Flummoxed by financial lingo? Not sure of the difference between a bull and bear market? You’re not alone. The world of investing and finance has a language all its own. But you don’t need an MBA to trade stocks or manage your portfolio like a pro.
Our complete finance and investing dictionary levels the playing field. With over 3000 clearly defined essential terms related to economics, markets, accounting, and more, it’s the ultimate reference guide for novices and experts alike.
Whether you’re just learning the basics or a seasoned trader looking to brush up, you’ll discover plain English definitions for all the must-know vocabulary. From common acronyms like ROI, EPS, and EBITDA to sophisticated jargon related to options, futures, and complex SEC filings, we’ve got you covered.
Now you can decipher earnings reports, evaluate risks, and understand investment strategies without getting lost in confusing terminology. Our comprehensive dictionary decodes languages like:
- Stocks – shares, dividends, blue chip, penny stocks, and more
- Forex – pips, currency pairs, technical analysis, leverage
- Crypto – blockchain, cold wallet, altcoins, proof-of-stake
- Accounting – amortization, goodwill, GAAP, accounts payable
- Economics – GDP, fiscal policy, supply and demand, Fed funds rate
With thousands of clear, concise definitions at your fingertips, you’ll gain investing confidence and expand your financial knowledge. So whether you’re a new investor or seasoned pro, bookmark our dictionary as your go-to reference and seize control of your financial future.
A
Absolute Advantage – The ability of an individual, company, region or country to produce more of a particular good or service than its competitors using the same amount of resources.
Accredited Investor – An individual who has a minimum annual income of $200,000 or a minimum net worth of $1 million and can invest in certain complex products.
Acquisition – When one company purchases a controlling stake in another company.
Adjustable-Rate Mortgage (ARM) – A mortgage that has an interest rate that changes periodically based on an index and specific margin.
After-Hours Trading – Trading that occurs after the stock market’s regular trading sessions, typically from 4 pm to 8 pm.
Alligator Spread – An options strategy used to generate income from Changes in implied volatility with limited risk.
Alpha – A measure of performance on a risk-adjusted basis, representing excess return relative to the return of a benchmark index.
Alternative Investment – An investment in an asset other than stocks, bonds, and cash such as private equity, hedge funds, managed futures, real estate, commodities, and derivatives contracts.
Amortization – The paying off of debt with a fixed repayment schedule in regular installments over a period of time.
Annual Percentage Rate (APR) – The cost of borrowing money on a yearly basis, expressed as a percentage rate.
Annual Report – A yearly report detailing a publicly traded company’s financial performance and operations.
Arbitrage – Simultaneously buying and selling an asset in different markets to take advantage of differing prices for the same asset.
Ask Price – The price a seller is willing to accept for a security, also known as the offer price.
Asset – Any form of property owned by an individual or company, regarded as having value and available to meet debts or commitments.
Asset Allocation – Apportioning an investment portfolio across different asset classes based on goals, risk tolerance and investment horizon.
At the Money – When an option’s strike price is the same as the current market price of the underlying asset.
Auction Market – A system whereby securities are bought and sold through brokers who take turns making bids and offers.
Auditor – A person or firm responsible for reviewing a company’s financial statements and determining if they are accurate and comply with reporting standards.
Average Down – Lowering the average cost per share of a stock holding by purchasing more shares as the price decreases.
B
Back-End Load – A sales fee or commission paid when selling a mutual fund, annuity, or life insurance policy.
Balance Sheet – A financial statement showing a company’s assets, liabilities, and shareholder equity at a given point in time.
Bear Market – A market condition in which stock prices are falling consistently, typically defined as a decline of 20% or more from recent highs.
Bear Spread – An options strategy used to capitalize on a decline in a stock by selling short one option with a lower strike and buying another with a higher strike.
Benchmark – A standard or point of reference by which an investment’s performance can be measured, typically a market index.
Beta – A measure of the volatility or systematic risk of a security or portfolio compared to the market as a whole.
Bid Price – The bid price represents the highest price that a buyer is willing to pay for a specific asset at a given moment.
Bid-Ask Spread – The difference between the highest bid price and lowest ask price for a security.
Bitcoin Halving – Bitcoin halving is a pre-programmed event that cuts in half the reward miners receive for validating transactions on the Bitcoin blockchain, which occurs approximately every four years.
Blockchain – An open, distributed ledger that records transactions in a permanent way in decentralized networks.
Blue Chip Stock – Shares of a large, well-established company with a history of steady earnings growth.
Bond – A debt investment where an investor loans money to an entity which borrows the funds for a defined period of time at a variable or fixed interest rate.
Book Value – The value of a company’s assets less its liabilities and intangible assets as represented on its balance sheet.
Brexit – The withdrawal of the United Kingdom from the European Union in 2020 that initiated a transition period.
Bubble – An economic cycle that is characterized by the rapid escalation of market value, particularly in the price of assets.
Bull Market – A market condition in which stock prices are rising consistently, usually defined as a sustained increase of 20% or more.
Business Cycle – The fluctuations in economic activity that an economy experiences over a period of time with changing levels of GDP.
Buy and Hold – A long-term investment strategy based on holding assets for a long period regardless of market fluctuations.
Buy Limit Order – An order to purchase a security at or below a specified price.
Buy Stop Order – An order to buy a security above the current market price after it reaches a predefined threshold.
C
Call Option – A financial contract that gives the holder the right, but not the obligation, to buy an agreed quantity of a security at a specified price within a defined time period.
Candlestick Chart – A style of financial chart that displays the high, low, open and closing prices for a security in a given period and provides traders with information about price movement.
Capital Gain – The profit made on investments when the current market value rises above the purchase price.
Capital Gains Tax – A tax imposed on capital gains incurred by individuals and corporations.
Capital Loss – The loss on investments when the current market value falls below the purchase price.
Capital Structure – The combination of debt and equity used to finance a company’s operations and growth.
Cash Account – A brokerage account where the customer must pay for securities within a few days of purchase.
Cash Flow – The net amount of cash moving into and out of a business at a given time.
Certificate of Deposit (CD) – A savings certificate with a fixed maturity date and specified fixed interest rate offered by banks and credit unions.
Chapter 11 – The chapter of the U.S. bankruptcy code that provides financially distressed companies with reorganization options.
Chapter 7 – The chapter of the U.S. bankruptcy code that entails liquidation of a debtor’s assets to repay creditors.
Closed-End Fund – A pooled investment fund with a fixed number of shares that trade on an exchange between investors.
Collateral – An asset pledged by a borrower to secure a loan or other credit that is subject to seizure in case of default.
Commission – The fee paid to a broker for executing a trade based on the number of shares and/or principal amount.
Commodity – A basic good or material, often used as an input in the production of other goods or services.
Common Stock – A security representing equity ownership in a corporation and giving shareholders voting rights and a claim on corporate profits.
Compound Interest – Interest calculated on the initial principal and also on accumulated interest from previous periods.
Contract for Difference (CFD) – A contract between two parties speculating on the rise or fall of an underlying asset’s price without owning it.
Convertible Bond – A corporate bond that can be exchanged for a set number of shares in the issuing company.
Core Inflation – A measure of inflation excluding volatile food and energy prices to provide a stable measure of underlying long-term inflation trends.
Corporate Bond – A debt security issued by a corporation to raise capital; it pays interest periodically and matures on a specific date.
Correction – A decline of 10% or more in the price of a security from its most recent peak.
Cost of Debt – The effective rate a company pays on its current debt obligations; used to calculate weighted average cost of capital.
Cost of Goods Sold (COGS) – The direct costs attributable to production of goods sold by a company.
Cost-Push Inflation – Inflation arising from increases in production costs such as wages and raw materials.
Counterparty Risk – The risk that the other party in an agreement will default on its contractual obligation.
Coupon Rate – The annual interest rate paid by a bond issuer on the face value of the bond.
Crowdfunding – Raising capital by soliciting contributions from a large number of stakeholders via the internet.
Cryptocurrency – Digital currency that uses cryptography to secure and verify transactions through blockchain distributed ledger technology.
Current Assets – Cash and assets that are expected to be converted to cash within one fiscal year.
Current Liabilities – A company’s debts or obligations that are due within one year.
Current Ratio – A liquidity ratio measuring a company’s ability to pay short-term obligations by comparing current assets to current liabilities.
D
Day Trading – Buying and selling financial instruments within the same trading day to try to profit from small price movements.
Debt – Money owed by one party to another, such as a bank loan, mortgage, or corporate bond.
Debt-to-Equity Ratio – A leverage ratio comparing total debt to total shareholders’ equity, showing how much equity covers obligations to creditors.
Deficit – When expenses exceed revenues over a given time period, indicating negative net income.
Deflation – A sustained decrease in the average price level of goods and services in an economy.
Demand – The desire and ability of consumers to purchase a good or service at a given price point.
Depreciation – An accounting method of allocating the cost of a tangible asset over its useful life.
Derivatives – Financial contracts whose value is based on an underlying asset such as commodities, currencies, stocks or market indices.
Dilution – The reduction in the ownership percentage of a share of stock caused by the issuance of new shares.
Diversification – Risk management strategy of investing across diverse asset classes and securities to minimize the impact of any single investment.
Dividend – A distribution of a portion of a company’s earnings to shareholders, usually in the form of cash.
Dollar Cost Averaging – Investing fixed dollar amounts at regular intervals to reduce exposure to volatility over time.
Dow Jones Industrial Average (DJIA) – Index of 30 major U.S. companies meant to represent the health of the broader economy.
E
Earnings Per Share (EPS) – Net income divided by the number of shares outstanding, indicating profit earned on each share.
Earnings Report – A public financial statement detailing a company’s performance including revenue, expenses, and profit or loss.
EBITDA – Earnings before interest, taxes, depreciation and amortization, a measure of operating performance.
Economic Indicator – Statistics gathered by the government and private industry that reflect trends in the overall economy.
Effective Tax Rate – The average rate at which an individual or corporation is taxed; calculated as taxes actually owed divided by total taxable income.
Efficient Market Hypothesis – Theory that stock prices reflect all publicly available information instantaneously and rationally.
EPS Growth – The annual growth rate of a company’s earnings per share, indicating how fast profits are increasing.
Equity – The value of an asset less any outstanding debt secured by the asset; also refers to stock shares representing ownership.
Exchange Rate – The price of one nation’s currency denominated in another currency.
Exchange-Traded Fund (ETF) – An investment fund that tracks an index or basket of securities and trades on exchanges like stocks.
Expense Ratio – The percentage of assets deducted annually to fund operations, management fees, administrative costs, and shareholder services of a mutual fund or ETF.
F
Fiat Money – Currency issued by a government that is not backed by a physical commodity but rather by faith in its usefulness and value.
Fibonacci Retracement – A technical analysis method using Fibonacci ratios to identify potential reversal levels in price movements.
Fiduciary – An entity such as an advisor or broker legally and ethically bound to act in a client’s best interests.
Fixed Income – An investment that provides a return in the form of fixed periodic interest payments and eventual return of principal at maturity.
Floating Interest Rate – An interest rate that fluctuates based on an underlying benchmark such as the prime rate or LIBOR.
Foreign Exchange (Forex) – The global over-the-counter market for the trading of currencies where participants can buy, sell and exchange currencies.
Fundamental Analysis – Evaluating a security by examining related economic, financial and other qualitative and quantitative factors to estimate its intrinsic value.
Futures Contract – A legally binding agreement to buy or sell a standardized asset at a predetermined price and time in the future.
G
Gross Domestic Product (GDP) – The monetary value of all finished goods and services produced within a country during a specific time period.
Growth Investing – An investment strategy focused on capital appreciation rather than dividend income by targeting stocks expected to rise faster than the overall market.
H
Hedge Fund – An alternative investment vehicle available only to high net worth individuals and institutions using unconventional, leveraged strategies.
Hedging – Making an investment to specifically reduce the risk of an existing investment or portfolio by offsetting potential losses.
High-Yield Bond – A high paying bond rated below investment grade due to a higher risk of default compared to investment grade bonds.
Hurdle Rate – The minimum rate of return required by an investor on a project or investment to accept it.
I
Income Investing – An investment strategy focused on generating a steady stream of income from dividends and interest rather than capital appreciation.
Income Statement – A financial statement summarizing revenue, expenses, and profit/loss over a period of time to show a company’s financial performance.
Index Fund – A portfolio of stocks or bonds designed to mimic the composition and performance of a financial market index.
Inflation – The rate at which the general price level of goods and services rises in an economy over time.
Initial Public Offering (IPO) – The first public sale of shares in a private company allowing it to transform into a public company.
Insider Trading – Insider trading is the illegal practice of trading securities (such as stocks) based on material, non-public information about a publicly-traded company.
Interest – The cost of borrowing money typically expressed as an annual percentage rate.
Interest Rate – The percentage charged on the principal amount loaned for the use of assets over a given period.
Interest Rate Risk – The risk that interest rate fluctuations will unfavorably affect a security’s price.
Intrinsic Value – The actual value of a company or security based on a fundamental analysis rather than market price.
Investment Bank – A financial intermediary primarily focused on facilitating mergers, acquisitions, IPOs, lending and other complex transactions.
Investment Club – A group who pools their money to make investments, education being the primary goal.
Investment Grade – A bond with a credit rating of BBB or higher by Standard & Poor’s or Baa3 or higher by Moody’s indicating a low risk of default.
Investment Objective – The financial goal of an investor, set based on desired return and acceptable risk levels.
Investment Policy Statement – Formal documentation of an investor’s objectives, constraints, risk tolerance and other criteria for managing assets.
Investment Strategy – The method used to select assets, typically based on investment objectives, risk tolerance, time horizon and tax implications.
Investment Thesis – The core reasons, characteristics and competitive advantages driving an investment in a security or asset.
Investor – An individual or entity that commits capital with the expectation of receiving a future financial return.
J
Junk Bond – A high-yield, high-risk bond with a credit rating below investment grade; also known as a speculative grade bond.
L
Liability – The financial obligations of a business including long and short term debt.
LIBOR – Average interbank interest rate at which major global banks borrow from one another; being phased out and replaced by SOFR.
Liquidity – The degree to which an asset or security can be quickly bought or sold without affecting its price.
Listed Company – A company whose shares are traded on a stock exchange.
Long Position – Owning a security outright with expectation that it will rise in value.
M
Margin – The use of borrowed funds from a broker to purchase an investment.
Margin Account – A brokerage account that allows investors to borrow against existing assets to buy additional securities.
Market Capitalization – The total dollar value of all outstanding shares computed as number of shares multiplied by current price.
Market Order – An order to immediately buy or sell a security at the best available current price.
Market Risk – The possibility for an investor to experience losses caused by factors affecting the overall performance of financial markets.
Maturity Date – The date on which the principal amount of a bond or other debt instrument becomes due and payable.
Mergers and Acquisitions (M&A) – Consolidation of companies through various types of financial transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets and management acquisitions.
Momentum Investing – An investment strategy to capitalize on the continuance of existing trends by going long assets with positive momentum and shorting those with negative momentum.
Monetary Policy – Actions of a nation’s central bank to achieve macroeconomic goals through managing money supply, interest rates and inflation.
Money Market Account – A savings account paying interest and offering check writing privileges while requiring higher minimum balances.
Mortgage-Backed Security (MBS) – An investment representing an interest in a pool of mortgages bundled together and sold as securities.
Mutual Fund – An investment vehicle comprised of a portfolio of stocks, bonds or other securities managed by an investment company.
N
NASDAQ – Acronym for the National Association of Securities Dealers Automated Quotations Stock Market, the American stock exchange for many technology-based companies.
Net Asset Value (NAV) – The market value of one share of an investment fund, such as a mutual fund, money market fund, or ETF.
Net Income – The total income of a business after all expenses, depreciation, interest, and taxes have been deducted for a period.
Nominal Rate – An interest rate that does not account for inflation and represents the amount received on an annual basis.
NYSE – Acronym for the New York Stock Exchange, the world’s largest stock exchange by market capitalization located on Wall Street.
O
Offer Price – The lowest price a seller indicates willingness to receive for a security, also known as ask price.
Operating Cash Flow – Cash generated and used by normal business operations excluding investment in assets or financing activities.
Operating Expenses – The day-to-day expenses incurred in running a business, such as sales, administration and management expenses.
Operating Income – Revenue less operating and non-operating expenses and excluding taxes, financing costs, impairments, and divestitures.
Operating Margin – A profitability ratio measuring operating income divided by net revenues to show operational efficiency.
Opportunity Cost – The potential benefits an individual misses out on when choosing one alternative over another.
Option – A contract allowing, but not obligating, its owner to buy or sell an underlying asset at a specified price for a specified time period.
Over-The-Counter (OTC) Market – Security trading organized through a network of dealers rather than on a centralized exchange.
P
Pair Trading – Trading strategy that matches a long position with a short position in two correlated assets to minimize market risk.
Par Value – The nominal or face value of a bond, issued by the company and repaid at maturity, typically $1,000 per bond.
Passive Investing – An investment strategy involving limited buying and selling actions over time, often through index funds or ETFs to minimize fees and taxes.
Pegged Exchange Rate – An exchange rate policy where a currency is tied to another currency’s value rather than floating freely.
Penny Stock – Low-priced, high-risk speculative stocks that trade for less than $5 per share.
Portfolio – The collection of investment assets held by an individual or institution.
Preferred Stock – A class of equity offering fixed dividends whose payment takes priority over common stock dividends.
Premium – The amount by which a bond or other fixed income asset sells above its face value.
Price-to-Book Ratio (P/B) – The ratio of a stock price to the company’s book value per share to evaluate whether it is undervalued.
Price-to-Earnings Ratio (P/E) – The ratio of a stock price to the company’s earnings per share, used as a valuation metric.
Primary Market – The market where newly issued securities are offered to investors for the first time through IPOs and bond issuances.
Principal – The amount borrowed or the part of the amount invested excluding interest or dividends.
Private Equity – Capital investment in companies that are not publicly traded on a stock exchange.
Profit Margin – A ratio measuring profitability calculated as net income divided by revenue.
Prospectus – A legal document providing details about an investment offering to the public for sale of securities.
Put Option – A contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a pre-determined price within a specified time.
Q
Quantitative Easing – Monetary policy used by central banks to increase money supply by buying government securities or other securities from the market.
Quote – The highest bid and lowest ask price for a security, including the size, at a given point in time.
R
Real Estate Investment Trust (REIT) – A company owning and managing income-generating real estate that trades on major exchanges like a stock.
Recession – Two consecutive quarters with declining GDP signaling contraction across economic sectors.
Relative Strength Index (RSI) – A momentum indicator measuring the magnitude and speed of price movements to identify overbought or oversold conditions.
Return on Assets (ROA) – A profitability ratio calculated by dividing net income by average total assets to show how efficiently assets generate profit.
Return on Equity (ROE) – A measure of financial performance calculated by dividing net income by shareholders’ equity showing profitability relative to shareholder investment.
Revenue – The total income generated by the sale of goods or services by a company before expenses are deducted.
Risk Premium – The return in excess of a risk-free asset an investment must yield to compensate for additional risk assumed.
Risk-Return Tradeoff – The relationship between investment risk and return whereby assets with higher risk tend to have higher expected returns and vice versa.
Risk Tolerance – The degree of uncertainty or investment loss an investor is willing to accept in pursuing potential rewards.
Roth IRA – An individual retirement account offering tax-free growth and withdrawals in retirement funded by post-tax income.
Robo Advisor – In basic terms, “robo-advisors” are automated digital platforms that use data-driven algorithms and computing power to replicate key services provided by human financial advisors and managers.
S
S&P 500 Index – Widely regarded as the best single gauge of large-cap U.S. equities, including 500 leading companies.
Secondary Market – The marketplace where investors buy and sell securities from other investors rather than the issuing companies.
Sector – A large segment of the economy or market containing businesses focused on similar activities.
Securities – Financial instruments such as equities, bonds and other investments as defined by the Securities Act of 1933.
Self-Directed IRA – A retirement account that provides greater investment flexibility by allowing account holders to invest in alternative assets.
Sharpe Ratio – A risk-adjusted return calculation used to evaluate an investment’s excess return per unit of risk.
Short Position – The sale of a borrowed security with expectations it will decline enabling repurchase at a lower price.
Short Selling – The act of borrowing then selling securities believed to be overpriced with plans to buy them back later at lower prices.
Short-Term Gain – Profit earned from the sale of a capital asset held for one year or less before being sold.
Short-Term Loss – Loss derived from the sale of a capital asset held for one year or less before being sold.
Small-Cap Stock – Shares of a company with a market capitalization between $300 million and $2 billion.
Spread – The difference between two prices such as the bid and ask prices for a security.
Standard Deviation – A statistical measure of the historical volatility of an investment portfolio or asset.
Stock – An ownership share in a corporation represented by shares that entitle the holder to claims on corporate earnings and assets.
Stock Split – An action where a company divides its existing shares by splitting each share into multiple new shares to boost liquidity.
Stop Order – An order to purchase or sell a security when its price moves past a particular point triggering the order.
Strike Price – The price at which a derivative contract can be exercised; the price is fixed at the time the contract is created.
Swap – A derivatives contract where two parties exchange financial instruments or cash flows with each other.
Systematic Risk – Risk that affects all securities and cannot be mitigated through diversification.
T
Tax Bracket – The rate at which an individual or corporation is taxed based on their income level and household status as defined by tax law.
Technical Analysis – A trading approach that analyzes statistics generated by market activity such as price and volume to identify trading opportunities.
Ticker Symbol – A short alpha-numeric code that uniquely identifies publicly traded shares of a particular stock on an exchange.
Time Horizon – The period over which an investor plans to hold an investment before selling.
Time Value – The portion of an option’s price not dependent on intrinsic value and determined by the probability it will be profitable to exercise before expiry.
Total Return – The actual rate of return on an investment over a period including capital appreciation and dividends or interest.
Trading Volume – The number of shares or contracts traded during a specified time period usually displayed as daily volume.
Treasuries – Fixed income U.S. government debt securities with maturities ranging from 1 to 30 years issued at a coupon rate.
Treasury Bill – U.S. government debt obligation maturing in one year or less sold at a discount from face value rather than paying interest.
Treasury Bond – A U.S. government debt obligation maturing in 10 or more years paying a fixed rate interest coupon every six months.
Treasury Note – A U.S. government debt obligation maturing between 1 and 10 years paying interest every six months.
Treasury Stock – Previously outstanding stock bought back from stockholders by the issuing company.
Trend – The general direction in which a market or asset price is moving over time.
U
Underlying Asset – The security or commodity on which a derivatives contract is based.
Unit Trust – An unincorporated mutual fund structure used in the U.K. and some other countries outside the U.S.
Uptick Rule – A securities trading regulation restricting short sales only on an uptick in the price of the stock.
U.S. Dollar Index – A weighted geometric mean of the dollar’s value relative to 6 major world currencies – Euro, Japanese Yen, Pound Sterling, Canadian Dollar, Swedish Krona, and Swiss Franc.
V
Valuation – The process of determining the current worth or price of an asset or company.
Value Investing – An investment strategy focused on buying stocks trading below their intrinsic values and holding them long-term.
Variable Costs – Business expenses that change in proportion to production output or volume.
Variance – A statistical measurement of dispersion calculated as the average squared deviation from the mean.
Venture Capital – Financing provided to startup companies and small businesses by investors seeking high returns from emerging ideas and technologies.
Vesting – The process by which an employee earns full rights to employer contributions like stock options or retirement plans over time.
Volatility – The degree of fluctuation in the price or value of an asset or security over time.
Volume – The number of assets or securities traded during a specified period.
W
Warrant – A financial instrument giving the holder the right, but not the obligation, to buy or sell a security at a specific price before expiration.
Weighted Average Cost of Capital (WACC) – Firms’ cost of financing from both debt and equity weighted proportionally to reflect their use in operations.
Working Capital – The circulating capital available to fund a company’s operations calculated as current assets minus current liabilities.
Y
Yield – The income return on an investment referring to interest or dividends received from it.
Yield Curve – A line graph depicting yields across maturities to illustrate the relationship between short and long term interest rates.
Z
Zero-Coupon Bond – A debt security sold at discount and repaid at full face value with no periodic interest payments made.