Investing Glossary

The lowest price a seller is currently willing to accept.

In plain English: What sellers want.

Example: Ask $100.05 means you can buy now at that price.

How your money is divided among stocks, bonds, cash and other assets.

In plain English: Your investment recipe.

Example: 60% stocks, 30% bonds, 10% cash.

A period when prices fall 20% or more from a recent high.

In plain English: Rough times — prices swiping down like a bear.

Example: Stocks entered a bear market in 2022.

A standard used to judge investment performance.

In plain English: Who you compare yourself to.

Example: StockSense uses SPY as your benchmark.

A measure of how much a stock moves compared with the overall market.

In plain English: Beta 2 = moves twice as much as the market.

Example: A beta of 0.5 means calmer than the market.

The highest price a buyer is currently willing to pay.

In plain English: What buyers offer.

Example: Bid $99.95 means someone will buy at that price now.

The difference between the bid and the ask.

In plain English: The tiny gap you lose by trading instantly.

Example: Bid $99.95, ask $100.05 → 10-cent spread.

A loan you make to a government or company that pays interest.

In plain English: You're the bank — they pay you back with interest.

Example: A 10-year Treasury bond pays interest twice a year.

A period when prices rise 20% or more from a recent low.

In plain English: Good times — prices charging upward like a bull.

Example: 2020–2021 was a strong bull market.

A chart bar showing a period's open, high, low and close prices.

In plain English: One candle = one day's price story.

Example: Green candles closed higher than they opened.

Tax on profit from selling an investment.

In plain English: The government's cut of your winnings.

Example: Holding over a year usually means a lower tax rate.

Earning returns on your previous returns.

In plain English: Money making money on its own money.

Example: $1,000 at 7% a year becomes about $7,600 in 30 years.

A drop of 10–20% from a recent high.

In plain English: A smaller dip than a bear market.

Example: A market correction in late 2018 lasted about three months.

The average price you paid per share.

In plain English: Your break-even price.

Example: Buy 1 at $10 and 1 at $20 → $15 cost basis.

Spreading money across many investments to reduce risk.

In plain English: Don't put all your eggs in one basket.

Example: Owning 10 stocks across 5 sectors is more diversified than owning 1.

A cash payment a company makes to shareholders from its profits.

In plain English: Getting paid just for owning the stock.

Example: KO pays a dividend every quarter.

Automatically using dividends to buy more shares.

In plain English: Letting your payouts buy more stock.

Example: Reinvesting helps your returns compound.

Annual dividends per share divided by the share price.

In plain English: The yearly "interest rate" a stock pays you.

Example: $2 dividend on a $50 stock = 4% yield.

Investing a fixed amount on a regular schedule no matter the price.

In plain English: Buy a little every month, rain or shine.

Example: $100 every month into an index fund.

The drop from a portfolio's peak to its lowest point afterward.

In plain English: How far you fell from your best.

Example: $12k peak to $9k low = 25% drawdown.

A company's profit over a period, reported each quarter.

In plain English: How much money the company actually made.

Example: Stocks often jump or drop on earnings reports.

A company's profit divided by its number of shares.

In plain English: How much profit each share "earns".

Example: $1B profit / 500M shares = $2 EPS.

Ownership value in a company or asset after debts are subtracted.

In plain English: What you truly own once loans are paid off.

Example: Stocks are often called equities.

Exchange-Traded Fund: a basket of investments that trades like a single stock.

In plain English: A bundle of stocks you can buy in one click.

Example: SPY holds all S&P 500 stocks.

The cutoff date: you must own shares before it to get the next dividend.

In plain English: Buy before this day to get paid.

Example: Buying on the ex-date itself is too late in StockSense.

The yearly fee a fund charges, as a percentage of your investment.

In plain English: The fund's annual price tag.

Example: 0.03% on $10,000 = $3 per year.

The US central bank, which sets key interest rates.

In plain English: The referee of the money system.

Example: The Fed raised rates sharply in 2022 to fight inflation.

Gross Domestic Product: the total value of goods and services a country produces.

In plain English: The size of the economy.

Example: US GDP growth is reported every quarter.

A company expected to grow faster than average, often with a high P/E.

In plain English: A company betting on a big future.

Example: Tech companies are often growth stocks.

A group of stocks tracked together to measure part of the market.

In plain English: A scoreboard for a group of stocks.

Example: The S&P 500 tracks 500 large US companies.

A fund that copies an index instead of picking stocks.

In plain English: Buy the whole scoreboard.

Example: Index funds are a popular low-cost way to diversify.

The general rise in prices over time, which lowers what money can buy.

In plain English: Why a candy bar costs more than it used to.

Example: 3% inflation means $100 buys what $97 bought last year.

The cost of borrowing money, as a yearly percentage.

In plain English: The price of money.

Example: When rates rise, bond prices usually fall.

Initial Public Offering: when a private company first sells shares to the public.

In plain English: A company's first day on the stock market.

Example: Facebook had its IPO in 2012.

A company with a market cap above roughly $10 billion.

In plain English: A big, established company.

Example: Microsoft and Walmart are large caps.

An order to buy or sell only at a set price or better.

In plain English: "Only if the price is right."

Example: A buy limit at $90 fills only if the price drops to $90 or lower.

How easily an asset can be bought or sold without moving its price.

In plain English: How fast you can turn it into cash.

Example: Apple stock is very liquid; a house is not.

Owning an asset expecting its price to rise.

In plain English: Buying and holding because you think it goes up.

Example: Buying 5 shares of KO is going long KO.

Share price multiplied by total shares outstanding.

In plain English: How much the whole company is worth on the market.

Example: 100 million shares at $50 = $5 billion market cap.

The times an exchange is open for regular trading, 9:30am–4pm Eastern on weekdays for US stocks.

In plain English: When the stock store is open.

Example: Orders placed Saturday wait until Monday's open.

An order to buy or sell immediately at the best available price.

In plain English: "Just get it done now."

Example: A market buy fills right away at the current ask.

The average price over a rolling number of days.

In plain English: A smoothed-out trend line.

Example: The 50-day moving average is widely watched.

A pooled fund managed by professionals, priced once per day.

In plain English: Like an ETF but trades only at day's end.

Example: Many retirement plans use mutual funds.

Open, High, Low, Close: the four key prices for a period.

In plain English: Start, top, bottom, finish.

Example: Each candlestick displays OHLC.

Share price divided by earnings per share.

In plain English: How many dollars you pay for $1 of yearly profit.

Example: $40 price, $2 EPS → P/E of 20.

The percentage of earnings paid out as dividends.

In plain English: How much of its profit a company hands back.

Example: EPS $4, dividend $1 → 25% payout ratio.

All the investments a person holds.

In plain English: Your collection of investments.

Example: Your StockSense dashboard shows your portfolio.

Profit divided by revenue.

In plain English: How much of each sales dollar is kept as profit.

Example: $20 profit on $100 revenue = 20% margin.

Profit or loss locked in when you sell.

In plain English: Money actually made or lost after selling.

Example: Sell at $60 after buying at $50 = $10 realized gain.

Buying and selling to bring your portfolio back to its target allocation.

In plain English: Resetting your recipe after the market changes it.

Example: Sell some winners and buy laggards to get back to 60/40.

A significant decline in economic activity lasting months.

In plain English: When the economy shrinks.

Example: The COVID crash in 2020 caused a short recession.

The gain or loss on an investment, usually as a percentage.

In plain English: How much you made or lost.

Example: $1,000 grows to $1,100 = 10% return.

Total money a company brings in from sales before costs.

In plain English: All the money coming in the door.

Example: A lemonade stand selling 100 cups at $1 has $100 revenue.

The chance that an investment loses value or returns less than expected.

In plain English: How much could go wrong.

Example: A single small company is riskier than an index fund.

How much loss an investor can handle, financially and emotionally.

In plain English: How big a drop you can stomach.

Example: A teen investing for 40 years can usually take more risk.

An index of about 500 of the largest US public companies.

In plain English: The most common "how is the market doing?" scoreboard.

Example: StockSense compares your portfolio to SPY, which tracks the S&P 500.

A group of companies in the same part of the economy.

In plain English: Which industry a company belongs to.

Example: Technology, Healthcare and Energy are sectors.

A single unit of a company's stock.

In plain English: One piece of the company pie.

Example: If you buy 10 shares at $20, you spent $200.

Borrowing shares to sell now, hoping to buy them back cheaper later.

In plain English: Betting a price will fall.

Example: Short at $50, buy back at $30 = $20 profit per share. If it rises instead, you lose.

A share of ownership in a company.

In plain English: Owning a stock means you own a tiny slice of the business.

Example: Buying 1 share of Apple makes you a (very small) Apple owner.

A marketplace where buyers and sellers trade securities.

In plain English: The store where stocks are bought and sold.

Example: The NYSE and Nasdaq are the biggest US exchanges.

An order that becomes a market order once the price hits a trigger.

In plain English: An automatic exit if things go wrong.

Example: Own at $100, set a stop at $90 to limit your loss.

A short code that identifies a stock on an exchange.

In plain English: A nickname for a company on the market.

Example: AAPL is Apple, KO is Coca-Cola.

How long you plan to keep money invested.

In plain English: When you'll need the money.

Example: Saving for college in 3 years is a short time horizon.

The general direction a price is moving over time.

In plain English: Up, down or sideways.

Example: Higher highs and higher lows signal an uptrend.

Profit or loss on shares you still own.

In plain English: Paper profit — not locked in yet.

Example: Bought at $50, now $60, not sold = $10 unrealized gain.

An estimate of what a company or share is worth.

In plain English: Is this stock cheap or expensive?

Example: Comparing P/E ratios is a quick valuation check.

A stock that looks cheap compared with its earnings or assets.

In plain English: A bargain hunter's pick.

Example: Banks and utilities are often value stocks.

How much and how quickly a price moves up and down.

In plain English: How bumpy the ride is.

Example: Tesla is more volatile than Coca-Cola.

The number of shares traded over a period.

In plain English: How busy a stock is.

Example: Volume often jumps on earnings day.

The income an investment produces, as a percentage of its price.

In plain English: What it pays you per year.

Example: A $1,000 bond paying $40 a year yields 4%.