investing vocab

  • Active Trading – Buying and selling stocks or funds quickly (within minutes to days) to try and make small profits from price changes. Studies show most active traders lose money.

  • Asset Allocation – Dividing your investments into different types (stocks, bonds, cash) to reduce risk.

  • Asset Class – A group of similar financial products, like stocks, bonds, or cash, that behave in similar ways in the market.

  • Bear Market – A market where prices are dropping, causing people to sell.

  • Bond – A loan you give to a company or government, which pays you interest and returns your money after a set time.

  • Bond Rating – A score that tells you how likely it is that you'll get your money back from a bond.

  • Brokerage Account – An account that lets you buy and sell stocks, bonds, and other investments.

  • Bull Market – A market where prices are rising, and people are buying more stocks.

  • Capital Gain – Profit made from selling something (like a stock or bond) for more than you paid for it.

  • Capital Gains Tax – A tax you pay on the profit made when selling an asset (like property or investments).

  • Compound Return – The way your investment grows over time when the money you earn (like interest) is reinvested to earn even more money.

  • Coupon – The annual interest payment on a bond, usually shown as a percentage of its face value.

  • Diversification – The practice of spreading your investments across many different stocks, bonds, and/or funds to reduce risk.

  • Dividend – A portion of a company's profits that is paid to shareholders, typically every few months.

  • Dollar Cost Averaging – The practice of investing a fixed amount of money at regular times, no matter if the price of the investment goes up or down.

  • Exchange-Traded Fund (ETF) – A collection of stocks or bonds that is traded on the stock market. Unlike mutual funds, they can be bought and sold all day like stocks.

  • Index Fund – A low-cost investment that tries to follow the performance of a specific stock market index without trying to pick individual stocks.

  • Individual Retirement Account (IRA) – A special account that lets you save money for retirement with certain tax advantages.

  • Inflation – The increase in the cost of goods and services over time, which means the money you have will buy less in the future.

  • Insider Trading – The illegal act of using non-public information to trade a company’s stock.

  • Investing – The process of putting money into something with the goal of making a profit over time, like for retirement.

  • Investment – An asset or item bought with the goal of making money in the future.

  • Market Capitalization – The total value of a company’s shares, found by multiplying the share price by the number of shares.

  • Micro-Investing Platform – An app that helps people save small amounts of money regularly for investing.

  • Municipal Bond – A bond issued by a state or local government, which is often tax-free, used to fund public projects like schools and roads.

  • Mutual Fund – A fund made up of stocks or bonds that is managed by an expert and bought and sold as one unit.

  • Nasdaq – The second-largest stock exchange in the world, based in the U.S.

  • New York Stock Exchange (NYSE) – The largest stock exchange in the world, located in New York City.

  • Nominal Rate of Return – The return on an investment that does not consider inflation or taxes.

  • Passive Investing – A long-term investing strategy where you buy investments (like index funds) and hold them for many years, which tends to reduce trading and costs. Research shows most passively managed funds perform better than actively managed ones over time.

  • Pension – A retirement plan provided by some employers, giving employees a fixed payout when they retire.

  • Portfolio – A collection of financial investments like stocks, bonds, and cash.

  • Purchasing Power – The amount of goods and services that money can buy. It tends to decrease over time due to inflation.

  • Rate Of Return – The amount of profit or loss on an investment compared to the amount you originally invested, also called ROI (Return on Investment).

  • Real Rate Of Return – The return on an investment that takes inflation and taxes into account.

  • Risk – The chance that an investment might not make money or could lose value.

  • Robo-Advisor – A service that gives you automated advice on how to invest your money using an algorithm, without a human financial advisor.

  • Roth IRA – A retirement account where you can save money after taxes, and when you withdraw it, it is tax-free.

  • Shareholder – A person or entity that owns at least one share of a company.

  • Security – A financial asset (like a stock or bond) that can be traded on the market.

  • S&P 500 – An index of 500 of the largest companies in the U.S., used to represent the overall market.

  • Social Security – A government program that provides financial benefits to retirees, disabled individuals, and surviving family members.

  • Stock – A share in the ownership of a company, which can be bought or sold.

  • Stock Exchange – A place where stocks of companies are bought and sold.

  • Target Date Fund (TDF) – An investment fund that automatically adjusts its mix of stocks and bonds as you get closer to a specific retirement date.

  • Treasury Bond – A long-term, risk-free bond issued by the U.S. government.

  • Traditional IRA – A retirement account where you save money before taxes, and you pay taxes when you withdraw it.

  • Traditional 401(k) Plan – A retirement savings plan offered by some employers, where your savings grow tax-free until you withdraw them. Employers often match your contributions.