Investing glossary
71 plain-English definitions for stocks, funds, options, and risk — written for beginners without the sales pitch. Jump to a letter or scroll.
#
- 52-week high/low
- The highest and lowest traded prices over the past year. Context for where today’s price sits in recent range — not a buy/sell signal alone.
- Stock lookup
A
- After-hours trading
- Trading outside the regular exchange session. Liquidity is thinner; moves can reverse by the next open.
- Extended hours movers
- Ask
- The lowest price a seller is currently willing to accept for a security. The gap between bid and ask is the spread.
- Asset allocation
- How you split money across stocks, bonds, cash, and other assets. Often a bigger driver of long-term results than stock picking.
- Average cost basis
- Your blended purchase price per share after multiple buys (or sells under average-cost accounting). Used to measure unrealized P&L and taxable gain.
- Average cost calculator
B
- Bear market
- A prolonged period of falling prices, often described as a decline of ~20% or more from recent highs. Opposite of a bull market.
- Beta
- A measure of how much a stock’s returns tend to move with the broader market. Beta near 1 tracks the market; above 1 is more volatile.
- Stock lookup
- Bid
- The highest price a buyer is currently willing to pay. Market orders to sell typically hit the bid.
- Bid-ask spread
- Ask minus bid. Crossing the spread is an immediate cost of trading, separate from commissions.
- Blue chip
- Informal label for large, established companies with relatively stable businesses and long trading histories — not a guarantee of safety.
- Bond
- A loan you make to a government or company. You usually receive interest (coupon) and principal back at maturity, unless the issuer defaults.
- Breakeven (options)
- The underlying price where an options trade neither profits nor loses at expiration (ignoring fees). For long calls: strike + premium; long puts: strike − premium.
- Options profit calculator
- Bull market
- A prolonged period of rising prices and optimistic sentiment. Definitions vary; often tied to gains of ~20% from lows.
C
- CAGR
- Compound annual growth rate — the smoothed yearly return that takes a starting value to an ending value over a period if growth were constant.
- Investment return calculatorCAGR guide
- Call option
- A contract that gives the buyer the right (not obligation) to buy shares at a fixed strike before or at expiration. Buyers are typically bullish.
- Options profit calculator
- Capital gains
- Profit from selling an investment above its cost basis. Tax treatment often differs for short-term vs long-term holding periods.
- Capital gains calculator
- Compounding
- Earning returns on prior returns. Reinvested dividends and growth over long periods are the classic compounding story.
- Compound projectorCompounding guide
- Cost basis
- What you paid for an investment (including certain adjustments). Subtracted from sale proceeds to figure taxable gain or loss.
- Average cost calculator
D
- Day trading
- Opening and closing positions within the same session. Higher transaction costs, stress, and pattern-day-trader rules can apply in some brokerages.
- Day trading vs long-term
- Diversification
- Spreading risk across uncorrelated or less-correlated holdings so one bad name hurts less. Does not eliminate market risk.
- Dividend
- A cash (or stock) distribution a company pays to shareholders from earnings or reserves. Not guaranteed and can be cut.
- Dividend calculatorEx-div calendar
- Dividend yield
- Annual dividend per share divided by share price, shown as a percent. High yield can signal income — or a falling price / risk of a cut.
- Stock lookup
- Dollar-cost averaging (DCA)
- Investing a fixed amount on a schedule regardless of price. Can reduce timing regret; it does not guarantee better returns than lump sum.
- DCA calculatorDCA guide
- Drawdown
- Decline from a peak to a trough in portfolio or price. Knowing your max historical drawdown helps set risk expectations.
- DRIP
- Dividend reinvestment plan — automatically uses dividends to buy more shares, often fractional, compounding share count over time.
- Dividend & DRIP calculatorDRIP guide
E
- Earnings
- A company’s profit, often discussed as EPS (earnings per share). Quarterly earnings reports can move prices sharply.
- Earnings calendar
- Economic calendar
- Schedule of macro releases (CPI, jobs, central-bank decisions) that can move markets around the print.
- Economic calendar
- EPS
- Earnings per share — profit allocated to each outstanding share. Used in P/E and growth comparisons.
- ETF
- Exchange-traded fund — a basket of holdings that trades like a stock. Popular for broad index exposure with low fees.
- ETFs for beginners
- Ex-dividend date
- The date on or after which a stock trades without the right to the upcoming dividend. To receive it, you typically need to own shares before the ex-date.
- Dividend calendar
- Expense ratio
- Annual fund fee as a percent of assets. Small differences compound a lot over decades in index funds and ETFs.
F
- FIRE
- Financial Independence, Retire Early — a planning approach that estimates a portfolio large enough to cover spending via a safe withdrawal rate.
- Retirement & FIRE calculator
- Fundamental analysis
- Valuing a company using business metrics — revenue, margins, cash flow, debt, growth — rather than only chart patterns.
- Fundamentals guide
I
- Index fund
- A fund designed to track a market index (like the S&P 500) instead of picking individual winners. Usually low cost.
- S&P 500 vs stock picking
- Inflation
- Rising general price level — cash buys less over time. Real returns subtract inflation from nominal gains.
- Inflation calculatorInflation guide
- IPO
- Initial public offering — when a private company first sells shares to public investors on an exchange.
L
- Limit order
- An order to buy or sell at a specific price or better. May not fill if the market never reaches your price.
- Liquidity
- How easily you can buy or sell without moving the price much. Large-cap stocks and major ETFs are usually more liquid.
- Long position
- Owning a security expecting it to rise. Opposite of a short position.
M
- Margin
- Borrowed money from a broker to buy securities. Amplifies gains and losses; interest and margin calls apply.
- Market cap
- Share price × shares outstanding — a rough size of the company’s equity value in the market.
- Stock lookup
- Market order
- An order to trade immediately at the best available price. Fast fills, but the price can slip in fast markets.
- Moving average
- Average price over a lookback window (e.g. 50-day). Used to smooth noise and spot trend direction — not predictive by itself.
- Reading charts
N
O
- Order book
- Visible bids and asks at various prices. Depth shows resting liquidity, but not all interest is displayed.
P
- P/E ratio
- Price-to-earnings — share price divided by earnings per share. High P/E can mean growth expectations or an expensive stock.
- Stock lookup
- Paper trading
- Simulated trading with fake money and real (or delayed) market prices. Useful for learning order flow without capital risk.
- Stock market simulatorPaper trading guide
- Pattern day trader
- U.S. brokerage label for frequent day traders in margin accounts, often triggering a $25,000 equity requirement. Rules vary by broker and account type.
- Portfolio
- Your collection of holdings — stocks, ETFs, cash, etc. Allocation and diversification describe how risk is spread.
- Portfolio trackerWatchlist
- Position sizing
- Choosing how many shares to buy so a stop-out loses only a planned percent of your account — risk first, size second.
- Position size calculatorPosition size guide
- Put option
- A contract giving the buyer the right to sell shares at a strike. Buyers are often bearish or hedging a long stock position.
- Options profit calculator
R
- Rebalancing
- Adjusting holdings back toward target weights after markets move — selling winners / buying laggards by plan, not vibes.
- Risk/reward ratio
- Potential profit divided by potential loss on a planned trade (e.g. 2:1). Helps filter weak setups before you size the position.
- Risk/reward calculatorR:R guide
- ROI
- Return on investment — gain or loss relative to capital invested, often as a percent. Does not by itself show time (see CAGR).
- Investment return calculator
S
- Sector
- A grouping of similar businesses (technology, energy, healthcare, etc.). Sector ETFs track those slices of the market.
- Market heatmap
- Short selling
- Borrowing shares to sell now, hoping to buy back cheaper later. Losses can exceed the initial proceeds if price rises.
- Spread
- Difference between bid and ask. Wide spreads raise trading costs, especially in illiquid names.
- Stop-loss
- A planned exit price (or order) that caps loss if the trade goes against you. Placement still needs judgment — gaps can slip past stops.
- Stop-loss calculatorStop-loss guide
- Strike price
- The fixed price at which an option buyer can buy (call) or sell (put) the underlying shares.
- Options profit calculator
- Support and resistance
- Price zones where buying or selling historically clustered. Useful as planning references — not magical barriers.
T
- Technical analysis
- Studying price and volume patterns, indicators, and levels to time trades. Complements — does not replace — understanding the business.
- Chart reading
- Ticker symbol
- Short exchange code for a security (e.g. AAPL, SPY). Same company can have different tickers on different venues.
- Stock lookup
- Time decay (theta)
- The tendency for options to lose extrinsic value as expiration approaches, all else equal. Painful for long premium holders in sideways markets.
- Options profit calculator
- Total return
- Price change plus dividends (and other distributions). Better than price-only charts for income-paying assets.
- Stock profit calculator
U
- Unrealized P&L
- Paper profit or loss on open positions. Becomes realized when you sell (or otherwise close) the position.
- Portfolio tracker
V
- Volatility
- How much prices swing. Higher volatility means wider moves — opportunity and risk. Options prices often rise when expected volatility rises.
- Volume
- Number of shares traded in a period. Unusual volume can confirm interest in a move; thin volume can mean shaky prices.
- Stock screener
W
Y
- Yield
- Income return relative to price — dividends, coupons, or distributions expressed as a percent. Compare apples-to-apples (trailing vs forward).
Educational definitions only — not advice. Explore free tools and guides.