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Glossary
67 terms in plain words. A dotted word in a lesson leads here.
A
After-hours tradingTrading in US shares after the regular session closes at 16:00 New York time.AllocationHow your portfolio's value is divided between its holdings and cash.AskThe lowest price a seller will accept for a share right now.Asset classA group of investments that behave in similar ways, such as shares, bonds or cash.Average costWhat you paid per share on average across all your buys: the total cost divided by the shares.
B
BenchmarkA yardstick — usually an index — that you compare your return with over the same days.BidThe highest price a buyer is offering for a share right now.BondA loan to a company or government that pays interest and is repaid.BrokerA licensed firm that buys and sells investments for you and holds them in your account.Brokerage accountAn account at a broker that holds your cash and your investments.
C
Candlestick chartA price chart that shows each period's open, high, low and close as one candle.Cash flow (deposit or withdrawal)Money you move into or out of your portfolio — not a gain or a loss.Compound interestEarning a return on earlier returns as well as on the money first put in.Consensus estimateThe average of analysts' forecasts for a company's results, such as its revenue or EPS.Cost basisWhat you paid for the shares you still hold — the starting point for your gain or loss.
D
DiversificationSpreading money across many different investments so that one failure does little damage.DividendA part of a company's profit paid out to its shareholders.Dividend yieldA share's yearly dividend divided by its price, as a percentage.Dollar-cost averagingInvesting a fixed amount on a fixed schedule, whatever the price.
E
Earnings reportA company's published results for a quarter or a year: revenue, costs, profit and earnings per share.Emergency fundCash kept aside, easy to reach, for costs nobody planned.EPS (earnings per share)A company's net income divided by its number of shares.ETF (exchange-traded fund)A fund whose units are bought and sold on a stock exchange, like a share.Ex-dividend dateThe cut-off date for a dividend: you must own the share before it to be paid.Expense ratioThe yearly cost of a fund, as a percentage of what you have in it.
F
G
H
I
IndexA single number that tracks the prices of a chosen group of shares.Index fundA fund that holds the same companies as an index, in the same proportions, instead of picking.InflationThe general rise in prices over time, which makes each unit of money buy less.Interest rateThe price of borrowing money, given as a percentage per year.InvestingUsing money to buy something expected to produce value over time, accepting that its value can fall.IPO (initial public offering)The first time a company sells its shares to the public.
L
M
Market capitalisation (market cap)A company's share price times its number of shares — what the market values the whole company at.Market orderAn order to buy or sell at once, at whatever price is available.Market timingTrying to sell before prices fall and to buy before they rise.Mutual fundA fund you buy from and sell back to the fund company, usually once a day at that day's price.
N
O
P
R
Realized gainThe gain or loss you locked in by selling: what you sold for minus what those shares cost.RebalancingBuying and selling to bring a portfolio's weights back to the ones you chose.ReturnWhat an investment earns or loses, in money or as a percentage of what was put in.RevenueThe money a company takes in from what it sells, before any costs.RiskThe chance that an investment earns less than expected, or loses money.
S
S&P 500An index of about 500 large US companies, weighted by market value.SavingSetting money aside so that it stays safe and ready to use.SettlementThe last step of a trade, when the money and the shares actually change hands.ShareOne equal piece of ownership in a company.ShareholderAnyone who owns at least one share of a company.Shares outstandingThe total number of a company's shares held by investors, insiders included.SpreadThe gap between the best price buyers offer (the bid) and the best price sellers ask (the ask).Stock exchangeThe market where shares are bought and sold.Stock splitDividing each share into several, which lowers the price per share but not the value of what you own.