Here is a glossary of investing terms. These may be useful when reading articles at Investing to Thrive, watching financial news, or talking to a financial advisor.


  • actively managed funds: mutual funds that are managed by professionals who use their judgment when buying and selling investments
  • alpha: a measure of investment performance that considers risk; it’s compared to results and risk associated with the entire stock market; a higher number indicates better-than-average performance


  • bear market: when the stock market is performing poorly
  • beat the market: get investment returns that are higher than what you could have gotten if you’d invested in index funds or the entire stock market; similar to outperform
  • beta: a measure of the difference between the price fluctuations of a specific investment and the price fluctuations of entire stock market; a 1 represents very similar performance historically, less than 1 indicates less fluctuation, and greater then 1 indicates more fluctuation
  • blended (growth and value): an investment strategy, system, mutual fund, or ETF that invests in growth and value stocks, not just growth and not just value
  • bonds: investments in a debt obligation of a business or government organization that pays interest
  • broker: person or organization that facilitates the sale or purchase of investments; a stockbroker is an individual and a broker-dealer is an organization
  • bull market: times when the stock market is performing well
  • buy and hold: investing for long-term results over a period of many years; buying investments with the intention of holding them and not selling for many years
  • “buy low and sell high”: an investing tenet that encourages investors to buy when stocks and investments are priced low and sell them when prices are high, thus generating a profit


  • CAPE ratio: Cyclically Adjusted Price Earnings ratio, which attempts to indicate whether stock prices are too high, too low, or just right compared to earnings for the past 10 years
  • capital gains: profits associated with the sale of capital assets (such as stocks or real estate), occurring when sales proceeds cover the cost of the transaction and the cost of the assets
  • CAPM: Capital Asset Pricing Model, a mathematical model to project the return and risk of a potential investment


  • diversification: developing a portfolio containing a mix of investments that make money differently so you can thrive in various economic situations
  • diversified vs. non-diversified portfolio: a diversified portfolio contains a mix of investments that perform differently under different market conditions; a non-diversified portfolio contains similar investments that perform similarly in various conditions; the purpose of diversification is to achieve the best possible returns at a specified level of risk, reduce the possibility for massive losses, and generate consistent returns
  • dividends: earnings shared with investors, often in the form of a cash payment
  • Dow: 30 stocks that represent U.S. industry as selected by the Dow Jones publishing company; short for Dow Jones Industrial Average


  • early redemption fees: fees charged to investors who sell certain mutual funds or ETFs soon after buying the investments; brokerage firms specify a timeframe that is “early,” such as 90 days or 180 days
  • earned income: income produced through work from a full-time job, part-time job, business, or side gig
  • efficient market: the idea that stocks are priced accurately all of the time
  • emerging markets economies associated with developing countries
  • ETF: exchange-traded fund, which is traded on a stock exchange like the New York Stock Exchange in a way that is similar to an individual stock
  • exchange-traded funds (ETFs): stock-like investments that contain stocks, bonds, and other investments


  • Forex: foreign exchange market for the buying, selling, and exchange of foreign currencies
  • fund manager :an employee of a mutual fund company who manages a fund by selecting its investments, deciding when to buy and sell these investments, and making decisions for the fund within guidelines


  • growth: (growth stock, growth investing) an investment or system of investing that relies on business or economic growth to deliver profits



  • index fund: a mutual fund that replicates the holdings and performance of a specific market index, such as the S&P 500
  • investment goals: goals that financial advisors think you should have so they can match an investing plan with suitable investments
  • IPO: initial public offering; an opportunity to invest in a company that is issuing stock for the first time
  • IRA: individual retirement arrangement or individual retirement account; an account dedicated to retirement savings that receives special tax treatment from the IRS




  • large cap: a company that is priced at $10 billion or more
  • limit order: an order for a stock or other investment at a specific price


  • market capitalization (market cap): the total price of a company or investment, which is calculated by multiplying the number of outstanding shares by the price of each share
  • market correction: when the stock market falls to a level in which stock prices are more aligned with their underlying values
  • market order: an order for a stock or other investment at the going price
  • mid cap: a company that is priced between $2 billion and $10 billion
  • Modern Portfolio Theory (MPT): a Nobel Prize winning economic theory that describes the role of asset allocation in developing a diversified portfolio
  • mutual fund: a collection of stocks, bonds, and other investments that meet pre-established criteria and can be purchased by shares


  • no-load mutual fund: a fund that carries no sales charge or sales commission when it’s purchased, sold, and/or owned


  • outperform: a stock, other investment, or investing strategy that generates profits at a rate higher than average
  • overvalued: when a stock or the entire market is priced more than its worth


  • passively managed funds: mutual funds that are managed by professionals who select investments based on a market index or other method that doesn’t involve exercising independent judgment
  • portfolio: a collection of investments, which may include individual stocks, bonds, mutual funds, ETFs, cash, and real estate
  • portfolio turnover: the percentage of a portfolio’s holdings that are bought and sold each year



  • rally (stock market rally): a situation in which the broader market increases unexpectedly or suddenly after a decline
  • real estate investment trusts (REITs): investments that contain real estate and generate profits through commercial, industrial, and residential real estate sales, rentals, etc.
  • risk: the possibility that an investment will decline in value
  • robo-advisor: an investment advisor that creates and manages a portfolio for clients using algorithms and automation


  • S&P 500: 500 of the largest U.S. companies that offer stock to the general public, a list developed and updated by financial services company Standard and Poor’s
  • share: a portion of a company
  • short sell: agreeing to sell an investment at a certain price and buying (or attempting to buy) the investment at a lower price in hopes of generating a profit
  • small cap: a company that is priced at $2 billion or less
  • stocks: investments in (or shares of) a business that represent partial ownership of the business


  • tax-advantaged account: an investment account that receives special tax treatment from the IRS; these include IRAs, health savings accounts (HSA), and 529 plans
  • the “market”: all or most of the stocks bought and sold on major stock exchanges, such as the New York Stock Exchange and NASDAQ in the United States
  • time horizon: an investing time frame starting now until the time you need or want to generate funds from your investment, such as the time from now until retirement
  • trade (trader, trading): the buying and selling of stocks or other investments; the term may indicate a person or activity that buys and sells investments frequently rather than buys and holds investments
  • trading cost: the cost of a making an investment transaction or trade



  • valuation: the true value of an investment, determined by the value of underlying assets (such as inventory and real estate of a retail store) and/or cash flow generated from the assets
  • value (value stock, value investing): an investment or system of investing that focuses on buying investments when they are priced at a bargain or exceptional value
  • volatility: price fluctuation that is independent of the true value of the underlying investment


  • watchlist: a list of stocks or investments that you’re monitoring in order to buy or sell when the price reaches a certain level