Glossary
Investing words, in plain English.
Every term gets its own page, with a real-number example and why it matters.
Investing
Asset allocationHow you split your money across different kinds of investments.BondA loan you make to a government or company in exchange for regular interest.Brokerage accountThe account where you buy, hold and sell your investments.Bull and bear marketsA bull market is when prices are rising. A bear market is a drop of 20% or more.Capital gainsThe profit you make when you sell an investment for more than you paid.CompoundingEarning returns on your past returns, so growth speeds up over time.DiversificationSpreading your money across many investments so one bad one cannot sink you.DividendA cash payment a company or fund sends you for owning its shares.Dividend reinvestmentUsing your dividends to buy more shares, so your income grows on its own.Dividend yieldA year of dividends divided by the share price, shown as a percent.Dollar-cost averagingInvesting the same amount on a schedule, no matter what prices are doing.ETFA fund that holds many investments and trades like a single stock.Index fundA fund that simply tracks a market index instead of picking winners.InflationThe slow rise in prices that makes each dollar buy a little less.Market crashA sudden, steep drop in stock prices over days or weeks.Mutual fundA fund that pools money from many people and is priced once a day.PortfolioEverything you are invested in, viewed together.RecessionA broad slowdown in the economy, usually with job losses and less spending.REITA company that owns income-producing real estate and pays out most of its profit.Retirement accountAn investment account with tax breaks, built for retirement savings.Risk toleranceHow much ups and downs you can live with without selling.StockA small slice of ownership in a company.Stock marketThe marketplace where shares of companies are bought and sold.YieldThe income an investment pays each year, as a percent of what it costs.
Personal finance
BudgetA plan for where your money goes each month.Credit scoreA number from 300 to 850 that lenders use to judge how you handle debt.Emergency fundCash set aside for surprises, usually three to six months of essential costs.Financial planA written roadmap from where your money is now to where you want it.High-yield savings accountA savings account that pays a higher interest rate than a typical bank account.Interest on loansThe extra you pay a lender for borrowing their money.Interest on savingsWhat a bank or borrower pays you for using your money.Life insuranceA policy that pays your family a lump sum if you die.Net worthEverything you own minus everything you owe.Personal financeHow you earn, spend, save and invest your own money.
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