Glossary

The strategy of dividing investments among different asset classes—stocks, bonds, and cash—to balance risk and return according to your goals and time horizon.

A prolonged period of falling asset prices, generally defined as a decline of 20% or more from recent highs, often accompanied by economic pessimism and reduced investor confidence.

Shares in large, well-established, and financially stable companies with a long track record of reliable performance and often a history of paying dividends.

A fixed-income instrument in which an investor loans money to a borrower—typically a corporation or government—that pays regular interest and returns the principal at maturity.

A licensed individual or firm that executes buy and sell orders for securities on behalf of clients, typically charging a commission or fee for the service.

A sustained period of rising asset prices, generally defined as a gain of 20% or more from recent lows, typically accompanied by strong economic conditions and investor optimism.

Interest calculated on both the initial principal and the accumulated interest from previous periods, causing wealth to grow at an accelerating rate over time.

A financial contract whose value is derived from the performance of an underlying asset, index, or rate, commonly used for hedging risk or gaining leveraged exposure.

A risk management strategy that spreads investments across different assets, sectors, or geographies so that poor performance in one area does not devastate the overall portfolio.

A portion of a company's profits distributed to shareholders, usually paid in cash or additional shares, as a reward for holding the stock.

An investment strategy of regularly investing a fixed amount regardless of the asset's price, reducing the average cost per unit over time and removing the pressure to time the market.

An Exchange-Traded Fund is a basket of securities that trades on a stock exchange like a single share, typically tracking an index and offering low-cost, diversified market exposure.

A pooled investment fund that employs diverse and often complex strategies—including leverage, short-selling, and derivatives—to generate returns, typically available only to accredited investors.

A type of mutual fund or ETF designed to replicate the performance of a specific market index, offering broad diversification at low cost compared to actively managed funds.

The rate at which the general level of prices for goods and services rises over time, eroding the purchasing power of money and affecting real investment returns.

An Initial Public Offering is the process by which a private company first offers shares to the public on a stock exchange, raising capital and providing an exit for early investors.

The ease with which an asset can be converted into cash quickly without significantly affecting its market price; stocks have high liquidity, while real estate has low liquidity.

The total market value of a company's outstanding shares, calculated by multiplying the current share price by the total number of shares; used to classify companies as large-cap, mid-cap, or small-cap.

A professionally managed investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

The Price-to-Earnings ratio divides a company's share price by its earnings per share, showing how much investors are willing to pay for each unit of profit—a key valuation metric.

A collection of financial investments—such as stocks, bonds, ETFs, and cash—held by an individual or institution, managed to achieve specific financial goals within an acceptable level of risk.

Return on Investment measures how much profit an investment generates relative to its cost, expressed as a percentage—a key metric for comparing the efficiency of different investments.

A share of ownership in a company, entitling the holder to a portion of the company's assets and earnings; stocks are traded on exchanges and their prices reflect market supply and demand.

A statistical measure of how much an asset's price fluctuates over a given period; high volatility means larger price swings and greater short-term uncertainty.

The income generated by an investment expressed as a percentage of its price or cost; for bonds it reflects interest paid, for stocks it typically represents the dividend income relative to share price.