Investing glossary: plain-English definitions

Money & saving basics

Budget: A plan for how you'll spend and save your money each month.
Emergency fund: Money set aside to cover unexpected costs, like a car repair, so you don't have to sell investments or go into debt.
Interest: Money a bank pays you for keeping your money there, or money you pay when you borrow.
Compound interest: Interest that earns interest on itself over time, so your money grows faster the longer you leave it invested.
Inflation: The general rise in prices over time, which slowly reduces what your money can buy.
Net worth: What you own minus what you owe.
Income: Money you earn, whether from a job, a business, or your investments.
Expense: Money you spend.
Debt: Money you owe to someone else, usually with interest attached.
Credit score: A number that reflects how reliably you've repaid money you've borrowed in the past.

Stock: A small piece of ownership in a company.
Share: One unit of stock; owning shares means owning a slice of that company.
Stock market: The collection of exchanges where investors buy and sell shares of public companies.
Ticker symbol: The short set of letters used to identify a company on the stock market, like AAPL for Apple.
Stock exchange: A marketplace, like the NYSE or Nasdaq, where stocks are bought and sold.
IPO: Short for Initial Public Offering — the first time a private company sells shares to the public.
Bull market: A period when stock prices are generally rising.
Bear market: A period when stock prices have dropped significantly, usually 20% or more from a recent high.
Market capitalization: The total value of a company's shares, found by multiplying share price by the number of shares that exist. Often shortened to "market cap."
Large-cap, mid-cap, small-cap: Categories that describe a company's size based on market capitalization.
Volatility: How much and how quickly a stock's price moves up and down.
Dividend: A portion of a company's profit paid out to shareholders, usually in cash.
Market order: An order to buy or sell a stock immediately at the current price.
Limit order: An order to buy or sell a stock only at a specific price or better.

Bond: A loan you give to a company or government that pays you back with interest over time.
Mutual fund: A pooled investment that combines money from many investors to buy a mix of stocks, bonds, or other assets.
Index fund: A fund designed to match the performance of a market index, like the S&P 500, rather than trying to beat it.
ETF: Short for Exchange-Traded Fund — similar to a mutual fund, but it trades on an exchange throughout the day like a stock.
Index: A group of stocks used to track and measure the performance of a market or sector, like the S&P 500.
Real estate: Property, like land or buildings, that can be bought as a long-term investment.
REIT: Short for Real Estate Investment Trust — a company that lets everyday investors buy into real estate portfolios without owning property directly.
Cryptocurrency: A digital currency secured by technology called a blockchain, not backed by a government or bank.
Cash equivalents: Very low-risk, easy-to-access assets like savings accounts or money market funds.
Commodity: A raw material or basic good, like gold, oil, or wheat, that can be traded.

Risk tolerance: How much loss or ups-and-downs you're personally comfortable with when investing.
Diversification: Spreading your money across different investments to reduce the impact of any single one performing poorly.
Asset allocation: How you divide your money among categories like stocks, bonds, and cash based on your goals and risk tolerance.
Portfolio: The full collection of investments you own.
Time horizon: How long you plan to keep your money invested before you'll need it.
Dollar-cost averaging: Investing a fixed amount on a regular schedule, regardless of whether prices are up or down.
Rebalancing: Adjusting your portfolio periodically to bring it back to your original target mix.
Buy and hold: A strategy of buying investments and keeping them for the long term instead of frequently trading.
Day trading: Buying and selling investments within the same day, aiming to profit from short-term price moves. High-risk, and not part of Nest & Grow's core approach.
Speculation: Making an investment based on a guess about short-term price movement rather than the underlying value of the asset.
Fundamental analysis: Evaluating an investment by studying a company's financial health, leadership, and industry position.
Technical analysis: Evaluating an investment by studying historical price charts and trading patterns.

Return: The gain or loss on an investment, usually shown as a percentage.
Annualized return: The average yearly return an investment produces over a period of time.
Capital gain: The profit made when you sell an investment for more than you paid.
Capital loss: The loss incurred when you sell an investment for less than you paid.
Cost basis: The original price you paid for an investment, used to calculate gain or loss when you sell.
P/E ratio: A company's share price divided by its earnings per share, used to gauge if a stock is expensive or cheap relative to its profits.
Earnings per share: A company's profit divided by its number of outstanding shares.
Dividend yield: The percentage return you get from dividends alone, based on the share price.
Net income: A company's total profit after all expenses and taxes are subtracted.
Revenue: The total money a company brings in from sales, before expenses.
Intrinsic value: What an asset is really worth based on its fundamentals, which may differ from its current market price.

Brokerage account: An account that lets you buy and sell investments like stocks, bonds, and funds.
Retirement account: An account with tax advantages designed to help you save specifically for retirement.
401(k): An employer-sponsored retirement account that lets you contribute part of your paycheck, often with a partial employer match.
IRA: Short for Individual Retirement Account — a personal retirement account with tax advantages, opened independently of an employer.
Roth vs. traditional: Two tax treatments for retirement accounts: Roth uses after-tax money now for tax-free withdrawals later; traditional uses pre-tax money now and is taxed on withdrawal.
Compound growth: The snowball effect of reinvested earnings generating their own earnings over time.
Emergency liquidity: How quickly and easily you can turn an investment into usable cash if you need it.
Broker: A person or platform that executes buy and sell orders on your behalf.
Robo-advisor: An online service that automatically builds and manages a diversified portfolio for you based on your goals.
Financial advisor: A professional who provides personalized guidance on investing, saving, and financial planning.