Investing Glossary

Every term used across Study, defined once, in plain English.

#

401(k): An employer-sponsored retirement account in the U.S., often including matching contributions from the employer.

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.

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.
Broker: The regulated intermediary that holds your account and routes your orders to the market.
BrokerCheck: A free FINRA tool for verifying the registration and disciplinary history of brokers and firms.
Buyback: A company purchasing and retiring its own shares, which increases each remaining share's claim on the business.

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, which becomes the dominant force 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: What you paid for an investment, used to calculate taxable gain or loss.
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 holds the asset.

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.

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 — net profit divided by shares outstanding.
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.

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.

G

Gas: The fee paid to execute a transaction or smart contract on Ethereum.

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.

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.

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.

N

Net asset value: The per-share value of a fund's holdings.

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.

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 — usually more important than which one.
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.

R

Rebalancing: Adjusting holdings back toward intended proportions, ideally using new contributions first.
Recency bias: Assuming the recent past will continue.
Recovery phrase: The words that restore a crypto wallet. Anyone who has it controls the funds.
Return on invested capital: How much profit a business generates from the capital it employs.
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.

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.
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: Our composite research score: Risk 30%, Long-Term Potential 30%, Fundamental Momentum 20%, Ownership Intelligence 20%.
Survivorship bias: Excluding failed or delisted companies from a study, which flatters historical results.

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.

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.