Pro Investor Academy

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Investing glossary

Every term we use across our research and courses, defined once and without jargon. Terms with real depth — compounding, drawdown, Form 13F, dilution — have their own full explanation page.

Explained in full

These concepts change how you read a company, so each has its own page with the formula, a worked example, the common mistake and how we use it in our research.

  • Compound interest

    Compound interest is growth earned on both your original money and on the growth it has already produced. It is the reason long holding periods matter more than clever entry points.

  • Dollar-cost averaging

    Dollar-cost averaging means investing a fixed amount on a fixed schedule regardless of price. It removes the need to decide when to invest, and it buys more shares when prices are lower.

  • Free cash flow

    Free cash flow is the cash a business has left after paying the costs of running and maintaining itself. It is the cash that can fund dividends, buybacks, debt repayment or reinvestment.

  • Expense ratio

    An expense ratio is the annual percentage of your money a fund keeps to run itself. It is deducted from returns quietly, every year, whether the fund performs well or badly.

  • Maximum drawdown

    Maximum drawdown is the largest peak-to-trough fall an investment has suffered over a period. It measures the worst stretch an investor would have had to sit through.

  • Diversification

    Diversification means owning enough different investments that no single failure can decide your outcome. It reduces the damage of being wrong about any one company.

  • Price-to-earnings ratio

    The price-to-earnings ratio compares a company's share price to its earnings per share. It is a rough statement of how much investors are paying for each dollar of profit.

  • Dividend yield

    Dividend yield is the annual dividend per share divided by the share price. It tells you the current income rate, not whether the dividend is safe.

  • Total return

    Total return counts price change plus dividends and other distributions. It is the only honest way to compare investments where some pay income and some do not.

  • Share dilution

    Dilution happens when a company issues new shares, shrinking each existing shareholder's slice of the business. Your ownership can fall even when the company grows.

  • Volatility

    Volatility measures how much an investment's price moves around, usually as the standard deviation of returns. It describes turbulence, not the probability of permanent loss.

  • Form 13F

    Form 13F is a quarterly SEC filing in which institutional investment managers with at least $100 million in Section 13(f) securities disclose those positions as of quarter end. Qualifying managers can be based outside the U.S. It is public evidence of professional ownership, reported after the fact.

  • Market capitalization

    Market capitalization is share price multiplied by shares outstanding — the market's current price for the entire company. It measures size and market sentiment, not quality, safety or how much cash a company actually has.

  • Revenue

    Revenue is total sales recognised over a period, before any costs are subtracted. It is the top line of the income statement and the base every margin is calculated from.

  • Earnings per share

    Earnings per share divides a company's net income by its share count, giving profit on a per-share basis. It is the figure most valuation ratios, including the price-to-earnings ratio, are built on.

  • Operating margin

    Operating margin is operating profit divided by revenue, showing how much of each sales dollar remains after running the core business. It is a measure of operating efficiency, before interest and taxes.

  • Return on invested capital

    Return on invested capital measures how much operating profit a business generates relative to the capital — debt and equity combined — used to produce it. It is a measure of how efficiently a company turns capital into profit.

  • Balance sheet

    A balance sheet is a snapshot of what a company owns and owes on a specific date. Assets always equal liabilities plus shareholders' equity, by definition.

  • Payout ratio

    The payout ratio is the share of a company's earnings or cash flow paid out as dividends. A very high ratio leaves little room for setbacks, while a low ratio can mean either caution or heavy reinvestment.

  • Buyback

    A buyback is a company purchasing and retiring its own shares, which increases each remaining share's claim on the business. Whether that benefits owners depends on the price paid and how it is funded.

  • Shares outstanding

    Shares outstanding is the total number of a company's shares currently held by all owners. It is the denominator behind market capitalization, earnings per share and every other per-share measure.

  • Index fund

    An index fund is built to match the return of a benchmark, such as the S&P 500, rather than to beat it. It typically achieves this at a far lower cost than a fund trying to pick winners.

  • ETF

    An ETF, or exchange-traded fund, is a basket of investments that trades on an exchange throughout the day like a single stock. Most track an index, but the label alone does not guarantee diversification or low cost.

  • Time horizon

    Time horizon is how long until you actually need the money, and it should be set by a real date rather than by comfort with risk. It determines what you can responsibly hold, because risk you can absorb over decades can be devastating over a couple of years.

  • Moat

    A moat is a durable competitive advantage that makes a business hard for rivals to displace. It is a qualitative concept, best supported by measurable evidence like sustained margins rather than treated as a label on its own.

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401(k)
An employer-sponsored retirement account in the U.S., often including matching contributions from the employer.
10-K
The annual report a U.S. public company files with the SEC. It includes audited financial statements, a business description and risk factors.
10-Q
The quarterly report a U.S. public company files with the SEC for its first three fiscal quarters. Its financial statements are generally unaudited.

A

Affinity fraud
Fraud that targets members of a shared community, faith or background to borrow trust that has not been earned.
Anchoring
Fixating on a reference point, usually the price you paid, instead of evaluating a holding on current evidence.
Ask
The lowest price a seller is currently willing to accept.
Asset allocation
How money is divided between broad categories such as stocks, bonds and cash.
Asset class
A group of investments that behave similarly, such as stocks, bonds, cash or cryptocurrency.
Advisory fee
A charge for investment advice or management, often a percentage of the assets managed each year.
Asset
Something a company owns or controls that is expected to bring future benefit, such as cash, inventory or equipment.
Acceleration
A growth rate that is rising from one period to the next. Accelerating growth can still be low growth.
Assets under management
The total market value of the money a fund or manager oversees.
Accumulation phase
The years in which you are mainly adding money to investments.
Anti-thesis
The strongest case against your investment, deliberately written down.

B

Backtest
A simulation of how a strategy would have behaved historically. Easy to build badly and easy to mislead with.
Balance sheet
A snapshot of what a company owns and owes on a specific date.
Bear market
A sustained decline in a market, conventionally 20% or more from a recent high.
Benchmark
The index a fund or strategy is measured against.
Bid
The highest price a buyer is currently offering.
Bid-ask spread
The gap between the best buying and selling prices — an implicit cost of trading.
Bitcoin
A decentralised digital asset with a capped supply of 21 million coins and no issuing authority.
Blockchain
A shared transaction record maintained simultaneously by many independent computers.
Bond
A loan to a government or company that pays interest and repays principal at maturity.
BrokerCheck
A free FINRA tool for verifying the registration and disciplinary history of brokers and firms.
Broker
The regulated intermediary that holds your account and routes your orders to the market.
Buyback
A company purchasing its own shares, which reduces shares outstanding and raises each remaining share's proportional claim. It creates value only if the price paid is sensible.
Beneficiary designation
The person or people named to receive an account such as an IRA or 401(k) at the owner's death. In the U.S. it generally controls who receives that account, even if a will says otherwise.
Business risk
Risk that comes from how a company operates — competition, debt, customers, regulation — as distinct from swings in its share price.
Bond ETF
An ETF holding bonds. Unlike a single bond it has no maturity date, and its price moves with interest rates and credit conditions.
Block
A batch of transactions added to a blockchain together and linked to the block before it.

C

CAGR
Compound annual growth rate — the constant annual rate that would produce a given total change over a period.
Capital gain
The profit realised when an investment is sold above its cost basis.
Compounding
Growth earned on previous growth. Under positive-return assumptions it can become the largest part of a balance over long periods.
Concentration risk
Risk created when too much of your outcome depends on one holding, sector or theme.
Correlation
How closely two investments tend to move together.
Cost basis
Generally what you paid for an investment including purchase costs, adjusted for events such as splits; used to calculate taxable gain or loss. Gifts and inheritances follow different rules.
Coverage
How much reliable evidence exists for a company. Low coverage means less can be assessed.
Credit risk
The risk that a borrower fails to make promised payments.
Custody
Who actually controls an asset. In crypto, whoever holds the private keys can sign transactions, subject to the token's own contract rules.
Contribution
Money you add to an account yourself. It raises the balance, but it is not an investment gain.
Contribution escalation
Raising a regular contribution on a schedule, for example with each pay rise.
Crossover point
In an illustration, the point where total growth first exceeds total contributions. Its timing depends entirely on the assumed return; with low or negative returns it may arrive much later or never.
Cash reserve
Cash deliberately set aside for near-term needs, so investments do not have to be sold to meet them.
Cost drag
How much fees and costs reduce returns over time. Because costs are taken from a growing balance, their effect compounds.
Capital
Money used to fund a business or an investment. Companies raise it by issuing shares (equity) or by borrowing (debt).
Cost of revenue
The direct costs of producing the goods or services a company sold in a period.
Current assets
Assets expected to be turned into cash or used up within about a year, such as cash, receivables and inventory.
Capital expenditures
Cash spent buying or improving long-term assets such as buildings and equipment. Often shortened to capex.
Competitive position
How well a company holds up against its rivals.
Capital efficiency
How much profit a company produces for each dollar invested in it, often measured with return on invested capital or return on equity.
Capital-light
Describes a business that needs relatively little investment in physical assets to grow.
Customer concentration
Relying on a few customers for a large share of revenue. Companies may disclose it in filings; Pro Investor Academy's research does not currently flag it.
Core holding
A broad, long-term position meant to form the base of a portfolio, as distinct from smaller positions around it.
Consensus
The rules by which a blockchain network's computers agree on which transactions are valid and in what order.
Custodial
An arrangement where a platform holds the private keys for you, so you depend on that platform's security and solvency.
Counterparty risk
The risk that the other party to an arrangement — an exchange, lender or issuer — fails to meet its obligations.
Circulating supply
The tokens currently available to trade, excluding locked, unvested or reserved tokens. Data providers can count it differently.
Correction
A decline, conventionally 10% or more from a recent high, smaller than a bear market. The threshold is a convention, not a rule.
Capitulation
A phase of heavy selling in which many investors give up. It is usually only recognizable in hindsight.
Confirmation bias
Favoring information that supports what you already believe.

D

Dilution
The reduction in each existing share's ownership when a company issues new shares.
Diversification
Spreading money across many investments so no single failure dominates the outcome.
Dividend
Cash a company pays out to shareholders from its profits.
Dividend yield
Annual dividends per share divided by the share price.
Dollar-cost averaging
Investing a fixed amount at regular intervals regardless of price.
Drawdown
The decline from a previous peak, measured peak to trough.
Distribution
A payment from a fund to its shareholders, such as dividends or capital gains. In a U.S. taxable account it is generally taxable in the year paid, even if reinvested.
Depreciation
Spreading the cost of a long-term asset over its useful life as an expense. It lowers reported profit without a cash payment in that period.
Deceleration
A growth rate that is falling from one period to the next. A company can still be growing while decelerating.
Due diligence
The research done before a decision: reading filings, checking facts and understanding the risks.
Disclosure
Information a company, fund or promoter is required to make public, such as an SEC filing or a notice that a promotion was paid for.
Disclosed data
Information taken from public filings or official releases, as opposed to estimates or opinions.
Drift
When a portfolio's mix moves away from its target because some holdings grew faster than others.
Decision journal
A dated record of what you decided, why, and what you expected, used to check your reasoning later.
Data freshness
How recent data is compared with when you are using it. Research should show the date the data was observed, not just when the page loaded.

E

EDGAR
The SEC's free public database of company regulatory filings.
Emergency fund
Accessible cash reserved for unexpected expenses, so investments never have to be sold at a bad moment.
EPS
Earnings per share. Basic EPS is earnings available to common shareholders divided by weighted-average common shares; diluted EPS also counts potential shares from options and convertibles.
ETF
Exchange-traded fund: a basket of investments that trades on an exchange like a single stock.
Ethereum
A programmable blockchain on which applications run as smart contracts.
Expense ratio
The annual percentage a fund deducts from assets to cover its costs.
Elite Investor Activity
Part of Ownership Intelligence (half of that component's weight): evidence from quarterly 13F filings by selected large investment managers. It describes dated past filings, not current positions.
Employer match
Money an employer adds to a U.S. workplace retirement plan such as a 401(k) based on what you contribute. Match formulas and vesting schedules are set by each plan.
Estate planning
Arranging how your assets will be managed and passed on at death or incapacity, usually with legal documents such as a will. The rules depend on where you live.
Equity
Ownership. A share of stock is a unit of equity; on a balance sheet, shareholders' equity is assets minus liabilities.
Exchange
A regulated marketplace, such as the New York Stock Exchange or Nasdaq, where listed securities are bought and sold.
EV/EBITDA
Enterprise value (roughly market capitalization plus debt minus cash) divided by earnings before interest, taxes, depreciation and amortization. EBITDA is not a standard accounting measure, so definitions vary.
Economic driver
The underlying force — such as interest rates, consumer spending or a single large customer — that several investments depend on.

F

Falsification
The pre-written condition that would tell you your investment reasoning was wrong.
FOMO
Fear of missing out — buying because something has already risen sharply.
Fractional share
Part of a single share, allowing investment by dollar amount.
Free cash flow
Cash generated by operations after the capital spending needed to maintain the business.
Fundamental Momentum
One of our four scored components: whether measured business fundamentals are improving or deteriorating.
Financial independence
Having enough income from savings, investments or other sources to cover living costs without needing paid work. The amount needed depends on spending, taxes and the assumptions used.
Forced sale
Selling because you need the cash or a lender requires it, rather than by choice — often at a bad moment.
Free cash flow yield
Free cash flow divided by market capitalization. Because free cash flow is defined differently by different sources, check which definition is used.
Financial strength
A company's capacity to meet its obligations and absorb setbacks, judged from its debt, cash and cash flow.
Financial momentum
The direction and pace of change in a company's reported results, such as revenue or margins, across recent periods.
Form 13F
A quarterly SEC report filed by institutional investment managers with at least $100 million in qualifying U.S. securities, due 45 days after quarter end. Managers based outside the U.S. can also have to file. It covers only securities on the SEC's Official List (mainly U.S.-listed stocks, ETFs and closed-end funds, plus certain convertible debt, options and warrants) and leaves out short positions, cash, mutual funds and most non-U.S. holdings.
Fund closure
When a fund's sponsor shuts a fund and returns cash to shareholders. It ends your intended holding and can create a taxable event in a taxable account.
Fixed supply
A supply cap set by a network's rules. Bitcoin's rules limit issuance to 21 million coins; such rules could only change with broad network agreement.

G

Gas
The fee paid to execute a transaction or smart contract on Ethereum.
Generational wealth
Assets passed from one generation to the next.
Gross margin
Revenue minus cost of revenue, shown as a percentage of revenue.
Goal-based investing
Organizing money by specific goals, each with its own time horizon and level of risk.

H

Holding period
How long an investment is owned. Under U.S. tax rules it also decides whether a gain is short-term (one year or less) or long-term (more than one year).
Holdings
The individual securities a fund or portfolio owns.
Hype cycle
A pattern in which attention to a new idea surges, collapses and then settles.

I

Index
A measurement of a group of investments, such as the S&P 500. An index cannot itself be bought.
Index fund
A fund designed to match an index rather than beat it, usually at low cost.
Inflation
A general rise in prices, which reduces what a given amount of money can buy.
Interest-rate risk
The risk that rising interest rates reduce the market value of existing bonds.
IPO
Initial public offering — the first sale of a company's shares to the public.
IRA
An individual retirement account in the U.S., available in traditional and Roth forms.
Institutional investor
An organization, such as a pension fund, mutual fund or insurer, that invests large pools of money.
Institutional ownership
The share of a company's stock held by institutional investors, often estimated from Form 13F filings — which are dated and incomplete.
Institutional activity
Changes in holdings reported by institutional managers, usually through quarterly Form 13F filings.
Insider transaction
A purchase, sale or award of a company's shares by its officers, directors or 10% owners, reported to the SEC on Form 4.
Inverse ETF
A fund designed to move opposite to an index over a single day. It resets daily, so results over longer periods can differ sharply from the index's inverse.
International ETF
An ETF holding securities from outside your home country. It adds currency and country risks.
Immutability
Once confirmed under later blocks, a blockchain record is extremely costly to change. That is not strictly impossible, and it does not make a recorded transaction correct or reversible.
Investment policy
A written set of personal rules covering goals, allocation, contributions and when to review or rebalance.
Investment thesis
A written explanation of why you own something, what evidence supports it and what would show it is wrong.
Investment process
The repeatable steps you use to research, decide, size and review investments.
Illusion of control
Believing you can influence outcomes that are largely down to chance.
Intelligent Accumulation
Pro Investor Academy's approach to investing: regular contributions to a diversified base, informed by research, without frequent trading. A way of organizing decisions, not a promise of results.
Immutable snapshot
A saved research record that is never edited after it is created, so past results can be checked against exactly what was known at the time.

L

Leveraged ETF
A fund aiming to multiply a daily index move. It resets daily and is not an accumulation vehicle.
Liquidity
How easily an asset can be sold at a fair price.
Lookahead bias
Using information in an analysis that was not actually available at the time being analysed.
Loss aversion
The tendency for losses to feel more painful than equivalent gains feel good.
Load
A sales charge some mutual funds take when you buy shares (front-end load) or sell them (back-end load).
Long-term capital gains
In the U.S., gains on assets held more than one year. They are generally taxed at lower rates than short-term gains; rates and income thresholds change, so check the current IRS rules.
Liability
An amount a company owes to others, such as loans, bonds or unpaid bills.
Long-term debt
Borrowing that is due more than a year after the balance-sheet date.
Large cap
A company with a large market capitalization. Cut-offs are conventions set by index providers and change over time; there is no single official threshold.
Leverage
Using borrowed money. It magnifies both gains and losses.
Long-Term Potential
One of the four Pro Investor Score™ components (30%): measured evidence about a company's durability and capacity to grow.

M

Margin
Borrowed money used to invest. It amplifies both gains and losses and can force selling.
Market capitalization
Share price multiplied by shares outstanding — the market's price for the whole company.
Market maker
A participant that continuously quotes buy and sell prices, providing liquidity.
Market risk
The risk that broad markets decline together, which diversification cannot remove.
Maturity
The date a bond repays its principal.
Moat
A durable competitive advantage that makes a business hard to displace.
Mutual fund
A pooled fund that transacts once per day at its net asset value.
Money market fund
A fund that invests in short-term, high-quality debt and usually seeks a stable share value. It is not a bank deposit, is not FDIC-insured and can lose value.
Monitoring
Checking holdings at planned intervals against your thesis and your rules.
Methodology
The documented rules a research process follows.
Market cycle
The recurring pattern of expansion, peak, decline and recovery in markets. Its timing and length are unpredictable.

N

Net asset value
A fund's assets minus its liabilities. Divided by shares outstanding, it gives NAV per share.
Net return
A return after fees and trading costs, and after taxes where that is stated.
Net income
Profit after all expenses, interest and taxes for a period — the bottom line of the income statement. Often called earnings.

O

Operating margin
Operating profit as a percentage of revenue — a measure of operational efficiency.
Ownership Intelligence
One of our four scored components: measured evidence about who owns a company, from public disclosures.
Operating cash flow
Cash generated or used by a company's normal business activities in a period, shown on the cash flow statement.
Operating leverage
How strongly operating profit changes when revenue changes, because a large part of costs is fixed.
Ownership concentration
How much of a company's shares are held by a small number of owners.
Open-market purchase
An insider buying shares on the market with their own money, reported on Form 4 with transaction code P.
Overlap
When two funds own many of the same securities, so holding both adds less diversification than it appears to.
Overconfidence
Overestimating your knowledge or your ability to predict outcomes.
Overfitting
Tuning a model so closely to past data that it captures noise rather than a lasting pattern, so it looks better in a backtest than it will in practice.

P

P/E ratio
Share price divided by earnings per share — how much is paid per dollar of current earnings.
Payout ratio
The share of earnings or cash flow paid out as dividends.
Permanent loss of capital
Value that does not recover, as distinct from a temporary decline.
Phishing
Deception designed to obtain credentials, keys or access, often by impersonating a trusted service.
Point-in-time
Using only the information that was genuinely available on a given historical date.
Ponzi scheme
A fraud that pays existing investors with new investors' money rather than real profits.
Position sizing
Deciding how much to hold in one investment. It limits how much a mistake can cost; it does not make the choice unimportant.
Private key
The secret that authorises crypto transactions. Control of the key is control of the asset.
Purchasing power
What an amount of money can actually buy.
Pyramid scheme
A structure that pays participants for recruiting others rather than for any real product or return.
Pro Investor Score
Our composite stock research score: Risk Intelligence 30%, Long-Term Potential 30%, Fundamental Momentum 20%, Ownership Intelligence 20%. Risk Intelligence and Long-Term Potential are tied as the largest components. Covers U.S. stocks only, not ETFs or crypto.
Primary source
The original document or data, such as a company's own filing, rather than someone's summary of it.
Proof of work
A consensus method in which computers spend energy solving puzzles to add blocks. Bitcoin uses it.
Performance chasing
Buying what has recently done best, often after much of the move has already happened.

R

Recency bias
Assuming the recent past will continue.
Rebalancing
Adjusting holdings back toward intended proportions, ideally using new contributions first.
Recovery phrase
The words that restore a crypto wallet. Anyone who has it controls the funds.
Return on invested capital
Conventionally after-tax operating profit divided by a stated measure of invested capital (for example debt plus equity, less excess cash). Definitions vary; check which is used.
Revenue
Total sales before any costs are subtracted.
Risk Intelligence
One of our four scored components: measured evidence about a company's risk characteristics.
Rug pull
A crypto fraud where creators abandon a project and remove its liquidity or funds.
Real return
A return after subtracting inflation — a measure of how much more the money can actually buy.
Resilience
A business's ability to keep operating and earning through downturns, competition or shocks.
Reinvestment
Putting profits or dividends back into a business or investment instead of paying them out.
Return on equity
Net income divided by shareholders' equity. Borrowing can raise it, so read it alongside the company's debt.
Regulatory filing
A document a company, fund or investor must submit to a regulator such as the SEC.
Reporting lag
The time between an event and its public report — up to 45 days after quarter end for Form 13F, and two business days for a Form 4 insider trade.
Rebalancing band
A tolerance range around a target allocation. You rebalance only when a holding drifts outside it.
Review trigger
A pre-set condition that prompts you to re-examine a holding. A review is not an automatic sale.
Round trip
Buying and then selling the same position, paying costs on both trades.
Recovery
A return to a previous peak after a decline. Past recoveries have taken months to many years, and some investments never recover.
Realised loss
A loss locked in by selling below your cost basis. A decline you have not sold is an unrealised loss.

S

S&P 500
An index of 500 large U.S. companies weighted by market capitalization.
Sector
A grouping of companies in similar businesses, which often move together.
Self-custody
Holding your own crypto private keys rather than relying on a platform. It controls signing, but issuer-controlled tokens can still be frozen by their issuer.
Settlement
The completion of a trade, when ownership is officially transferred.
Share
A unit of ownership in a company.
Share class
Different categories of a company's shares, which can carry different voting rights.
Shares outstanding
The total number of a company's shares currently held by all owners.
Smart contract
Code on a blockchain that executes automatically when its conditions are met.
SPIVA
S&P Dow Jones Indices' scorecards comparing active fund performance against benchmarks.
Stablecoin
A crypto token designed to hold a steady value, usually against a currency such as the U.S. dollar.
Stock split
Dividing existing shares into more shares at a proportionally lower price. Economically neutral.
Suggested Investment Score
The earlier name of the Pro Investor Score™. Same model and weights; the score is now shown under the Pro Investor Score name.
Survivorship bias
Excluding failed or delisted companies from a study, which flatters historical results.
Shareholder
Someone who owns at least one share of a company.
Sentiment
The overall mood of investors toward a market or security. It can move prices in the short term regardless of business results.
Small cap
A company with a relatively small market capitalization. As with large cap, the cut-off is a convention, not an official rule.
Stock grant
Shares awarded as pay rather than bought. A grant says little about the insider's own view of the stock.
Sector ETF
An ETF holding companies from one industry sector. It is more concentrated than a broad-market fund.
Staking
Locking tokens to help secure a proof-of-stake network in return for rewards. Risks include lock-up periods, penalties and the platform you stake through.
Sell discipline
Written reasons for selling, decided in advance, before emotions are involved.
Scheduled review
A review done on a fixed calendar rather than in reaction to price moves.
Screener
A tool that filters a list of investments by chosen criteria. A match is a starting point for research, not a conclusion.
Signal
A measured indicator that something has changed and may deserve attention. It is not a prediction or an instruction.
Sequence-of-returns risk
The risk that poor returns early in the withdrawal phase do lasting damage, because more units must be sold at low prices to fund spending.
Sentiment cycle
The swing of investor emotion from optimism to fear and back, which often moves alongside market cycles.
Standard deviation
A statistical measure of how widely values, such as returns, spread around their average. A common measure of volatility.

T

Taxable account
A standard brokerage account with no special tax treatment.
Ticker
The short code identifying a listed security.
Time horizon
How long until you need the money. It determines what you can responsibly own.
Turnover
How frequently holdings are bought and sold. Higher turnover means higher costs.
Total return
Price change plus income such as dividends or interest, usually assuming the income is reinvested. Check whether a quoted figure is before or after fees.
Taxable event
An action that can create a tax bill, such as selling at a gain or receiving a dividend in a taxable account. These examples follow U.S. rules; other countries differ.
Trading plan
A pre-arranged plan (in the U.S., under SEC Rule 10b5-1) that lets insiders schedule future trades in advance.
Tracking difference
The gap between a fund's return and its index's return over a period, usually driven by fees and costs.
Tracking error
How much a fund's return varies around its index's return over time, usually measured as the standard deviation of the differences.
Tax efficiency
How little of a fund's return is lost to taxes, for example by paying out fewer capital-gain distributions. It depends on the fund and on your own account and tax situation.
Thematic fund
A fund built around a theme such as a technology trend, often concentrated in a narrow group of related companies.
Tokenomics
The rules for a crypto token's supply and distribution: how many exist, who received them, when new ones are released or destroyed, and what the token is used for.
Token burn
Permanently removing tokens from supply by sending them to an address no one can spend from. A burn on its own does not create value.
Target allocation
The intended mix of investments, for example 80% stocks and 20% bonds.

U

Universe
The full set of investments a screen, index or model considers.
Unusual attention
A spike in discussion, searches or trading compared with a security's normal level. Attention is not evidence of value.

V

Valuation
Assessing the price of an investment relative to the business behind it.
Volatility
How sharply a value moves over time. High volatility means a wider range of short-term outcomes.
Vesting
A schedule that releases tokens or shares to their holders gradually. When large amounts unlock, the supply available to sell can rise.

W

Working capital
Current assets minus current liabilities. Changes in it are one reason cash flow can differ from profit.
Weighting
How much each holding counts in an index or portfolio — for example by market capitalization, or equally.
Watchlist
A list of investments you are following, not necessarily owning.
Withdrawal phase
The years in which you are mainly taking money out of investments to spend.

Sources and methodology

Definitions are written in-house. Where a term has a regulatory meaning, the primary source is the regulator's own material.

Keep reading

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    Compound interest is growth earned on both your original money and on the growth it has already produced. It is the reason long holding periods matter more th

  • Dollar-cost averaging

    Dollar-cost averaging means investing a fixed amount on a fixed schedule regardless of price. It removes the need to decide when to invest, and it buys more s

  • Free cash flow

    Free cash flow is the cash a business has left after paying the costs of running and maintaining itself. It is the cash that can fund dividends, buybacks, deb

  • Expense ratio

    An expense ratio is the annual percentage of your money a fund keeps to run itself. It is deducted from returns quietly, every year, whether the fund performs

  • Maximum drawdown

    Maximum drawdown is the largest peak-to-trough fall an investment has suffered over a period. It measures the worst stretch an investor would have had to sit

  • Diversification

    Diversification means owning enough different investments that no single failure can decide your outcome. It reduces the damage of being wrong about any one c