure and salary. Read more →
- Portfolio
- The full collection of investments you hold across all your accounts. Read more →
- Price-to-book ratio
- Share price divided by book value per share — a classic value-investing metric. Read more →
- Price-to-earnings ratio
- Share price divided by earnings per share — the most quoted valuation metric. Read more →
- Principal
- The original amount of money invested or borrowed, before interest. Read more →
- Profit and loss (P&L)
- A statement summarising revenues, costs, and profits over a period. Read more →
- Prospectus
- A legal document describing a security offered for sale. Read more →
- Put option
- A contract giving the buyer the right to sell an asset at a set strike price by expiry. Read more →
R
- Real return
- Investment return after subtracting inflation — the true growth of purchasing power. Read more →
- Rebalancing
- Adjusting a portfolio back toward its target asset allocation. Read more →
- Recession
- A period of broad, sustained decline in economic activity. Read more →
- Refinancing
- Replacing an existing loan with a new one, usually at a lower rate or better terms. Read more →
- REIT (real estate investment trust)
- A company that owns income-producing real estate and pays out most of its profits as dividends. Read more →
- Required minimum distribution (RMD)
- The minimum amount you must withdraw annually from certain retirement accounts starting at a set age. Read more →
- Retirement
- The stage of life when you have enough savings and income to make paid work optional. Read more →
- Return on assets (ROA)
- Net income divided by total assets — how well a company deploys its asset base. Read more →
- Return on equity (ROE)
- Net income divided by shareholders' equity — how efficiently a company turns equity into profit. Read more →
- Return on invested capital (ROIC)
- Net operating profit after tax divided by invested capital — a rigorous measure of business quality. Read more →
- Reverse stock split
- Combining multiple shares into fewer shares to raise the nominal price. Read more →
- Risk management
- The practice of limiting downside so you can stay in the game long enough to benefit from upside. Read more →
- Risk tolerance
- How much portfolio value-swing you can accept without abandoning your plan. Read more →
- ROI (return on investment)
- Total net gain from an investment as a percentage of the amount invested. Read more →
- Roth IRA
- A US retirement account funded with after-tax dollars, with tax-free growth and tax-free qualified withdrawals. Read more →
S
- S&P 500
- An index of 500 of the largest US companies, weighted by market cap. Read more →
- Safe withdrawal rate
- The percentage of a portfolio you can withdraw annually with high confidence of not running out. Read more →
- Saving rate
- The percentage of take-home pay you keep rather than spend. Read more →
- Secondary offering
- Additional share issuance after the IPO. Read more →
- Secured debt
- Debt backed by collateral. Read more →
- Securities regulation
- Government rules governing the issuance and trading of financial securities. Read more →
- Short selling
- Borrowing shares to sell them, hoping to buy back cheaper later. Read more →
- Sinking fund
- Money set aside monthly for a known future expense. Read more →
- Sinking fund vs emergency fund
- A sinking fund covers expected expenses; an emergency fund covers unexpected ones. Read more →
- Small-cap stock
- A company with a small total market value, typically $300 million to $2 billion. Read more →
- Snowball method
- Paying off debts from smallest balance to largest, regardless of interest rate. Read more →
- Sortino ratio
- Like Sharpe, but penalises only downside volatility. Read more →
- Spread
- The gap between the current bid and ask price. Read more →
- Stablecoin
- A cryptocurrency designed to hold a stable value, usually pegged to a fiat currency like the US dollar. Read more →
- Standard deviation
- A statistical measure of dispersion around an average return. Read more →
- Stock
- A financial security representing ownership in a company. Read more →
- Stock split
- Dividing existing shares into more shares, without changing total value. Read more →
- Stop order
- An order that activates when a specified trigger price is reached. Read more →
- Stop-loss
- A pre-set price at which a position is automatically closed to cap losses. Read more →
- Strike price
- The pre-agreed price at which an option can be exercised. Read more →
- Sunk cost
- Money already spent that can't be recovered. Read more →
T
- Target-date fund
- A single-fund solution that automatically adjusts its stock/bond mix as a target retirement date approaches. Read more →
- Tax bracket
- The rate applied to the top slice of your income. Read more →
- Tax-advantaged account
- An account that lets investments grow with reduced or deferred tax. Read more →
- Tax-loss harvesting
- Selling investments at a loss to offset capital gains and reduce tax owed. Read more →
- Terminal value
- The value assigned to a business beyond the explicit DCF forecast period. Read more →
- Ticker symbol
- A short code identifying a stock on the exchange. Read more →
- TIPS (Treasury Inflation-Protected Securities)
- US Treasury bonds whose principal adjusts with inflation, protecting real purchasing power. Read more →
- Total return
- Price change plus dividends, expressed as a percentage. Read more →
- Traditional IRA
- A US retirement account funded with pre-tax dollars, taxed as ordinary income on withdrawal. Read more →
- Treasury bond
- A long-term US government debt instrument, typically 10–30 year maturity. Read more →
U
- Unsecured debt
- Debt not backed by any collateral. Read more →
V
- Value investing
- Buying companies for less than you believe they're worth, and holding until price catches up. Read more →
- VIX
- The Cboe Volatility Index, expressing 30-day implied volatility of the S&P 500. Read more →
- Volatility
- How much a price moves up and down over a period. Read more →
- Volume
- The number of shares traded in a given period. Read more →
W
- WACC (weighted-average cost of capital)
- A blended cost of a company's debt and equity financing, weighted by capital structure. Read more →
- Wash sale
- A US rule disallowing a loss deduction when you rebuy a substantially identical security within 30 days. Read more →
- Wash-sale rule
- A rule that disallows a tax loss if you rebuy the same or 'substantially identical' security within 30 days. Read more →
- Windfall
- An unexpected, one-time sum of money — tax refund, bonus, inheritance. Read more →
Y
- Yield
- The income an investment produces relative to its price, expressed as a percentage. Read more →
- Yield curve
- A chart of bond yields at different maturities, usually for government debt. Read more →
Z
- Zero-based budget
- A budgeting method where every dollar of income is assigned a job before the month begins. Read more →
- Zero-based budgeting
- Assigning every dollar of income a specific purpose before the month begins. Read more →