TradeWize · Investing Glossary
The investing terms you'll actually run into.
Plain-English definitions — no jargon, no fluff. Every term is explained in one line, then a little deeper with a real example. When you're ready to use one, each links to the free lesson that teaches it hands-on.
#
A
Abandonment triggerThe specific scenarios in which you would actually break your written plan — surfaced and named in advance so you can defend against them.Account statementThe monthly or quarterly document summarising your account activity, balances, and realized gains.Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.AccrualsAccounting entries that record revenue or expense before cash actually moves.AcquisitionOne company buys another. The bought company's shares are converted to cash, acquirer stock, or a mix at the closing price.Active fundA fund whose manager picks stocks in the hope of beating a benchmark.Active investingPicking individual stocks (or actively-managed funds) instead of just buying the index.AllocationHow your portfolio is split across asset classes (stocks, bonds, cash, alternatives).Allocation driftThe slow movement of your portfolio away from its target mix as market values change.AlternativesInvestments outside the core stocks/bonds/cash mix — REITs, commodities, gold, crypto.AnchoringLetting one earlier number — like the price you paid — drive your judgment about a current decision.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.APRAnnual Percentage Rate. The yearly interest cost of a loan, including most fees.AskThe lowest price a seller is currently willing to accept.ASMLDutch semiconductor-equipment company that makes the EUV lithography machines every advanced chip is manufactured on — a global monopoly with no US peer.Asset allocationThe mix of stocks, bonds, and cash in a portfolio, expressed as percentages.Asset classA broad category of investment with similar behavior. Stocks, bonds, cash, real estate, commodities.Asset mixThe split of the portfolio across asset classes — stocks, bonds, real estate, commodities, cash.AutomateSet up recurring transfers so investing happens without your willpower.
B
Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.Balanced fundA single fund that holds both stocks and bonds at a fixed ratio, automatically rebalanced.Base rateThe long-run average probability of an event, before you weight any recent evidence.Bear marketA prolonged market decline, conventionally defined as 20%+ from recent highs.Behavior gapThe difference between a fund's reported return and what its investors actually earned — usually worse.Behaviour gapThe gap between the returns a fund delivers and the returns its actual investors earn.BenchmarkThe reference index a fund compares itself to — e.g. the S&P 500, MSCI World, or Bloomberg Aggregate.BidThe highest price a buyer is currently willing to pay.BondA loan from you to an issuer (government or company), repaid with interest on a known schedule.Bond ladderA portfolio of bonds with staggered maturities — one matures every year (or every few years) so cash continuously becomes available.Book valueTotal assets minus total liabilities — the accounting net worth of the business.Broad ETFAn ETF that tracks a wide market index — total US stock market, total international, total bond market.BrokerThe licensed firm you go through to buy and sell investments on an exchange.Brokerage accountThe account you open at a broker to hold your investments.Buy ruleA pre-written condition that has to be true before you allocate new capital — to a sleeve, a position, or the market in general.
C
Calendar ruleRebalance on a fixed schedule (e.g. annually) regardless of how far the portfolio has drifted.Capital expenditures (CapEx)Money spent on long-lived assets — buildings, equipment, software, improvements.Capital gainThe profit from selling an investment for more than you paid.Carve-outA parent company sells part of a subsidiary in an IPO, keeping a stake.Cash flow statementThe cash truth — actual cash in and out, split into operating, investing, and financing activities.Cash from financing (CFF)Cash raised from or returned to lenders and shareholders — debt issued or repaid, dividends, buybacks.Cash from investing (CFI)Cash spent on (or received from) long-term investments — capex, acquisitions, securities.Cash from operations (CFO)Cash actually generated by running the business — the most truthful number on the cash flow statement.CatalystThe event or condition that will close the valuation gap — and an estimated timeline.ChargebackA consumer protection on credit-card transactions that lets you reverse fraudulent charges.Circle of competenceThe set of industries, business models, and types of companies you actually understand well enough to evaluate.Circuit breakerAn automatic trading halt that fires when the broad market falls past a threshold.CommissionThe per-trade fee some brokers charge to execute an order.CommodityA raw physical good like gold, oil, wheat, or copper — priced by the ounce, barrel, or bushel.CompoundingWhen your returns earn returns of their own, so money grows faster the longer it's invested.Concentration riskThe risk that one position, sector, or country represents enough of the portfolio that a single bad outcome dominates returns.Confirmation biasReading the things that agree with you and ignoring the things that don't.ConvictionHow strong your evidence is for a thesis — and therefore how much capital it earns.Core-and-satelliteA portfolio structure where most of your money sits in a 'core' diversified base, with smaller 'satellite' bets around the edges.Corporate actionAny event initiated by a company that changes its securities or distributes value to holders.CorrelationHow tightly two investments tend to move together, measured from +1 (identical moves) to −1 (opposite moves).Correlation trapThe phenomenon where assets that look uncorrelated in calm markets all crash together in a crisis.Cost basisWhat you originally paid for a holding, used to calculate gains and losses when you eventually sell.Cost of goods sold (COGS)The direct cost of producing whatever was sold — materials, direct labor, manufacturing overhead.CouponThe fixed interest payment a bond issuer promises, usually expressed as an annual percentage of face value.Creation/redemptionThe mechanism that keeps ETF prices close to NAV. Authorized participants swap baskets of underlying stocks for ETF shares (or vice versa).CryptocurrencyDigital assets recorded on a blockchain — Bitcoin, Ethereum, etc. Highly volatile and not backed by cash flows or governments.Currency hedgingAn overlay used by some international ETFs to remove the effect of currency moves, so you get the foreign stock return in your home currency.Current assetsCash, receivables, inventory, and other assets the company expects to convert to cash within a year.Current liabilitiesBills the company has to pay within a year — accounts payable, short-term debt, accrued expenses.Current ratioCurrent assets ÷ current liabilities. Above 1 means the company can cover next year's bills from current assets.Customer supportThe broker's ability to actually help when something goes wrong.
D
DCF (discounted cash flow)Estimate intrinsic value by adding up the present value of every future cash flow the business produces.Deal spreadThe gap between the announced deal price and the live market price of the target's stock.Decision journalA pre-trade written record of your thesis, sizing, and what would change your mind.Declaration dateThe date the company's board formally announces the dividend.DefaultWhen a borrower fails to make a scheduled payment on a debt — a missed coupon, or failure to return principal at maturity.Default actionWhat your broker will do on your behalf if you take no action by a corporate-action deadline.Default riskThe risk that a bond issuer fails to make a payment on time.Depreciation & amortization (D&A)Non-cash accounting charge that spreads the cost of long-lived assets over their useful life.Developed markets (DM)The world's mature, high-income economies outside the US — Western Europe, Japan, Canada, Australia, the UK.DilutionYour ownership percentage shrinks because the company issued more shares.Discount rateThe annual rate used to translate future dollars back into today's dollars in a DCF.Disposition effectSelling winners too early to lock in gains and holding losers too long to avoid realizing the loss.DistributionThe income a fund pays out to its shareholders — dividends from stocks held, plus realized capital gains.DiversificationHolding many different investments so no single one can sink you.DividendA cash payment a company makes to shareholders — usually quarterly — out of its profits.Dividend yieldAnnual dividend per share ÷ share price. The cash income the stock pays out as a percentage of price.Do-nothing ruleAn explicit commitment to NOT trade in response to specific common triggers (single headlines, short-term volatility, peer envy).Dollar-cost averagingInvesting a fixed amount on a fixed schedule, regardless of market level.DrawdownThe peak-to-trough fall in an investment's value before it recovers.DriftThe gradual shift in your portfolio's mix as some assets grow faster than others.DRIPDividend Reinvestment Plan — automatically uses cash dividends to buy more shares of the same company.DurationA measure of how much a bond's price moves when interest rates change. Longer duration = more price sensitivity.
E
Earnings per share (EPS)Net income ÷ shares outstanding. The 'per-share slice' of the company's profit.EBITDAEarnings before interest, taxes, depreciation, and amortization — operating income plus non-cash D&A.Economic moatA durable advantage that lets a business defend high returns against competitors over time.EDGARThe SEC's free public database where US-listed companies file their 10-Ks, 10-Qs, 8-Ks, and other disclosures.EdgeWhatever it is about you that gives this pick a chance to outperform — information, time, temperament, or focus.Emergency fundCash reserved for unexpected expenses, usually 3–6 months of your usual spending.Emerging markets (EM)Stock markets in faster-growing, less mature economies — China, India, Brazil, Taiwan, South Korea, Mexico, etc.Employer matchFree money from an employer that matches part of what you contribute to a workplace retirement plan.Enterprise value (EV)Market cap + total debt − cash. The 'takeover price' of the whole business, regardless of how it's financed.EquityOwnership in something. For a company, it's what's left after all debts are paid — split across all shareholders.ETFExchange-Traded Fund — a basket of many stocks (or bonds) bundled into a single share that trades on an exchange like a regular stock.EV/EBITDAEnterprise value ÷ EBITDA. A 'capital-structure-neutral' multiple for comparing businesses across leverage levels.Ex-dateThe first trading day on which buyers no longer get the upcoming dividend.ExchangeWhere buyers and sellers of the same stock meet to trade.Expense ratioThe annual percentage of assets a fund charges to cover management and operations.
F
Face valueThe amount the bond issuer promises to repay at maturity. Also called par value.Fee dragThe cumulative effect of every fee you pay on the return you actually keep.FOMO buyingFear of missing out — piling into something after it has already run, because everyone else seems to be winning.Forward P/EP/E using next-12-month earnings forecasts in the denominator instead of trailing earnings.Free cash flow (FCF)Cash from operations minus capital expenditures — the cash actually available to shareholders or debt holders.Fund shortlistA small set of candidate funds you've pre-screened against your criteria and are ready to allocate between.FX feeThe markup applied when your broker converts your home currency to the currency of a foreign stock.FX markupThe gap between the true (mid-market) exchange rate and the rate your broker gives you.
G
GARP — growth at a reasonable priceA style that pays for growth, but not at any price — looks for moderate multiples on above-average growth.Glide pathA planned shift in allocation over time — typically moving from stocks toward bonds as retirement approaches.Gross marginGross profit as a percentage of revenue — how much of every dollar of revenue survives direct costs.Gross profitRevenue minus COGS — what's left after the direct cost of producing the product.Growth stockA stock priced for above-average revenue or earnings growth — typically high multiples and reinvesting cash.
H
Headline noiseThe constant churn of financial news that moves prices intraday but is irrelevant to a multi-decade investor.HedgeAn asset held specifically because it tends to rise (or at least not fall) when something else in the portfolio falls.Hedge fundA loosely regulated investment fund that uses leverage, shorting, and complex strategies to seek returns uncorrelated with the broader market.HerdingDoing what everyone else is doing because everyone else is doing it.High-yield (HY) / Junk bondCorporate bonds rated below investment grade — companies with material default risk that pay much higher coupons to compensate.High-yield savings accountA bank account that pays meaningfully more interest than a standard checking account.HorizonHow long until you need the money.
I
Inactivity feeA fee charged if you don't trade enough times per year.Income statementThe 'movie' statement — what came in (revenue), what was spent (costs), and what was left as profit, over a period.Index fundA fund that passively holds every stock in a named benchmark (S&P 500, MSCI World, etc.) in proportion.InflationThe gradual loss of purchasing power over time. $100 buys less each year.Interest rateThe cost of borrowing money, or the reward for lending it, expressed as a percentage.Interest-rate riskThe risk that rising interest rates push existing bond prices down, forcing a holder who sells before maturity to take a loss.Intrinsic valueWhat a business is worth based on the cash it can produce, independent of today's market price.InvalidationWhat would have to happen for you to admit the thesis is wrong and exit.InventoryGoods the company has made or bought but not yet sold.Investment Policy Statement (IPS)A written one-page document stating your time horizon, target allocation, position limits, rebalancing rule, and crash behaviour.Investment scamAny pitch or scheme designed to take your money without delivering real investment services.Investment-grade (IG)Corporate bonds rated BBB- or better — issuers strong enough that default is rare but not impossible.Investor protection schemeA legally-mandated fund that reimburses retail clients (up to a cap) if a regulated broker fails.IPOInitial Public Offering — the first time a company sells shares to the public.
K
L
Lazy portfolioA pre-defined simple portfolio recipe that requires no ongoing decision-making.Life eventA real-life change (job change, marriage, child, medical, large planned spend) that legitimately justifies revisiting the plan.Lifestyle creepThe pattern where spending rises to match every raise, so saving never increases.Limit orderBuy only at $X or better — price-protected, but may not fill.LiquidityHow quickly and cheaply you can turn an investment into spendable cash.Loss aversionFeeling losses about twice as strongly as equivalent gains — leading you to hold losers far too long.Lump sumInvesting a large amount all at once instead of spreading it over time.
M
Margin of safetyThe discount you demand below your fair-value estimate, so you can be wrong and still not lose.Market orderBuy (or sell) now at whatever the ask (or bid) is.Market priceWhat buyers and sellers are agreeing on right now — the last printed trade.Market timingTrying to buy near lows and sell near highs — which almost nobody does reliably.MaturityThe date a bond's face value is repaid and the loan ends. Can be months, years, or decades away.Mean reversionThe tendency of valuations and margins to return to long-run averages over time.MergerTwo companies legally combine into one new entity, usually with shareholders of both receiving stock in the combined firm.Money market fundA fund that holds very short-term, high-quality debt (like T-bills) and aims to stay stable at a $1 share price.Mutual fundA pooled fund priced once per day at its net asset value. Shares bought and sold directly with the fund company.
N
Narrative biasBelieving the better story over the better data.Net asset valueNAV — the fair value of one fund share, computed from the underlying holdings.Net incomeThe bottom line — what's left after everything (costs, OpEx, interest, taxes) is subtracted.Net marginNet income as a percentage of revenue — final profit per dollar of sales.Net worthEverything you own minus everything you owe.New-money rebalancingBringing the portfolio back to target by directing new contributions into underweight sleeves, rather than selling overweight ones.Nominal returnThe headline return, before inflation is subtracted. What the portfolio says on paper.
O
Opening auctionA single pre-market batch where pent-up orders accumulate and then cross to set the day's opening price.Operating expenses (OpEx)Costs of running the business that aren't directly tied to making the product — sales, marketing, R&D, general & admin.Operating incomeGross profit minus operating expenses — profit from the core business, before interest and taxes.Operating marginOperating income as a percentage of revenue — how much survives all operating costs.Opportunity costThe value of what you give up when you choose one option over another.Order bookThe running list of every bid (offer to buy) and ask (offer to sell) waiting at an exchange, sorted by price.OverconfidenceMistaking a few lucky trades for skill, then sizing up the next one.
P
P/B ratio (price-to-book)Market cap ÷ book value of equity. What you're paying for a dollar of accounting net worth.P/S ratio (price-to-sales)Market cap ÷ revenue. What you're paying per dollar of sales the company brings in.Panic sellingDumping investments into a drawdown because the pain of watching feels worse than the pain of missing the rebound.Passive fundA fund that holds the benchmark it's tracking — no stock picking.Pay dateThe date the cash actually lands in your brokerage account.PEG ratioP/E ÷ expected earnings growth rate. A way to ask 'how much am I paying per point of growth?'Permanent lossLoss that does not come back — a stock that goes to zero, or a portfolio sold at the bottom and never reinvested.PhishingFake emails, SMS, or messages impersonating your broker to steal your login or money.Platform feeA recurring monthly or quarterly fee some brokers charge just for holding an account.Ponzi schemeA scam that pays 'returns' to early investors using deposits from later ones, until the flow of new money stops.PortfolioThe combined collection of investments you own across one or more accounts.Position sizeThe fraction of the total portfolio invested in a single holding.Position sizingHow much of your portfolio you put into a single pick.Premium/discountHow far an ETF's trading price is above (premium) or below (discount) its net asset value.Present value (PV)What a future amount of money is worth today, after applying the discount rate.Price discoveryThe process by which the market figures out what a stock is currently worth.Price-to-earnings (P/E) ratioHow many dollars you pay per dollar of annual earnings — written as 'NN×'.Primary marketWhere a company raises money by issuing new shares. Cash flows to the company.Private equity (PE)Investment in companies that are not listed on public stock exchanges — typically through a fund that buys, restructures, and sells private businesses.Property, plant & equipment (PP&E)Long-lived physical assets — buildings, machinery, vehicles — sitting on the balance sheet at cost minus accumulated depreciation.ProspectusThe legal document that describes a fund — its strategy, fees, risks, holdings, and tax treatment.Protection capThe maximum amount the investor-protection scheme will reimburse per client per broker failure.Pump and dumpCoordinated promotion of a thinly-traded stock or crypto to drive the price up, followed by the promoters selling while retail buyers are still piling in.Purchasing powerWhat your money can actually buy, adjusted for price changes.
R
Real assetA physical asset with intrinsic value — property, commodities, infrastructure, farmland.Real returnYour return after subtracting inflation. The true change in your purchasing power.Realized gainThe profit (or loss) on positions you've actually sold, as opposed to paper gains on positions you still hold.Realty Income (O)A US REIT that owns ~15,000 single-tenant retail properties and is famous for paying a monthly dividend that has grown for over 25 years.RebalanceSelling some of what's grown most and buying more of what's grown least to return the portfolio to its target weights.RebalancingPeriodically bringing your allocation back to target as market moves push it off.Rebalancing premiumThe small return boost a disciplined rebalancer earns over a buy-and-drift portfolio, by systematically selling high and buying low.Recency biasTreating the recent past as if it will continue, leading you to chase whatever just performed well.Record dateThe date the company checks its register to confirm who is on it.RecoveryThe time it takes a portfolio to climb back to its previous peak after a drawdown.RegionA geographic grouping of equity exposure — US, developed-ex-US, emerging markets, etc.RegulatorThe national authority that licenses brokers and enforces investor-protection rules.Regulator checkLooking up a broker or advisor on the national regulator's public register before sending money.REITA Real Estate Investment Trust — a company that owns income-producing real estate and trades on a stock exchange.Retained earningsCumulative net income kept in the business, not paid out as dividends — sits in shareholders' equity.Retirement wrapperA tax-advantaged account type dedicated to long-term retirement savings.ReturnThe percentage change in the value of an investment over a period, usually a year.RevenueThe top line — money the business earned from its primary activity over the period (also called sales).Reverse splitA split run in the opposite direction — fewer shares, higher per-share price.Review cadenceHow often you sit down and look at the portfolio with intent — typically annual or semi-annual, deliberately not more.Rights issueExisting holders receive the right to buy more shares at a discount, by a deadline.Risk capacityYour financial ability to absorb losses without derailing your life.Risk premiumThe extra return investors demand for taking on risk, over and above what cash pays.Risk profileA label describing an investor's combined tolerance, capacity, and horizon — e.g. Conservative, Balanced, Growth, Aggressive.Risk toleranceYour willingness to accept losses in exchange for the chance of higher returns.Round-tripThe full cost of buying and then selling a position — commission + spread + FX, both sides.
S
Satellite sleeveA small portion of your portfolio (usually 5–15%) reserved for active picks, with the rest indexed.Savings rateThe share of your income you don't spend. Usually expressed as a percentage.Scheduled contributionAn automatic, recurring deposit from a funding source into your investment account.Secondary marketWhere investors trade existing shares with each other. Cash flows between investors, not to the company.SectorAn industry grouping inside the equity universe — tech, financials, healthcare, energy, consumer staples, etc.Secular changeA long-term, structural shift in an industry — technology, regulation, demographics — not a cyclical wobble.Sell rulePre-committed conditions under which you'll exit a position — written before you buy.Sequence of returnsThe order in which your returns arrive matters — big early losses hurt more than late ones.Sequence-of-returns riskThe danger that bad market years hit right when you start withdrawing — permanently damaging a portfolio.Set and forgetAn investing approach where setup happens once and ongoing decisions are minimal or zero.SettlementThe delay between placing a trade and the money + shares actually changing hands.Share buybackA company buying its own shares back on the secondary market.Share registerThe company's official list of who owns its shares on a given date.ShareholderAnyone who owns a share. The company communicates corporate actions to you because of this.Single-stock riskThe risk that one company you own goes to zero or close to it — independent of the broader market.SlippageWhen your order fills at a worse price than you expected because the order was big enough to eat through the best levels.Social engineeringManipulating someone into giving up access, credentials, or money through psychological tactics rather than technical hacking.Sovereign bondA bond issued by a government — you are lending money to a country in exchange for interest.Special dividendA one-off, larger-than-usual cash dividend, often funded by a windfall.Spin-offA parent company distributes the shares of a subsidiary to existing holders, creating a separate listed company.SpreadThe gap between the best bid and the best ask.StockA unit of ownership in a company, also called a share. Entitles the holder to a proportional slice of profits and assets.Stock dividendExtra shares distributed to existing holders instead of cash.Stock splitThe company increases its share count by a fixed ratio while the per-share price drops by the same ratio.Stop-limit orderA protective order that triggers a limit order when the price reaches a threshold.Sunk-costLetting money you've already spent or lost dictate your next decision.System 1The fast, automatic, emotional part of the brain that reacts before you can think.
T
Tail riskThe risk of rare, extreme outcomes that sit far in the tails of the return distribution — events that 'shouldn't happen but do'.Target allocationThe intended weights of each asset class, sector, or position in your portfolio — the shape you set on a calm day.Target-date fundA single fund that automatically rebalances and gets more conservative as you approach a target retirement year.Tax dragThe return reduction from realising taxable gains when you sell winners to rebalance.Tender offerA public offer to buy your shares at a stated price by a stated date.ThesisA written statement of why you believe a stock will outperform — and what would prove you wrong.Threshold ruleRebalance whenever any sleeve drifts more than a set percentage from its target, regardless of how recently you last rebalanced.Time horizonHow long until you need to spend the money you're investing.Time in forceHow long an order stays active: day (expires at close), GTC (good-till-cancelled), or IOC (immediate-or-cancel).Time in marketHow long your money stays invested — the single most reliable predictor of real returns.Total returnThe full return from an investment — price change plus any income (dividends, interest) it paid.Tracking errorHow far a passive fund's performance drifts from its stated index.Trading haltA pause on a single stock's trading, often around news or volatility.Trailing P/EP/E using the most recent four reported quarters of earnings in the denominator.Treasury billA short-term government bond, typically 4–52 weeks to maturity. Considered the safest widely-available asset in its currency.TurnoverHow much of a fund's portfolio is bought and sold per year.Two-factor authenticationRequiring a second form of verification beyond your password to log in.
U
V
Valuation gapThe difference between what a stock is worth (estimated) and what it currently trades at.Value stockA stock priced low on standard multiples relative to its fundamentals — usually slower-growing.Value trapA stock that looks cheap on a backward-looking multiple but is cheap for a reason — the business is impaired.VolatilityHow much an investment's price swings, up and down, over time.