A
The strategy of dividing investments among different asset categories like stocks, bonds, and cash to balance risk and reward based on goals and risk tolerance.
The percentage gain or loss on an investment over a one-year period, including dividends and capital gains.
B
A market condition where prices fall 20% or more from recent highs, typically accompanied by widespread pessimism.
A debt security where an investor loans money to an entity (government or corporation) that pays fixed interest and returns principal at maturity.
A market condition where prices are rising or expected to rise, typically defined as a 20%+ increase from recent lows.
C
The profit from selling an asset for more than its purchase price. Can be short-term (held less than a year) or long-term.
Interest calculated on the initial principal and accumulated interest from previous periods. The key to long-term wealth building.
D
Spreading investments across various assets, sectors, and regions to reduce risk.
A portion of a company's profits distributed to shareholders, usually quarterly.
Investing a fixed amount regularly regardless of price, reducing the impact of market volatility.
E
A basket of securities that trades on an exchange like a stock, offering diversification with trading flexibility.
The annual fee charged by a fund, expressed as a percentage of assets. Lower is generally better.
I
A fund that tracks a market index (like the S&P 500) by holding the same securities in the same proportions.
A tax-advantaged retirement savings account. Traditional IRAs offer tax-deductible contributions; Roth IRAs offer tax-free withdrawals.
M
The total market value of a company's outstanding shares. Large-cap: $10B+, Mid-cap: $2-10B, Small-cap: under $2B.
A pooled investment vehicle managed by professionals that invests in stocks, bonds, or other assets.
P
Stock price divided by earnings per share. Used to evaluate if a stock is over or undervalued.
A collection of investments owned by an individual or institution.
R
A company that owns income-producing real estate. REITs trade like stocks and must distribute 90% of taxable income as dividends.
An investor's ability and willingness to lose some or all of their investment in exchange for potential greater returns.
S
A share of ownership in a company. Stockholders can profit through price appreciation and dividends.
A stock market index tracking 500 large U.S. companies. Often used as a benchmark for overall market performance.
V
The degree of variation in an investment's price over time. Higher volatility means greater price swings and risk.
Y
The income return on an investment, typically expressed as an annual percentage.
4
An employer-sponsored retirement plan that allows employees to save and invest pre-tax income. Many employers offer matching contributions.