A
Jensen's alpha
The return an investment earns above or below what would be expected given its risk, usually measured against a benchmark or a model such as CAPM. Positive alpha suggests outperformance after adjusting for risk, though it can come from luck as well as skill.
Example: If a fund was expected to return 8% for its level of risk and actually returned 10%, its alpha is 2 percentage points.
In the app: Module 22 · Jensen's Alpha · Premium
Anchoring
Relying too heavily on the first number you see, such as a purchase price or a past high, when judging value. An investor anchored to a $100 purchase price may wait to sell until the stock gets back there, even if the business has changed.
In the app: Module 11 · Anchoring Bias · Premium
Annual percentage rate
The yearly cost of borrowing expressed as a percentage, including the interest rate and certain fees. APR does not include the effect of compounding within the year, so it is mainly used to compare loans and credit cards.
Example: A credit card with an 18% APR charges about 1.5% interest per month on a balance that is carried over.
In the app: Module 8 · APR vs APY · Premium
Annual percentage yield
The yearly return on a savings or deposit account including the effect of compounding. Because it counts interest earned on interest, APY is equal to or higher than the stated simple rate, which makes it the better number for comparing savings accounts.
Example: A 5% rate compounded monthly gives an APY of about 5.12%.
In the app: Module 8 · APR vs APY · Premium
How a portfolio is divided among asset classes, such as stocks, bonds and cash. It is a major driver of a portfolio's risk and return, and is usually set based on goals, time horizon and risk tolerance.
Example: A portfolio with $60,000 in stock funds and $40,000 in bond funds has a 60/40 asset allocation.
A group of investments with similar characteristics that tend to behave alike in the market. The main asset classes are stocks, bonds and cash, and others include real estate, commodities such as gold, and cryptocurrencies.
In the app: Module 9 · Stocks vs Bonds vs Gold · Premium
Availability bias
Judging how likely something is by how easily examples come to mind. Recent, dramatic or heavily reported events, such as a market crash or a famous success story, can seem more common than they really are.
In the app: Module 11 · Availability Heuristic · Premium
B
Backtest
Testing a trading or investing strategy on historical data to see how it would have performed. Results can look better than real life because of trading costs, slippage and overfitting, which is tuning a strategy so closely to the past that it fails on new data.
In the app: Module 29 · Backtesting Basics · Premium
A situation in a futures market where contracts for later delivery cost less than nearer contracts or the current spot price. It often appears when a commodity is in short supply right now.
In the app: Module 20 · Contango vs Backwardation · Premium
Statement of financial position
A financial statement that shows what a company owns (assets), what it owes (liabilities) and what is left for shareholders (equity) at a single point in time. It always balances: assets equal liabilities plus shareholders' equity.
Example: A company with $500 million of assets and $300 million of liabilities has $200 million of shareholders' equity.
In the app: Module 5 · What is a Balance Sheet? · Premium
A legal process for people or businesses that cannot repay their debts. For individuals in the US, Chapter 7 generally sells certain assets to pay creditors and discharges many remaining debts, while Chapter 13 sets up a court-approved repayment plan over several years. Bankruptcy stays on credit reports for years and does not erase every type of debt.
In the app: Module 8 · Bankruptcy Basics · Premium
Bearish
A period of broad, sustained price declines in a market, usually with widespread pessimism. A common rule of thumb calls it a bear market when an index falls 20% or more from its recent high. Being bearish means expecting prices to fall.
A field that combines psychology and economics to study how emotions, mental shortcuts and biases lead people to make financial decisions that are not fully rational. It helps explain market patterns such as bubbles and panics and common investor mistakes.
A measure of how much a stock or portfolio has tended to move compared with the overall market. A beta of 1 means it has moved in line with the market, above 1 means larger swings and below 1 means smaller swings. It is based on past data and can change.
Example: A stock with a beta of 1.5 has historically moved about 15% when the market moved 10%.
In the app: Module 22 · Beta and Systematic Risk · Premium
Bid/ask spread · Spread
The difference between the highest price a buyer is currently willing to pay (the bid) and the lowest price a seller is willing to accept (the ask). A narrow spread usually signals a liquid market, while a wide spread adds a hidden cost to each trade.
Example: If the bid is $49.95 and the ask is $50.05, the spread is $0.10.
In the app: Module 2 · Bid/Ask Spread · Premium
BTC
The first cryptocurrency, launched in 2009 by the pseudonymous Satoshi Nakamoto. Its code sets a maximum supply of 21 million coins and cuts the rate of new issuance in half at regular intervals, an event known as the halving. Some investors call it digital gold, though its price has been far more volatile than gold.
In the app: Module 32 · Bitcoin Economics · Premium
Black swan event
A rare, hard-to-predict event with an extreme impact that people often explain as obvious only after it happens. The term was popularized by Nassim Nicholas Taleb, who argued that standard risk models tend to underestimate such events.
In the app: Module 10 · Black Swan Events · Premium
Black-Scholes-Merton model · Black-Scholes
A mathematical model published in 1973 for estimating the fair price of European-style options. It uses the underlying price, strike, time to expiration, interest rate and volatility, and it assumes conditions such as constant volatility that do not fully hold in real markets.
In the app: Module 18 · Black-Scholes Intuition · Premium
Distributed ledger
A shared digital ledger in which transactions are grouped into blocks, each linked to the previous one, and copies are kept by many computers in a network. Because changing a past record would require redoing the linked blocks and convincing most of the network, the history is very hard to alter.
In the app: Module 32 · Blockchain 101 · Premium
A chart indicator made of a moving average (commonly 20 periods) with bands drawn a set number of standard deviations above and below it (commonly two). The bands widen when volatility rises and narrow when it falls, and prices near the bands are sometimes read as stretched.
In the app: Module 7 · Bollinger Bands · Premium
Fixed income · Debt security
A loan you make to a government or company in exchange for regular interest payments and the return of the face value on a set date, called maturity. Bonds are often called fixed income because the payments are set in advance. Their prices move in the opposite direction to interest rates.
Example: A $1,000 bond with a 5% coupon pays $50 of interest a year and returns $1,000 at maturity, if the issuer does not default.
In the app: Module 17 · What Is a Bond? · Premium
A portfolio of bonds or CDs with staggered maturities, such as one maturing each year for several years. As each one matures, the money can be spent or reinvested at the long end, which spreads out interest rate risk and provides regular access to cash.
In the app: Module 17 · Bond Ladders · Premium
A move of the price above a resistance level or below a support level, often with higher volume. Traders watch breakouts as a possible start of a new trend, but a false breakout happens when the price quickly returns into its old range.
Brokerage · Broker-dealer
A firm licensed to buy and sell securities on behalf of customers. You open a brokerage account with a broker to place orders, hold investments and receive dividends; in the US, brokers are regulated by the SEC and FINRA.
In the app: Module 2 · How to Buy a Stock · Premium
Asset bubble · Speculative bubble
A period when the price of an asset rises far above what its fundamentals can justify, driven by excitement, easy money and the expectation of selling to someone else at a higher price. Bubbles are usually recognized clearly only after they burst, often with steep and rapid price falls.
In the app: Module 26 · Common Patterns in Bubbles · Premium
Spending plan
A plan for how you will use your income over a set period, usually a month. It lists expected income, spending by category and the amount set aside for savings or debt payments, so you can see where your money goes before you spend it.
Example: With $3,000 of monthly take-home pay, a budget might assign $1,500 to essentials, $900 to everything else and $600 to savings.
In the app: Module 1 · What is a Budget? · Free Read: What is a Budget and Why It Changes Your Life
Bullish
A period when prices in a market rise broadly over a sustained stretch, often with strong investor confidence. A common rule of thumb calls it a bull market when an index climbs 20% or more from a recent low. Being bullish means expecting prices to rise.
Economic cycle
The repeating pattern of growth and decline in an economy, usually described in four phases: expansion, peak, contraction and trough. Cycles differ widely in length and strength, and different sectors and asset classes tend to do better in different phases.
In the app: Module 14 · What is an Economic Cycle? · Premium
A long-term strategy of buying investments and keeping them for years regardless of short-term market swings, instead of trying to time when to get in and out. It keeps trading costs and taxes low but means sitting through declines.
In the app: Module 9 · Buy and Hold Philosophy · Premium
C
Call
A contract that gives the buyer the right, but not the obligation, to buy an asset at a set price (the strike) until or on a set date. The buyer pays a premium and profits if the price rises far enough above the strike; the most the buyer can lose is the premium. The seller receives the premium and must sell if the option is exercised.
Example: A call with a $50 strike bought for $2 starts to make money at expiration only if the stock is above $52.
In the app: Module 18 · Call Options · Premium
Candlestick · Japanese candlestick
A price chart where each period is drawn as a candle showing the open, high, low and close. The thick body spans the open and close, the thin wicks show the high and low, and the color shows whether the price closed higher (often green) or lower (often red) than it opened.
In the app: Module 6 · What is a Candlestick Chart? · Premium
Capitalization rate
A property's net operating income (rental income minus operating expenses, before mortgage payments) divided by its price or value. It is used to compare the income return of real estate investments; a higher cap rate usually comes with higher risk or lower expected growth.
Example: A building bought for $1,000,000 that produces $60,000 of net operating income has a 6% cap rate.
In the app: Module 21 · Cap Rate (Capitalization Rate) · Premium
LTCG · STCG · Long-term capital gain · Short-term capital gain
The profit from selling an asset for more than its cost basis; selling for less produces a capital loss. In the US, gains on assets held more than one year are long-term and are usually taxed at lower rates than short-term gains, which are taxed like ordinary income. Gains are generally taxed only when realized, meaning when you sell.
Example: Buying shares for $1,000 and selling them for $1,400 creates a $400 capital gain.
In the app: Module 27 · Capital Gains: LTCG vs STCG · Premium
Capital asset pricing model
A model that estimates an asset's expected return as the risk-free rate plus its beta times the market risk premium (the market's expected return minus the risk-free rate). It says investors should be paid only for risk that cannot be diversified away.
Example: With a 3% risk-free rate, an 8% expected market return and a beta of 1.2, CAPM gives an expected return of 9%.
In the app: Module 22 · The CAPM Model · Premium
A strategy of borrowing in a currency with a low interest rate and investing in one with a higher rate, aiming to earn the difference. It can earn steady income for long periods but can lose heavily and quickly if the higher-yielding currency falls sharply.
In the app: Module 19 · The Carry Trade · Premium
Statement of cash flows
A financial statement that shows the cash coming into and going out of a company over a period, split into operating, investing and financing activities. Because profit includes non-cash accounting entries, a company can report a profit and still run short of cash, which this statement helps reveal.
In the app: Module 5 · The Cash Flow Statement · Premium
Commodities
A basic raw material that is largely interchangeable no matter who produces it, such as oil, natural gas, gold, copper, wheat or coffee. Commodities are traded in spot markets and, very often, through futures contracts, and their prices are driven mainly by supply and demand.
In the app: Module 20 · Commodity Market 101 · Premium
Compounding
Interest earned on both your original money and the interest it has already earned. Because each period's interest is added to the balance, growth speeds up over time. The same effect works against you on debt, where unpaid interest is added to what you owe.
Example: $1,000 earning 5% a year grows to $1,050 after one year and $1,102.50 after two, because the second year's interest is also earned on the first year's $50.
In the app: Module 1 · The Magic of Compound Interest · Free Read: The Magic of Compound Interest: $500/Month for 30 Years
The tendency to seek out and believe information that supports what you already think, while ignoring or discounting evidence against it. Investors can end up overconfident in a position because they read only the bullish case.
In the app: Module 11 · Confirmation Bias · Premium
A situation in a futures market where contracts for later delivery cost more than nearer contracts or the current spot price. It often reflects storage and financing costs, and it can reduce the returns of funds that keep rolling futures contracts forward.
In the app: Module 20 · Contango vs Backwardation · Premium
Correlation coefficient
A measure from -1 to +1 of how closely two investments move together. At +1 they move in lockstep, at 0 there is no consistent relationship, and at -1 they move in opposite directions. Combining assets with low correlation is what makes diversification work, though correlations can rise during crises.
In the app: Module 10 · Correlation and Diversification · Premium
Basis · Tax basis
The original value of an investment for tax purposes, usually the purchase price plus fees, adjusted for events such as stock splits or reinvested dividends. Your capital gain or loss is the sale price minus the cost basis.
Example: Buying 10 shares at $50 with a $5 fee gives a cost basis of $505.
Coupon rate · Coupon payment
The interest a bond pays, stated as a yearly percentage of its face value; many US bonds pay it in two installments a year. Maturity is the date when the issuer repays the face value and the bond ends.
Example: A $1,000 bond with a 4% coupon paid twice a year pays $20 every six months.
In the app: Module 17 · Coupon and Maturity · Premium
An options strategy where you own shares of a stock and sell call options on those shares. You collect the premium as income, but you give up gains above the strike price and still carry the risk of the stock falling.
Example: Owning 100 shares bought at $48 and selling a $50 call for $1 caps your sale price at $50 if the call is exercised, plus the $1 premium per share.
In the app: Module 18 · Covered Call · Premium
Consumer Price Index · Core CPI
A measure of the average change over time in prices paid by consumers for a basket of goods and services, published monthly in the US by the Bureau of Labor Statistics. It is the most widely followed inflation gauge. Core CPI excludes food and energy prices, which tend to swing more, to show the underlying trend.
In the app: Module 14 · CPI, PPI, and Core Inflation · Premium
Bond rating
A grade given by agencies such as S&P Global, Moody's and Fitch that reflects their opinion of an issuer's ability to repay its debt. Ratings of BBB- (Baa3 at Moody's) and above are called investment grade; anything lower is considered speculative or junk. Ratings are opinions and can change.
In the app: Module 17 · Reading Credit Ratings · Premium
FICO score
A three-digit number that summarizes how likely you are to repay borrowed money, based on the information in your credit reports. In the US the most widely used model is the FICO score, which weighs factors such as payment history, amounts owed, length of credit history, new credit and types of credit. Lenders use it to decide whether to lend and at what rate.
In the app: Module 8 · Your FICO Score · Premium
The extra yield a bond pays over a Treasury bond of similar maturity, as compensation for the risk that the issuer might default. Spreads widen when investors grow worried about the economy and narrow when confidence is high.
Example: If a 10-year corporate bond yields 6% and the 10-year Treasury yields 4%, the credit spread is 2 percentage points.
In the app: Module 17 · Credit Spread · Premium
Crypto · Digital currency
A digital asset that uses cryptography and a blockchain to record ownership and transfers without a central bank or company keeping the ledger. Prices can be extremely volatile, and in the US the IRS treats cryptocurrency as property for tax purposes, so selling or swapping it can create a taxable gain or loss.
Exchange rate risk · FX risk
The risk that changes in exchange rates will raise or lower the value of investments held in a foreign currency. For a US investor, a foreign stock can rise in its local currency yet lose value in dollars if that currency weakens.
Example: A European stock that gains 5% in euros returns about 0% in dollars if the euro falls about 5% against the dollar over the same period.
In the app: Module 28 · Managing FX Risk · Premium
Current assets divided by current liabilities, a measure of whether a company can pay the bills due within the next year. The quick ratio is a stricter version that leaves inventory out of current assets.
Example: Current assets of $300 million and current liabilities of $200 million give a current ratio of 1.5.
In the app: Module 5 · Liquidity Ratios · Premium
D
Day trader
Buying and selling securities within the same trading day, closing all positions before the market closes. It relies on small price moves, involves frequent trading costs and, in the US, comes with special broker and regulatory rules for accounts that trade this way often.
Discounted cash flow · DCF analysis
A valuation method that estimates a company's value by forecasting its future free cash flows and discounting them back to today at a rate that reflects risk and the time value of money. Small changes in the growth or discount rate assumptions can change the result a lot.
Example: At a 10% discount rate, $110 expected one year from now is worth $100 today.
In the app: Module 12 · The Logic of DCF · Premium
A chart signal that occurs when a shorter-term moving average, usually the 50-day, crosses below a longer-term one, usually the 200-day. It is the opposite of a golden cross and is read as a sign of weakening momentum.
In the app: Module 7 · Golden Cross and Death Cross · Premium
Avalanche method
A debt payoff method where you make minimum payments on every debt and put any extra money toward the debt with the highest interest rate first. It usually costs the least total interest.
Example: With a 24% credit card and a 7% car loan, the avalanche method sends extra payments to the credit card first.
In the app: Module 8 · Avalanche vs Snowball · Premium
Snowball method
A debt payoff method where you make minimum payments on every debt and put any extra money toward the smallest balance first, then roll that payment into the next smallest. It can cost more interest than the avalanche method, but quick early wins help some people stay motivated.
Example: With a $500 medical bill and a $6,000 loan, the snowball method pays off the $500 bill first.
In the app: Module 8 · Avalanche vs Snowball · Premium
D/E ratio · Debt/equity
A company's debt divided by its shareholders' equity, showing how much of the business is financed by borrowing compared with owners' money. Some sources use total liabilities instead of debt, so check how it is calculated. Normal levels vary widely by industry.
Example: Debt of $400 million and equity of $800 million give a debt-to-equity ratio of 0.5.
In the app: Module 5 · Leverage Ratios · Premium
Decentralized finance
Financial services such as lending, borrowing and trading that run on blockchains through smart contracts rather than through banks or brokers. DeFi is open to anyone with a crypto wallet but carries risks such as code bugs, hacks, volatile collateral and limited consumer protection.
In the app: Module 32 · DeFi Basics · Premium
A general fall in prices across an economy over time, the opposite of inflation. Although lower prices sound good, sustained deflation can lead people to delay spending, raise the real burden of debts and deepen economic slowdowns.
An option Greek showing how much an option's price is expected to change for a $1 move in the underlying asset. Call deltas range from 0 to 1 and put deltas from 0 to -1; delta is also used as a rough estimate of the chance an option ends in the money.
Example: A call with a delta of 0.40 would gain about $0.40 if the stock rose $1, other things equal.
In the app: Module 18 · Delta · Premium
A financial contract whose value is based on the price of something else, called the underlying asset, such as a stock, index, currency, interest rate or commodity. Options, futures, forwards and swaps are the main types; they are used to hedge risk and to speculate, often with leverage.
In the app: Module 18 · What Is a Derivative? · Premium
The tendency of investors to sell investments that have gained value too soon while holding on to investments that have lost value for too long, hoping to get back to even. It was named by Hersh Shefrin and Meir Statman in 1985.
In the app: Module 11 · The Disposition Effect · Premium
Spreading money across many investments, sectors, asset classes or countries so that a loss in one has a smaller effect on the whole portfolio. It reduces the risk tied to any single company but cannot remove the risk of the overall market falling.
In the app: Module 9 · Portfolio Diversification · Premium
Dividends · Cash dividend
A payment a company makes to its shareholders, usually in cash and often quarterly in the US, out of its profits or reserves. Dividends are decided by the board of directors and can be raised, cut or stopped at any time.
Example: Owning 200 shares of a company that pays $0.50 per share each quarter brings in $100 per quarter.
In the app: Module 2 · What Are Dividends? · Premium Read: Dividends 101: 5 Key Questions
A company's yearly dividends per share divided by its share price, shown as a percentage. A very high yield can be a warning sign, because it may mean the price has fallen on worries that the dividend will be cut.
Example: A $40 stock that pays $1.60 a year in dividends has a dividend yield of 4%.
In the app: Module 3 · Dividend Yield · Premium
A candlestick where the open and close are almost the same, leaving a very thin body. It shows that buyers and sellers ended the period roughly balanced, and traders read it as a sign of indecision, especially after a strong move.
In the app: Module 6 · Doji Pattern · Premium
DCA
Investing a fixed amount of money at regular intervals regardless of price. You automatically buy more shares when prices are low and fewer when they are high, which reduces the risk of putting everything in at a bad moment. It does not guarantee a profit or protect against losses.
Example: Investing $200 every month buys 10 shares at $20 one month and 8 shares at $25 the next.
In the app: Module 9 · Dollar-Cost Averaging · Premium
A chart pattern where the price reaches about the same high twice, with a dip in between, shaped like an M. It is read as a possible sign that an uptrend is ending, confirmed if the price falls below the low between the two peaks. A double bottom is the mirror image, shaped like a W, at the end of a downtrend.
In the app: Module 6 · Double Top and Double Bottom · Premium
Dow · DJIA · The Dow
A US stock index made up of 30 large, well-known companies. Unlike most modern indexes, it is price-weighted, so stocks with higher share prices move the index more regardless of company size.
In the app: Module 2 · What Is an Index? · Premium
Modified duration · Macaulay duration
A measure of how sensitive a bond's price is to changes in interest rates, expressed in years. As a rough rule, a bond's price changes by about its duration in percent, in the opposite direction, for each 1 percentage point change in rates. Longer-term and lower-coupon bonds have higher duration.
Example: A bond fund with a duration of 6 would lose roughly 6% of its value if interest rates rose by 1 percentage point.
In the app: Module 17 · Modified Duration · Premium
E
Earnings beat · Earnings miss
The difference between the earnings a company reports and the average estimate of analysts before the report. Reporting above the estimate is called a beat and below it a miss; share prices often react more to the surprise and to future guidance than to the results themselves.
Example: If analysts expected EPS of $1.00 and the company reports $1.10, the earnings surprise is +10%.
In the app: Module 4 · Earnings Surprise Analysis · Premium
Earnings before interest, taxes, depreciation and amortization
A company's earnings before interest, taxes, depreciation and amortization are subtracted. It is used as a rough measure of operating profit that can be compared across companies with different debt levels and tax situations, but it is not defined under GAAP and ignores real costs such as equipment spending.
In the app: Module 4 · What Is EV/EBITDA? · Premium
Moat
A lasting competitive advantage that protects a company's profits from competitors, a term popularized by Warren Buffett. Common sources include strong brands, network effects, high switching costs, cost advantages and legal protections such as patents or licenses.
In the app: Module 30 · Moat Analysis: The Five Types · Premium
In modern portfolio theory, the curve of portfolios that offer the highest expected return for each level of risk. Portfolios below the curve are inefficient because another mix offers more return for the same risk. In practice the curve depends heavily on estimates that can be wrong.
In the app: Module 22 · The Efficient Frontier · Premium
Rainy day fund
Cash set aside for unexpected costs such as a job loss, medical bill or urgent repair, kept somewhere safe and easy to access rather than invested in volatile assets. A common guideline is several months of essential expenses, adjusted to how stable your income is.
Example: If essential costs are $2,500 a month, a three-month emergency fund would be $7,500.
In the app: Module 9 · Emergency Fund · Premium
EM
Countries whose economies and financial markets are growing and becoming more developed but are less mature than developed markets such as the US, Western Europe or Japan. Their stocks and bonds can offer higher growth potential with higher risks, including political, currency and liquidity risk. Index providers such as MSCI decide which countries are classified as emerging.
In the app: Module 28 · Developed vs Emerging Markets · Premium
401(k) match
Money an employer adds to an employee's retirement plan based on how much the employee contributes, up to a limit set by the plan. Matching money may be subject to a vesting schedule, which means you only keep it fully after working there for a certain time.
Example: Under a plan that matches 50% of contributions up to 6% of salary, an employee earning $50,000 who contributes $3,000 receives $1,500 from the employer.
In the app: Module 13 · The Employer Match · Premium
The tendency to value something more highly simply because you own it. Investors may demand a higher price to sell a stock they hold than they would be willing to pay to buy the same stock today.
In the app: Module 11 · The Endowment Effect · Premium
EV
A measure of a company's total value that adds debt to its market capitalization and subtracts its cash. It approximates what it would cost to buy the whole business, which makes it useful for comparing companies with different amounts of debt.
Example: A company with a $5 billion market cap, $2 billion of debt and $500 million of cash has an EV of $6.5 billion.
In the app: Module 4 · What Is EV/EBITDA? · Premium
Earnings per share
A company's net income divided by its number of shares outstanding, showing how much profit belongs to each share. Diluted EPS also counts shares that could be created from stock options, convertible securities and similar instruments, so it is usually a little lower.
Example: A company that earns $10 million with 5 million shares has an EPS of $2.
In the app: Module 3 · What is EPS? (Earnings Per Share) · Premium
Exchange-traded fund
A fund that holds a basket of assets, such as stocks or bonds, and trades on an exchange throughout the day like a single stock. Many ETFs track an index, and one share gives you a small slice of everything the fund holds.
In the app: Module 9 · ETFs and Mutual Funds · Premium
Ether · ETH
A blockchain network that runs smart contracts and decentralized applications, with ether (ETH) as its native cryptocurrency. Users pay transaction fees, called gas fees, in ether to have the network process their transactions.
In the app: Module 32 · Ethereum and Smart Contracts · Premium
Enterprise multiple
Enterprise value divided by EBITDA. Because it includes debt and is less affected by accounting and tax differences than P/E, it is often used to compare companies within the same industry or to value whole businesses in acquisitions.
Example: A company with an EV of $6 billion and EBITDA of $600 million trades at 10 times EV/EBITDA.
In the app: Module 4 · What Is EV/EBITDA? · Premium
Ex-date
The cutoff date for receiving an upcoming dividend: if you buy the stock on or after this date, the seller gets that dividend instead of you. On the ex-dividend date, the share price usually opens lower by roughly the amount of the dividend.
In the app: Module 31 · Dividend Arbitrage · Premium
The average amount a trading system can expect to win or lose per trade over many trades, combining the win rate with the average size of wins and losses. A system can win less than half the time and still have positive expectancy if its wins are much larger than its losses.
Example: Winning 40% of trades with an average gain of $300 and losing 60% with an average loss of $100 gives an expectancy of $60 per trade.
In the app: Module 29 · Expectancy · Premium
Fund expense ratio
The yearly cost of owning a fund, shown as a percentage of the money invested. It is taken out of the fund's assets automatically rather than billed to you, so it lowers your return without appearing as a separate charge.
Example: A 0.50% expense ratio costs $50 a year on a $10,000 investment.
Expiry · Expiration
The last day an option or futures contract is valid. After it passes, an option that has not been exercised or sold either is settled based on its value or expires worthless if it is out of the money.
In the app: Module 18 · Strike, Premium, Expiration · Premium
F
Fed funds rate
The interest rate at which US banks lend reserves to each other overnight. The Federal Reserve's FOMC sets a target range for it, and changes in that target ripple through to rates on loans, mortgages, savings accounts and bonds.
The Fed · FOMC · Federal Open Market Committee
The central bank of the United States. Congress has given it a dual mandate of maximum employment and stable prices, and its Federal Open Market Committee (FOMC) sets monetary policy, mainly through a target for short-term interest rates. The Fed also supervises banks and acts as a lender of last resort in crises.
In the app: Module 14 · The Fed's Role · Premium
Fibonacci levels
A charting tool that marks levels where a price might pause after a big move, based on ratios linked to the Fibonacci sequence, such as 23.6%, 38.2% and 61.8%, plus the 50% level. Traders use them as possible support or resistance zones; they have no guaranteed predictive power.
Example: After a rise from $100 to $150, the 38.2% retracement level is about $130.90.
In the app: Module 7 · Fibonacci Levels · Premium
Fiduciary duty
A person or firm legally required to act in your best interest, putting your interests ahead of their own. In the US, registered investment advisers owe a fiduciary duty to their clients, while other financial salespeople may be held to different standards, so it is worth asking how an advisor is paid and what standard applies.
In the app: Module 16 · Choosing a Financial Advisor · Premium
Financial independence · FI
The point where income from your savings and investments can cover your living costs, so paid work becomes a choice rather than a necessity. A common rule of thumb estimates the target as about 25 times your yearly spending, which is linked to the 4% rule.
Example: Someone who spends $40,000 a year would aim for roughly $1,000,000 under the 25-times rule of thumb.
In the app: Module 1 · What is Financial Freedom? · Free
Financial Industry Regulatory Authority
A self-regulatory organization, overseen by the SEC, that writes and enforces rules for US brokerage firms and their registered representatives. Its free BrokerCheck tool shows the background and disciplinary history of brokers and firms.
Financial Independence, Retire Early · FIRE movement
A lifestyle and savings approach that aims to reach financial independence well before the usual retirement age. Followers typically save a large share of their income, invest it in diversified funds and plan withdrawals using rules such as the 4% rule.
In the app: Module 13 · The FIRE Movement · Premium
The government's use of spending and taxation to influence the economy. Spending more or cutting taxes can boost demand during a downturn, while the opposite can cool an overheating economy; in the US, fiscal policy is set by Congress and the President.
Fixed costs · Variable costs
Fixed expenses are costs that stay about the same each month, such as rent, a loan payment or an insurance premium. Variable expenses, such as groceries, fuel or entertainment, change from month to month and are usually easier to adjust.
Example: A $1,200 rent payment is a fixed expense, while a grocery bill that ranges from $350 to $500 is a variable expense.
In the app: Module 1 · Income and Expense Types · Free
Fear of missing out
The anxious feeling that others are making money from something you are missing, which can push investors to buy after a big price rise without doing their own research. It often peaks near the top of hype-driven rallies.
In the app: Module 11 · What Is FOMO? · Premium
FX · Foreign exchange · Currency market
The global market where currencies are exchanged, mostly traded over the counter between banks and other institutions rather than on one central exchange. Currencies are quoted in pairs, such as EUR/USD, showing how much of the second currency one unit of the first costs.
Example: A EUR/USD quote of 1.10 means one euro costs 1.10 US dollars.
In the app: Module 19 · The FX Market 101 · Premium
Forward price-to-earnings ratio
A P/E ratio that uses analysts' estimates of earnings for the coming 12 months instead of the earnings already reported. Trailing P/E uses the past 12 months of actual earnings. Forward P/E reflects expected growth but depends on forecasts that may turn out wrong.
Example: A $60 stock that earned $3 last year and is expected to earn $4 next year has a trailing P/E of 20 and a forward P/E of 15.
In the app: Module 3 · Trailing vs Forward P/E · Premium
Making different choices depending on how the same information is presented. A fund described as having a 90% chance of avoiding losses can feel safer than one with a 10% chance of losing money, even though the two statements are identical.
In the app: Module 11 · The Framing Effect · Premium
FCF
The cash a company generates from its operations after paying for capital expenditures such as equipment and buildings. It is the money available to pay dividends, buy back shares, reduce debt or invest in growth. FCF yield divides free cash flow by market capitalization.
Example: Operating cash flow of $800 million minus $300 million of capital spending gives free cash flow of $500 million.
In the app: Module 3 · FCF Yield · Premium
Evaluating a company by studying its business, financial statements, management, industry and the wider economy to estimate what it is worth. The result is compared with the market price to judge whether the stock looks expensive or cheap.
In the app: Module 3 · Fundamental Analysis Workflow Template · Premium
Futures
A standardized, exchange-traded agreement to buy or sell an asset at a set price on a future date. Futures are used to hedge price risk and to speculate; traders put up only a margin deposit, so positions are leveraged, and gains and losses are settled daily.
In the app: Module 20 · Commodity Market 101 · Premium
I
IV
The level of future volatility that the market is pricing into an option, worked out backward from the option's current price. Higher implied volatility means more expensive options. It often rises before uncertain events such as earnings reports and drops sharply afterward.
In the app: Module 18 · Implied Volatility (IV) · Premium
ITM · ATM · OTM · Moneyness
Describes where an option's strike price sits compared with the current price of the underlying asset. A call is in the money (ITM) when the price is above the strike, at the money (ATM) when they are about equal and out of the money (OTM) when the price is below the strike; for puts it is the reverse.
Example: With a stock at $55, a $50 call is $5 in the money and a $50 put is out of the money.
In the app: Module 18 · Moneyness (ITM/ATM/OTM) · Premium
Profit and loss statement · P&L · Statement of operations
A financial statement that shows a company's revenue, expenses and profit over a period such as a quarter or a year. It runs from revenue (the top line) through costs and taxes down to net income (the bottom line).
In the app: Module 5 · The Income Statement · Premium
A mutual fund or ETF that aims to match the performance of a market index, such as the S&P 500, by holding the same securities in roughly the same proportions. Because it does not pay analysts to pick stocks, its costs are usually low. John Bogle launched the first index fund for individual investors in the 1970s.
In the app: Module 9 · Index Investing (The Bogle Way) · Premium
A general rise in prices across an economy over time, which means each dollar buys less than before. Moderate, stable inflation is considered normal; high inflation erodes savings and fixed incomes, and central banks often raise interest rates to slow it.
Example: With 3% yearly inflation, something that costs $100 today would cost about $103 a year from now.
In the app: Module 14 · Inflation Basics · Premium
An organization that invests large pools of money for others, such as a pension fund, mutual fund, insurance company or hedge fund. A retail investor is an individual investing their own money, usually in much smaller amounts through a brokerage account.
In the app: Module 2 · Institutional vs Retail Investors · Premium
The price of borrowing money, shown as a yearly percentage of the amount borrowed, and the return paid to savers and lenders. Interest rates affect loan payments, savings income, bond prices and stock valuations; when rates rise, existing bond prices fall.
In the app: Module 14 · The Impact of Interest Rates · Premium
An estimate of what a business or share is really worth based on its expected future cash flows and risks, separate from its current market price. Different analysts can reach different intrinsic values because the estimate depends on their assumptions. In options, the same phrase has a different meaning: the amount by which an option is in the money.
In the app: Module 12 · What Is Intrinsic Value? · Premium
Yield curve inversion
A yield curve where short-term yields are higher than long-term yields, the reverse of the usual shape. In the US, inversions have come before many past recessions, but the timing varies widely and an inversion is not a guarantee that a recession will follow.
In the app: Module 17 · Four Yield Curve Shapes · Premium
Initial public offering · Going public
The first time a private company sells its shares to the public and lists them on a stock exchange. Investment banks usually underwrite the offering and help set the starting price, and the company must file a registration statement with the SEC first.
In the app: Module 2 · The IPO Process · Premium
Individual retirement account · Traditional IRA
A US retirement account you open yourself, separate from an employer plan. In a traditional IRA, contributions may be tax-deductible depending on your income and whether you have a workplace plan, investments grow tax-deferred, and withdrawals are taxed as ordinary income. The IRS sets yearly contribution limits.
In the app: Module 27 · Tax-Advantaged Accounts · Premium
Internal Revenue Service
The US federal agency that collects taxes and administers the federal tax code. It sets the yearly limits for retirement accounts and issues the forms used to report investment income, such as Form 1099.
M
Moving average convergence divergence
A trend and momentum indicator calculated as the difference between two exponential moving averages, commonly the 12-period and 26-period. A 9-period average of that line, called the signal line, is plotted with it, and crossovers between the two are watched as possible changes in momentum.
In the app: Module 7 · What is MACD? · Premium
Buying on margin · Margin trading
Money borrowed from a broker to buy securities, using the investments in the account as collateral. Margin magnifies both gains and losses, and the borrowed amount carries interest. If the account's value falls below a required level, the broker issues a margin call, asking for more cash or selling holdings.
Example: Buying $10,000 of stock with $5,000 of your own money and $5,000 borrowed means a 20% price drop wipes out 40% of your equity.
The gap between an investment's estimated intrinsic value and the price paid for it. Popularized by Benjamin Graham, the idea is to buy only well below estimated value so that errors in the estimate or bad luck do less damage.
Example: Buying a stock at $70 when you estimate its value at $100 gives a 30% margin of safety.
In the app: Module 12 · Margin of Safety · Premium
Market cap
The total market value of a company's shares, calculated as the share price times the number of shares outstanding. Companies are often grouped into large-cap, mid-cap and small-cap by size, though the cutoffs vary by index provider.
Example: A company with 50 million shares trading at $40 has a market cap of $2 billion.
A firm that stands ready to buy and sell a security throughout the trading day by posting both a bid and an ask price. Market makers add liquidity so orders can be filled quickly, and they earn money mainly from the difference between the two prices.
In the app: Module 2 · What Is a Market Maker? · Premium
An order to buy or sell immediately at the best price currently available. It almost always gets filled, but the final price is not guaranteed and can differ from the last quote, especially in fast-moving or thinly traded stocks.
In the app: Module 2 · Market Orders · Premium
Max drawdown · MDD
The largest drop from a peak to a later low in the value of an investment or portfolio before a new peak is reached. It shows the worst loss an investor would have experienced during a period, and larger drawdowns need much larger gains to recover.
Example: A portfolio that falls from $100,000 to $70,000 has a 30% drawdown and needs a gain of about 43% to get back to $100,000.
In the app: Module 10 · Maximum Drawdown · Premium
The tendency of prices, returns or valuation ratios to move back toward their long-run average over time after moving far above or below it. It is a tendency, not a rule; the timing is uncertain, and the average itself can shift.
In the app: Module 22 · Mean Reversion · Premium
Treating money differently depending on where it came from or what it is mentally labeled for, even though all dollars are interchangeable. Examples include spending a tax refund freely while carrying high-interest credit card debt.
In the app: Module 11 · Mental Accounting · Premium
MPT · Markowitz portfolio theory
A framework introduced by Harry Markowitz in 1952 showing how to combine assets to get the highest expected return for a given level of risk. Its key insight is that an asset's risk should be judged by how it affects the whole portfolio, which depends on how its returns move with the other holdings.
In the app: Module 22 · Markowitz and Modern Portfolio Theory · Premium
The actions a central bank takes to influence interest rates, money supply and credit in order to keep prices stable and support employment. Raising rates (tightening) tends to slow borrowing and inflation, while cutting rates (easing) tends to encourage borrowing and spending.
A method that runs thousands of random scenarios for future returns, inflation or other inputs to see the range of possible outcomes. In retirement planning, it estimates how often a plan would last, often shown as a probability of success.
Example: A result of 85% means the money lasted in 850 of 1,000 simulated futures.
In the app: Module 13 · Monte Carlo Simulation · Premium
Home loan
A loan used to buy property, with the property itself as collateral, so the lender can take it if the loan is not repaid. A fixed-rate mortgage keeps the same interest rate for the whole term, while an adjustable-rate mortgage (ARM) has a rate that can change after an initial period.
Example: Buying a $300,000 home with a $60,000 down payment means taking a $240,000 mortgage.
In the app: Module 8 · Choosing a Mortgage · Premium
MA · SMA · EMA
The average price over a set number of recent periods, recalculated each period so it forms a smooth line on a chart. A simple moving average (SMA) weights all periods equally, while an exponential moving average (EMA) gives more weight to recent prices. It is used to see the direction of a trend.
Example: A 50-day moving average adds the last 50 closing prices and divides by 50.
In the app: Module 7 · Types of Moving Averages · Premium
Muni bond · Munis
A bond issued by a US state, city or other local government to fund public projects such as schools or roads. Interest on most munis is exempt from federal income tax, and sometimes from state tax for residents of the issuing state, which is why their stated yields are often lower than taxable bonds.
In the app: Module 17 · Municipal Bonds · Premium
A fund that pools money from many investors to buy a portfolio of securities managed by professionals. Unlike ETFs, mutual fund shares are bought and sold directly with the fund company at a price set once a day, after the market closes.
In the app: Module 9 · ETFs and Mutual Funds · Premium
N
Nasdaq Composite · Nasdaq-100
A US stock exchange that began as the first electronic stock market, with no trading floor, and lists many technology companies. The name is also used for its indexes: the Nasdaq Composite, which covers most stocks listed there, and the Nasdaq-100, which tracks about 100 of its largest non-financial companies.
In the app: Module 2 · US Stock Exchanges · Premium
Net asset value
The value of a fund's assets minus its liabilities, usually expressed per share. Mutual funds are bought and sold at their NAV, calculated once a day, while an ETF's market price can be slightly above or below its NAV during the day.
Example: A fund with $100 million in net assets and 5 million shares has a NAV of $20 per share.
Needs and wants
A budgeting distinction between spending you cannot reasonably avoid (needs, such as housing, basic food and essential transport) and spending that improves your life but is optional (wants, such as dining out or upgrades). Many purchases mix both, so the line often depends on the specific version you choose.
Example: A basic phone plan can be a need, while the extra cost of the newest phone model is a want.
In the app: Module 1 · Needs vs. Wants · Free Read: Needs vs Wants: 12 Questions That Trick Your Brain
Net margin · Profit margin
Net income divided by revenue, showing how many cents of profit a company keeps from each dollar of sales after all expenses, interest and taxes. Typical margins differ a lot between industries.
Example: A company with $200 million of revenue and $20 million of net income has a 10% net margin.
In the app: Module 4 · Net Profit Margin · Premium
The total value of what you own (assets such as cash, investments and property) minus everything you owe (liabilities such as loans and credit card balances). It is a snapshot of your overall financial position at one point in time.
Example: Assets of $60,000 and debts of $25,000 give a net worth of $35,000.
In the app: Module 15 · Calculating Your Net Worth · Premium
NFP · Jobs report
The monthly change in the number of US jobs, excluding farm workers and a few other categories, published by the Bureau of Labor Statistics in its employment report. It is one of the most closely watched economic releases and can move stock, bond and currency markets sharply.
In the app: Module 14 · The Nonfarm Payrolls Report (NFP) · Premium
New York Stock Exchange
A stock exchange based in New York City and one of the largest in the world by the total value of its listed companies. It combines electronic trading with a trading floor where designated market makers help keep trading orderly.
In the app: Module 2 · US Stock Exchanges · Premium
P
Price-to-book ratio · Price/book
A stock's price divided by its book value per share, where book value is the company's assets minus its liabilities as shown on the balance sheet. It is widely used for banks and other asset-heavy businesses, and less useful for companies whose value comes mainly from brands or software.
Example: A $30 stock with a book value of $20 per share has a P/B of 1.5.
In the app: Module 3 · Price-to-Book Ratio (P/B) · Premium
Price-to-earnings ratio · PE ratio · Earnings multiple
A stock's price divided by its earnings per share. It shows how many dollars investors pay for each dollar of yearly profit; a higher P/E usually means the market expects faster growth, while a low P/E can signal either a bargain or a problem. It is most useful when compared with similar companies.
Example: A $100 stock earning $5 per share has a P/E of 20.
In the app: Module 1 · What is the P/E Ratio? · Free
Price-to-sales ratio
A company's market capitalization divided by its yearly revenue, or the share price divided by revenue per share. It is often used for young or unprofitable companies that have no earnings for a P/E, but it ignores costs and debt.
Example: A company worth $2 billion with $500 million in yearly sales has a P/S of 4.
In the app: Module 3 · Price-to-Sales Ratio (P/S) · Premium
Selling investments in a rush because of fear during a sharp market decline, rather than because of a planned decision. It can turn temporary paper losses into permanent ones and leave the investor out of the market during a recovery.
In the app: Module 11 · Panic Selling · Premium
Simulated trading · Virtual trading
Practicing buying and selling with virtual money instead of real money, usually on a simulator that uses real market prices. It lets you learn order types and test a strategy without financial risk, but it cannot fully reproduce real fills or the emotions of having real money at stake.
In the app: Module 29 · Paper Trading · Premium Read: Top 5 Paper Trading Apps in 2026
Face value · Principal
The amount a bond's issuer promises to repay at maturity, often $1,000 per bond in the US. A bond trading below par is said to trade at a discount and above par at a premium, mainly because market interest rates have changed since it was issued.
In the app: Module 17 · Par, Discount, Premium · Premium
Income that keeps coming in without you trading hours of work for it, such as rental income or earnings from a business you do not run day to day. It is usually contrasted with active income, which comes from a job or self-employment. Most passive income still needs money, effort or time up front.
In the app: Module 1 · Income and Expense Types · Free Read: Active vs Passive Income: The 8 Types of Cash Flow
Index investing
An approach that tries to match the market's return, usually by holding low-cost index funds for the long term, rather than trying to beat it. Active management, by contrast, uses research and stock picking to try to outperform a benchmark, typically at higher cost, and many active funds fall short of their benchmarks over long periods.
In the app: Module 9 · Passive vs Active Investing · Premium
A savings habit where you move money into savings or investments as soon as you are paid, before spending on anything else, often through an automatic transfer. Spending then comes out of what is left instead of saving whatever happens to remain at the end of the month.
Example: Setting an automatic $300 transfer to savings on every payday is a way to pay yourself first.
In the app: Module 15 · Pay Yourself First · Premium
Dividend payout ratio
The share of a company's earnings paid out as dividends, calculated as dividends divided by net income (or dividends per share divided by EPS). A ratio above 100% means the company is paying out more than it earns, which is hard to keep up.
Example: A company with EPS of $4 that pays $1 per share in dividends has a payout ratio of 25%.
In the app: Module 3 · Payout Ratio and Sustainability · Premium
Price/earnings-to-growth ratio
A stock's P/E ratio divided by its expected yearly earnings growth rate (in percent). It adjusts the P/E for growth, so a fast-growing company with a high P/E can still look reasonably priced. It relies on growth forecasts, which can be wrong.
Example: A stock with a P/E of 30 and expected earnings growth of 15% a year has a PEG of 2.
In the app: Module 4 · The PEG Ratio · Premium
Percentage in point
The standard smallest price step used to quote most currency pairs, usually the fourth decimal place (0.0001). For pairs involving the Japanese yen, it is usually the second decimal place (0.01).
Example: If EUR/USD moves from 1.1000 to 1.1025, it has moved 25 pips.
In the app: Module 19 · Pip, Lot and Leverage · Premium
The full collection of investments a person or institution owns, such as stocks, bonds, funds and cash. Investors usually judge risk and return at the level of the whole portfolio rather than each holding alone.
Deciding how much money to put into a single investment or trade, often based on how much of the account you are willing to lose if it goes wrong. Keeping each position's possible loss small limits the damage from any one mistake.
Example: Risking 1% of a $20,000 account means a maximum loss of $200 on the trade; with a $4 stop distance, that allows 50 shares.
In the app: Module 10 · Position Sizing · Premium
Preferred shares
A class of company shares that usually pays a fixed dividend and gets paid before common stock if the company is liquidated, but typically has no voting rights. Its price tends to behave partly like a bond because of the fixed payments.
PoS
A method a blockchain uses to agree on new blocks, in which validators lock up (stake) the network's coins as collateral and are chosen to confirm transactions. Validators who act dishonestly can lose part of their stake. It uses far less energy than proof of work, and Ethereum switched to it in 2022.
In the app: Module 32 · Proof of Work vs Proof of Stake · Premium
PoW
A method a blockchain uses to agree on new blocks, in which computers called miners compete to solve hard mathematical puzzles and the winner adds the next block and earns a reward. It makes attacks expensive but uses large amounts of electricity. Bitcoin uses proof of work.
In the app: Module 32 · Proof of Work vs Proof of Stake · Premium
A theory developed by Daniel Kahneman and Amos Tversky in 1979 describing how people actually make decisions under risk. It shows that people judge outcomes as gains or losses from a reference point rather than by total wealth, feel losses more than gains, and overweight small probabilities.
In the app: Module 25 · Prospect Theory: The Gain-Loss Asymmetry · Premium
Married put
Buying a put option on a stock you own to limit how much you can lose if its price falls. It works like insurance: you pay a premium, and below the strike price the put's gains offset further losses on the shares.
In the app: Module 18 · Protective Put · Premium
PMI · ISM index
A monthly survey-based indicator of business conditions in manufacturing or services, based on questions to purchasing managers about orders, output, employment and prices. A reading above 50 suggests the sector is expanding and below 50 that it is contracting. It is watched as an early signal of economic turns.
In the app: Module 14 · PMI and Leading Indicators · Premium
The amount of goods and services a unit of money can buy. Inflation reduces purchasing power over time, which is why money held in cash can lose real value even when its dollar amount stays the same.
Example: If prices rise 25% over several years, $100 buys only what about $80 bought before.
Put
A contract that gives the buyer the right, but not the obligation, to sell an asset at a set price (the strike) until or on a set date. The buyer pays a premium and profits if the price falls far enough below the strike, which makes puts a common tool for protecting against declines.
Example: A put with a $40 strike bought for $1.50 starts to make money at expiration only if the stock is below $38.50.
In the app: Module 18 · Put Options · Premium
R
Real rate
An interest rate after subtracting inflation, showing the actual gain in purchasing power. The nominal rate is the stated rate before adjusting for inflation. When inflation is higher than the nominal rate, the real rate is negative.
Example: A savings account paying 4% while inflation is 3% earns a real rate of about 1%.
In the app: Module 14 · Real vs Nominal Rates · Premium
Buying and selling investments to bring a portfolio back to its target asset allocation after market moves have pushed it off course. It can be done on a schedule, such as once a year, or when an allocation drifts beyond a set range.
Example: If a 60/40 portfolio drifts to 70/30 after stocks rise, rebalancing sells some stock funds and buys bond funds to return to 60/40.
In the app: Module 9 · Rebalancing Schedule · Premium
Giving too much weight to recent events and assuming they will continue. After a strong year, investors may expect gains to keep coming; after a crash, they may expect losses to continue.
In the app: Module 11 · Recency Bias · Premium
A significant decline in economic activity that spreads across the economy and lasts more than a few months, usually seen in falling output, employment, income and sales. Two straight quarters of falling GDP is a common rule of thumb, but in the US the official dates are set by a committee of the National Bureau of Economic Research (NBER), which looks at a broader set of data.
In the app: Module 14 · What is a Recession? · Premium
Real estate investment trust
A company that owns, operates or finances income-producing real estate, such as apartments, offices, warehouses or mortgages. To qualify as a REIT in the US, it must pay out most of its taxable income to shareholders as dividends. Many REITs trade on stock exchanges like ordinary shares.
In the app: Module 21 · What Is a REIT? · Premium
Resistance level
A price level where a rising price has tended to stall or turn lower because selling interest increases there. If the price breaks clearly above resistance, that level often acts as support afterward.
In the app: Module 6 · What is Resistance? · Premium
Risk profile · Risk appetite
How much ups and downs in the value of your investments you are willing and able to accept. It depends on your goals, time horizon, income stability and how you react emotionally to losses. Investors are often grouped into profiles such as conservative, moderate and aggressive.
In the app: Module 1 · What's Your Risk Profile? · Free
Reward-to-risk ratio · Risk-reward ratio
A comparison of how much a trade could lose (the distance to the stop-loss) with how much it could gain (the distance to the profit target). It is used to judge whether a trade is worth taking, together with the chance it works out.
Example: Buying at $50 with a stop at $48 and a target at $56 risks $2 to make $6, a risk/reward of 1:3.
In the app: Module 10 · Risk/Reward Ratio · Premium
Required minimum distribution
The minimum amount the IRS requires you to withdraw each year from most tax-deferred retirement accounts, such as traditional IRAs and 401(k)s, once you reach an age set by law. The starting age has changed over time, and missing an RMD can lead to a tax penalty.
In the app: Module 13 · Tax Strategies in Retirement · Premium
Return on equity
Net income divided by shareholders' equity, showing how much profit a company generates with the money shareholders have invested. DuPont analysis splits ROE into profit margin, asset turnover and financial leverage, which shows whether a high ROE comes from strong operations or from heavy borrowing.
Example: Net income of $30 million and shareholders' equity of $200 million give an ROE of 15%.
In the app: Module 4 · ROE and the DuPont Breakdown · Premium
Return on invested capital
After-tax operating profit divided by the total capital invested in the business by both shareholders and lenders. It shows how well a company turns all the money put into it into profit, and a ROIC that stays above the company's cost of capital for years is often seen as a sign of a durable competitive advantage.
Example: After-tax operating profit of $120 million on $1 billion of invested capital is a 12% ROIC.
In the app: Module 4 · Return on Invested Capital (ROIC) · Premium
A US individual retirement account funded with after-tax money. Investments grow tax-free, and qualified withdrawals in retirement, including earnings, are not taxed. Eligibility to contribute depends on income, and the IRS sets yearly limits that change over time.
In the app: Module 27 · Tax-Advantaged Accounts · Premium
Relative Strength Index
A momentum indicator that measures the speed and size of recent price moves on a scale from 0 to 100, commonly calculated over 14 periods. Readings above 70 are often called overbought and below 30 oversold, but prices can stay at extreme readings for a long time in strong trends.
In the app: Module 7 · What is RSI? · Premium
S
Standard & Poor's 500
A stock index of roughly 500 large US companies chosen by a committee, weighted by market capitalization so bigger companies have more influence. It is the most widely used benchmark for the US stock market.
In the app: Module 2 · What Is an Index? · Premium
Safe-haven asset
An asset that investors expect to hold its value or rise when markets are under stress, such as gold, US Treasury bonds or certain currencies. No asset is safe in every situation, and safe havens can still fall in value.
In the app: Module 20 · Gold: The Safe Haven · Premium
Securities and Exchange Commission
The US federal agency that regulates securities markets. It enforces securities laws, oversees exchanges, brokers and investment advisers, and requires public companies to disclose financial information through filings such as the 10-K, which are free to read on its EDGAR database.
Recovery phrase · Mnemonic phrase
A list of words, usually 12 or 24, generated by a crypto wallet that can restore all of its private keys. Anyone who learns the seed phrase can take the funds, so it should never be shared or typed into a website, and scammers often ask for it.
In the app: Module 32 · Wallet Security · Premium
Non-custodial wallet · Self-custodial wallet
Holding your cryptocurrency in a wallet where you alone control the private keys, rather than leaving it with an exchange or other custodian. It removes the risk of the custodian failing or freezing withdrawals, but if you lose your keys or seed phrase, no one can recover the funds.
In the app: Module 32 · Custodial vs Self-Custody · Premium
Sequence risk
The risk that poor investment returns early in retirement, while you are already withdrawing money, do lasting damage to a portfolio, even if the long-run average return turns out fine. Selling assets after a fall locks in losses and leaves less money to recover.
In the app: Module 13 · Sequence of Returns Risk · Premium
Trade settlement · Settlement date
The final step of a trade, when the buyer's cash and the seller's securities officially change hands. In the US it happens a set number of business days after the trade date, under a cycle set by regulators that has been shortened over the years.
In the app: Module 2 · Settlement (T+1) and Transfer · Premium
Stockholders' equity · Book value · Net assets
A company's total assets minus its total liabilities, as shown on the balance sheet. It represents the accounting value that belongs to shareholders and is the basis for book value per share and the P/B ratio.
In the app: Module 5 · What is a Balance Sheet? · Premium
A measure of return per unit of risk, calculated as an investment's return minus the risk-free rate, divided by the standard deviation of its returns. A higher Sharpe ratio means more return for the volatility taken. The Sortino ratio is a variation that counts only downside volatility.
Example: A portfolio returning 10% with a 3% risk-free rate and 14% volatility has a Sharpe ratio of 0.5.
In the app: Module 22 · Sharpe Ratio · Premium
Shorting · Short sale · Going short
Borrowing shares, selling them, and hoping to buy them back later at a lower price to return to the lender. The short seller profits if the price falls but loses if it rises, and because a price can keep rising, the possible loss has no fixed limit. Short sellers also pay borrowing costs and any dividends owed on the borrowed shares.
Example: Shorting a stock at $50 and buying it back at $40 makes $10 per share before costs; buying back at $70 loses $20.
In the app: Module 2 · Short Selling · Premium
Interest calculated only on the original amount (the principal), not on interest already earned or charged. Simple interest grows in a straight line, while compound interest grows faster over time.
Example: $1,000 at 5% simple interest earns $50 every year, so after three years the total interest is $150.
In the app: Module 8 · How Interest Works · Premium
Securities Investor Protection Corporation
A US nonprofit organization that protects customers of member brokerage firms if a firm fails and customer cash or securities are missing, up to limits set by law. It does not protect against losses from investments falling in value.
A program stored on a blockchain that runs automatically when set conditions are met, such as releasing funds once a payment is received. Smart contracts power DeFi applications, but bugs in their code have led to large losses because transactions usually cannot be reversed.
In the app: Module 32 · Ethereum and Smart Contracts · Premium
Special purpose acquisition company · Blank check company
A shell company with no business of its own that raises money through an IPO in order to merge with a private company within a set deadline, taking that company public. If no deal is completed in time, the money is generally returned to shareholders.
Bitcoin ETF · Spot crypto ETF
An exchange-traded fund that holds actual bitcoin and tracks its price, letting investors get exposure through a regular brokerage account without managing a crypto wallet. The SEC first approved spot bitcoin ETFs in the US in 2024, followed by spot ether ETFs. They charge fees and do not let holders use the coins directly.
In the app: Module 32 · Spot BTC and ETH ETFs · Premium
A cryptocurrency designed to keep a steady value, usually one US dollar, either by holding reserves such as cash and short-term Treasuries or through algorithms. A stablecoin can lose its peg if its reserves are inadequate or its design fails.
In the app: Module 32 · Stablecoins · Premium
A combination of high inflation, slow or shrinking economic growth and high unemployment. It is hard for policymakers because raising interest rates to fight inflation can weaken the economy further. The US experienced it in the 1970s.
In the app: Module 14 · Stagflation: The Ghost of the 70s · Premium
Locking up cryptocurrency on a proof-of-stake network to help validate transactions in exchange for rewards paid in that cryptocurrency. Rewards are not guaranteed, staked coins may be hard to withdraw quickly, and misbehaving validators can lose part of their stake, a penalty called slashing.
In the app: Module 32 · Staking and Yield · Premium
Stepped-up basis
A US tax rule under which inherited assets generally get a new cost basis equal to their market value on the date the original owner died. Gains that built up during the original owner's life are therefore not subject to capital gains tax when the heir sells.
Example: Shares bought for $10,000 and worth $50,000 at the owner's death get a $50,000 basis for the heir.
In the app: Module 27 · Step-Up in Basis · Premium
Share · Equity · Common stock
A unit of ownership in a company. Shareholders have a claim on part of the company's assets and future profits, and common stock usually carries voting rights. A stock's value can rise or fall, and shareholders are paid only after lenders if the company fails.
Example: If a company has 1,000,000 shares and you own 1,000, you own 0.1% of the company.
In the app: Module 1 · What is a Stock? · Free
Share repurchase · Buyback
When a company uses its cash to buy back its own shares from the market. This reduces the number of shares outstanding, which raises each remaining share's slice of earnings, and it is one way besides dividends to return cash to shareholders.
Example: A company with 100 million shares that buys back 5 million leaves each remaining share with a slightly larger claim on profits.
In the app: Module 31 · Stock Buyback Analysis · Premium
Exchange
A regulated marketplace where listed securities are bought and sold under set rules for trading, listing and reporting. The main US stock exchanges include the New York Stock Exchange (NYSE) and Nasdaq.
In the app: Module 2 · US Stock Exchanges · Premium
Index · Market index
A number that tracks the combined performance of a selected group of stocks, used to measure a market or a part of it. You cannot buy an index directly, but index funds and ETFs try to match its returns.
In the app: Module 2 · What Is an Index? · Premium
Equity market · Share market
The network of exchanges and other trading venues where shares of public companies are bought and sold. Prices move as buyers and sellers react to company results, economic news and expectations about the future.
In the app: Module 1 · What is the Stock Market? · Free Read: What is the Stock Market? NYSE, NASDAQ, BIST in 5 Minutes
Stop-market order
An order that turns into a market order once the price reaches a level you choose, called the stop price. It is often used to limit losses or to enter a trade on a breakout. Because it becomes a market order, the fill price can be worse than the stop price if the market moves quickly or opens with a gap.
In the app: Module 2 · Stop Orders · Premium
An order with two prices: when the stop price is reached, it becomes a limit order at the limit price. This avoids filling at a much worse price than planned, but if the market moves past the limit, the order may not be filled at all.
Example: A sell stop-limit with a $40 stop and $39.50 limit becomes a sell limit order at $39.50 once the price hits $40.
In the app: Module 2 · Stop-Limit Orders · Premium
Stop-loss order
A preset exit point used to cap the loss on a position, usually placed as a stop or stop-limit order with a broker. It helps remove emotion from the decision to exit, but it does not guarantee the exit price when markets gap or move fast.
Example: Buying at $100 with a stop-loss at $92 aims to limit the loss to about 8% per share.
In the app: Module 10 · What is a Stop-Loss? · Premium
An options strategy that buys a call and a put on the same asset with the same strike price and expiration. It profits if the price moves far enough in either direction to cover the cost of both premiums. A strangle is similar but uses an out-of-the-money call and put with different strikes, which costs less but needs a bigger move.
In the app: Module 18 · Straddle and Strangle · Premium
Exercise price · Strike
The fixed price at which the holder of an option can buy (for a call) or sell (for a put) the underlying asset. Together with the expiration date and the current market price, it determines how much the option is worth.
In the app: Module 18 · Strike, Premium, Expiration · Premium
Sunk cost
Continuing with a decision because of money, time or effort already spent that cannot be recovered, instead of judging it on its future prospects. In investing, it can mean holding a losing position because selling would feel like admitting the earlier money was wasted.
In the app: Module 11 · The Sunk Cost Fallacy · Premium
Support level
A price level where a falling price has tended to stop and bounce because buying interest increases there. If the price breaks clearly below support, that level often acts as resistance afterward.
Example: A stock that has bounced off $50 three times in recent months is said to have support near $50.
In the app: Module 6 · What is Support? · Premium
Market risk · Non-diversifiable risk
Risk that affects the whole market, such as recessions, interest rate changes or major crises, and cannot be removed by diversifying. Unsystematic risk, which is specific to one company or industry, can be reduced by holding many different investments.
In the app: Module 22 · Beta and Systematic Risk · Premium
T
Lifecycle fund · Target-retirement fund
A fund built around a planned retirement year that automatically shifts its mix from mostly stocks toward more bonds and cash as that year approaches. The planned path of that shift is called the glide path.
In the app: Module 9 · Lifecycle Investing · Premium
Tax-sheltered account
An account that gets special tax treatment, such as tax-deductible contributions, tax-deferred growth or tax-free withdrawals. In the US, examples include 401(k)s, traditional and Roth IRAs, HSAs and 529 plans, each with its own rules and limits.
In the app: Module 27 · Tax-Advantaged Accounts · Premium
Selling investments that are worth less than you paid in order to realize a capital loss that offsets capital gains. If losses are larger than gains, a limited amount can offset ordinary income each year and the rest can be carried forward. The wash sale rule limits buying the same investment back right away.
Example: Realizing a $2,000 loss in one stock can offset a $2,000 gain taken in another.
In the app: Module 27 · Tax-Loss Harvesting · Premium
Studying past price and volume data, usually on charts, to look for patterns and trends that traders use to time decisions. It focuses on how the market is behaving rather than on the company's finances, and its signals are probabilities, not certainties.
Life insurance that pays a death benefit if the insured person dies within a set period, such as 20 or 30 years, and builds no cash value. Whole life (permanent) insurance lasts for life and includes a savings component, which makes its premiums much higher for the same coverage.
In the app: Module 16 · Life Insurance: Term vs Whole · Premium
Time decay
An option Greek showing how much an option's price is expected to fall each day as time passes, with other factors unchanged. Time decay works against option buyers and in favor of sellers, and it usually speeds up as expiration gets closer.
Example: An option with a theta of -0.05 loses about $0.05 of value per day, other things equal.
In the app: Module 18 · Theta · Premium
TVM
The idea that a dollar today is worth more than the same dollar received in the future, because money you have now can be invested to earn a return and because inflation reduces what future dollars can buy. It is the basis for discounting, present value and most valuation methods.
Example: If you can earn 5% a year, $1,000 today is worth the same to you as about $1,050 a year from now.
In the app: Module 1 · The Time Value of Money · Free
Treasury Inflation-Protected Securities
US Treasury bonds whose principal is adjusted with inflation as measured by the Consumer Price Index. The fixed coupon rate is paid on the adjusted principal, so interest payments rise with inflation, and at maturity you receive the higher of the adjusted or original principal.
In the app: Module 17 · TIPS (Inflation-Protected Treasuries) · Premium
The full return on an investment over a period, combining the change in price with income received, such as dividends or interest. It gives a more complete picture than price change alone, especially for dividend-paying stocks and bonds.
Example: A stock bought at $50 that rises to $53 and pays $2 in dividends has a total return of 10%.
A written set of rules covering what you trade, when you enter and exit, how much you risk on each trade and how you review results. Writing it down before trading helps keep decisions consistent and less driven by emotion.
In the app: Module 29 · Writing a Trading Plan · Premium
Trailing stop
A stop order whose stop price moves with the market by a set dollar amount or percentage. For a long position, the stop rises as the price rises but does not fall when the price falls, so it can protect part of a gain.
Example: With a 10% trailing stop, a stock that climbs from $50 to $60 moves the stop from $45 up to $54.
In the app: Module 2 · Trailing Stop Orders · Premium
Treasuries · T-bills · T-notes · T-bonds
Debt issued by the US Department of the Treasury and backed by the full faith and credit of the US government. They come as bills (short-term), notes (medium-term) and bonds (long-term), and their yields serve as the main benchmark for other interest rates. Their interest is exempt from state and local income taxes but not federal tax.
In the app: Module 17 · Treasuries vs Corporates · Premium
