Reference
Glossary
Plain-language definitions for the terms you will see most often.
- Asset allocation
- How your money is split among stocks, bonds, and cash.
- Bond
- A loan to a government or company that pays interest. Usually steadier, and slower to grow, than stocks.
- Brokerage
- The company that holds your investments and lets you buy and sell them.
- Compounding
- Growth on both your original money and the growth it has already earned.
- Diversification
- Spreading money across many investments so one failure has less impact.
- Dollar-cost averaging (DCA)
- Investing a fixed amount on a regular schedule, regardless of price.
- Emergency fund
- Savings set aside for unexpected costs, kept separate from investments.
- ETF
- Exchange-traded fund. A fund that trades on an exchange like a stock and can track an index.
- Expense ratio
- A fund’s yearly fee, as a percentage of the money invested.
- 401(k)
- A workplace retirement account, often with pre-tax contributions and sometimes an employer match.
- Index fund
- A fund that holds the investments in a market index, usually at low cost.
- IRA
- Individual Retirement Account, a retirement account you open yourself.
- Rebalancing
- Returning your mix of investments to your target after markets move.
- Stock
- A small share of ownership in a company.
- Target-date fund
- A fund that holds a mix of stocks and bonds and gets more conservative as a set year approaches.