Investment Glossary

⚡In 30 seconds

•31 investment terms explained
•Clear definitions with real examples
•Links to calculators and tax guides
•Click any term for detailed explanation

Understand key investing concepts. Each term includes plain-language explanations, examples, and links to our calculators and tax guides.

4

401(k)

US employer-sponsored retirement plan with tax advantages.

B

Beta

A measure of a stock's volatility relative to the overall market.

Blue Chip Stock

Large, established companies with a history of stable performance.

C

Capital Gains

Profit from selling an investment for more than you paid.

Cost Basis

The original purchase price of an investment, used to calculate gains or losses.

Compound Interest

Interest calculated on both initial principal and accumulated interest.

D

Dividend

A payment made by a company to shareholders from its profits.

Dividend Yield

Annual dividend divided by stock price, expressed as a percentage.

Diversification

Spreading investments across different assets to reduce risk.

Dollar-Cost Averaging (DCA)

Investing equal amounts at regular intervals to reduce timing risk.

E

Ex-Dividend Date

The date by which you must own shares to receive the upcoming dividend.

Exchange-Traded Fund (ETF)

A fund that trades like a stock and holds a basket of securities.

Earnings Per Share (EPS)

Company profit divided by outstanding shares.

F

FIRE

Financial Independence, Retire Early – a movement focused on aggressive saving.

Four Percent Rule

Guideline suggesting 4% annual withdrawal from retirement portfolio is sustainable.

H

Herfindahl Index (HHI)

A measure of portfolio concentration based on squared position weights.

I

Index Fund

A fund that tracks a market index like the S&P 500.

Inflation

The rate at which prices rise, reducing purchasing power over time.

L

Long-Term Capital Gains (LTCG)

Gains from assets held longer than one year, often taxed at lower rates.

M

Market Capitalization

Total market value of a company's outstanding shares.

P

P/E Ratio

Price-to-Earnings ratio, a common stock valuation metric.

Portfolio Rebalancing

Adjusting portfolio holdings to maintain target asset allocation.

Q

Qualified Dividend

Dividends eligible for lower tax rates (US specific).

R

Roth IRA

US retirement account with tax-free growth and withdrawals.

S

Short-Term Capital Gains (STCG)

Gains from assets held one year or less, typically taxed as ordinary income.

Systematic Investment Plan (SIP)

Investing a fixed amount at regular intervals regardless of price.

T

Tax-Loss Harvesting

Selling losing investments to offset gains and reduce taxes.

Traditional IRA

US retirement account with tax-deductible contributions and deferred taxes.

V

Volatility

How much an investment's price fluctuates over time.

W

Wash Sale Rule

IRS rule preventing loss deductions if you rebuy the same stock within 30 days.

Y

Yield on Cost

Dividend yield calculated using your original purchase price.