100 Terms Every Investor Should Know

No.	Term	Definition
1.	Accredited investor	Meets income/net-worth rules to access private deals.
2.	Active management	Picking securities to beat a benchmark.
3.	Alpha	Excess return over a risk-adjusted benchmark.
4.	Alternative investment	Assets beyond stocks, bonds, and cash.
5.	Arbitrage	Profiting from price differences of the same asset.
6.	Ask price	Lowest price a seller is willing to accept.
7.	Asset allocation	Mix of asset classes in a portfolio.
8.	Asset class	Group of similar investments (e.g., equities).
9.	Assets under management (AUM)	Total client assets a firm manages.
10.	Bear market	Prolonged market decline of ~20% or more.
11.	Benchmark	Standard index used to measure performance.
12.	Beta	Sensitivity of a security to market moves.
13.	Bid price	Highest price a buyer is willing to pay.
14.	Blue-chip stock	Shares of large, established companies.
15.	Bond	Debt security paying interest and principal at maturity.
16.	Book value	Net assets on a company’s balance sheet.
17.	Broker	Intermediary that executes trades for clients.
18.	Bull market	Prolonged market rise with broad optimism.
19.	Buyback	Company repurchases its own shares.
20.	CAGR	Compound annual growth rate of an investment.
21.	Call option	Right to buy an asset at a set price.
22.	Capital gain	Profit from selling an asset above cost.
23.	Capital structure	Mix of debt and equity financing.
24.	Cash flow	Money moving in and out of a business.
25.	Compound interest	Interest earned on prior interest.
26.	Correlation	Degree two assets move together.
27.	Coupon	Bond’s periodic interest payment.
28.	Credit rating	Agency grade of a borrower’s credit risk.
29.	Custodian	Institution that safekeeps client assets.
30.	Debt-to-equity (D/E)	Leverage ratio of debt versus equity.
31.	Default risk	Chance a borrower fails to pay.
32.	Derivative	Contract whose value depends on another asset.
33.	Discount rate	Rate used to present-value future cash flows.
34.	Diversification	Spreading risk across different assets.
35.	Dividend	Cash or stock distribution to shareholders.
36.	Dividend yield	Annual dividends divided by share price.
37.	Dollar-cost averaging	Investing fixed amounts at regular intervals.
38.	Drawdown	Peak-to-trough decline in value.
39.	Duration	Bond price sensitivity to rate changes.
40.	EBITDA	Earnings before interest, taxes, depreciation, amortization.
41.	Efficient frontier	Best return for a given level of risk.
42.	Emerging market	Developing economy with higher growth and risk.
43.	Enterprise value (EV)	Market cap plus net debt and adjustments.
44.	Earnings per share (EPS)	Profit per outstanding share.
45.	Exchange-traded fund (ETF)	Fund trading intraday like a stock.
46.	EV/EBITDA	Valuation multiple comparing EV to EBITDA.
47.	Expense ratio	Annual fund fee as a percent of assets.
48.	Fiduciary	Must act in clients’ best interests.
49.	Fixed income	Investments paying scheduled interest/coupons.
50.	Free cash flow (FCF)	Cash left after capital spending.
51.	Futures	Contracts to buy/sell later at a set price.
52.	Fundamental analysis	Valuing securities via business and financial data.
53.	Growth stock	Company expected to grow revenue/earnings fast.
54.	Hedge	Position taken to reduce risk.
55.	Hedge fund	Pooled vehicle using flexible strategies.
56.	High-yield bond	Below-investment-grade, higher-risk bond.
57.	Holding period	Time you keep an investment.
58.	Hurdle rate	Minimum acceptable return for a project.
59.	Index	Statistical basket tracking a market segment.
60.	Index fund	Fund designed to match an index.
61.	Inflation	Sustained rise in general price levels.
62.	Insider trading	Trading on material nonpublic information.
63.	Interest-rate risk	Losses from changing interest rates.
64.	Investment-grade	Bonds rated BBB-/Baa3 or higher.
65.	Initial public offering (IPO)	First sale of stock to the public.
66.	Internal rate of return (IRR)	Discount rate that zeros NPV.
67.	Implied volatility	Market’s forecast of option volatility.
68.	Junk bond	High-yield, below-investment-grade bond.
69.	Large-cap	Company with large market capitalization.
70.	Leverage	Using borrowed money to amplify returns.
71.	Limit order	Trade only at a specified price or better.
72.	Liquidity	Ease of converting to cash without impact.
73.	Lock-up period	Time insiders are barred from selling.
74.	Long position	Owning an asset expecting it to rise.
75.	Management fee	Fee charged by managers for services.
76.	Margin	Borrowed funds used to trade.
77.	Market capitalization	Share price times shares outstanding.
78.	Market maker	Firm quoting continuous buy/sell prices.
79.	Market order	Trade executed immediately at best price.
80.	Momentum	Tendency of winners/losers to keep moving.
81.	Economic moat	Durable advantage protecting profits.
82.	Mutual fund	Pooled fund priced once daily at NAV.
83.	Net asset value (NAV)	Per-share value of fund assets.
84.	Net present value (NPV)	Value of future cash flows today.
85.	Nominal return	Return before adjusting for inflation.
86.	Offer price	Price at which new shares are sold.
87.	Option	Contract granting a right, not obligation.
88.	Over-the-counter (OTC)	Traded via dealers, not exchanges.
89.	Par value	Face value of a bond or share.
90.	Passive investing	Tracking an index rather than beating it.
91.	Price-to-book (P/B)	Price per share divided by book value.
92.	Price-to-earnings (P/E)	Share price divided by EPS.
93.	PEG ratio	P/E divided by earnings growth rate.
94.	Portfolio	Collection of investments you hold.
95.	Premium (option)	Price paid to buy an option.
96.	Prospectus	Official document describing a security or fund.
97.	Put option	Right to sell an asset at a set price.
98.	Qualified dividend	Dividend taxed at lower long-term rates.
99.	Quantitative easing (QE)	Central bank bond-buying to add liquidity.
100.	Real return	Nominal return minus inflation.