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401(k)
An employer-sponsored US retirement plan funded from your paycheck, often with an employer match. 401(k) vs. IRA →
52-week high/low
The highest and lowest prices a stock has traded at over the past year. Shows where today's price sits in its recent range. Reading stock charts →
A
Ask price
The lowest price a seller is currently willing to accept for a stock. You pay the ask when you buy with a market order.
Asset allocation
How a portfolio is divided among stocks, bonds, cash and other assets. One of the biggest drivers of risk and return. Asset allocation by age →
B
Basis point
One hundredth of a percentage point (0.01%). A fee cut from 0.10% to 0.05% is a 5-basis-point cut.
Bear market
A decline of 20% or more in a broad market index from a recent high. Bull vs. bear markets →
Beta
A measure of how much a stock has historically moved relative to the overall market. The market has a beta of 1. What is beta? →
Bid price
The highest price a buyer is currently willing to pay for a stock. You receive the bid when you sell with a market order.
Bid-ask spread
The gap between the bid and ask prices. Narrow spreads mean a stock is cheap to trade; wide spreads add hidden cost.
Blue-chip stock
Shares of a large, well-established, financially strong company with a long record of reliable performance. What are blue-chip stocks? →
Bond
A loan to a government or company that pays interest and returns the principal at maturity. Stocks vs. bonds →
Book value
A company's total assets minus total liabilities, also called shareholders' equity. Price-to-book ratio →
Brokerage account
An investment account with a licensed broker used to buy, sell and hold securities. What is a brokerage account? →
Bull market
A sustained rise in stock prices, commonly marked by a gain of 20% or more from a recent low. Bull vs. bear markets →
Buyback
When a company repurchases its own shares, reducing the share count and usually raising earnings per share.
C
CAGR
Compound annual growth rate: the steady yearly rate that turns a starting value into an ending value over a period. CAGR calculator →
Call option
A contract giving the right, but not the obligation, to buy a stock at a set price before a set date. Options basics →
Capital expenditures (capex)
Money a company spends on long-term assets such as buildings and equipment. Free cash flow →
Capital gain
The profit from selling an investment for more than you paid. Gains on assets held over a year are taxed at lower US rates. Capital gains tax →
Compound interest
Earning returns on both your original money and on returns already earned. Compound interest →
Correction
A drop of 10% to 20% from a recent high in a stock or index. Bull vs. bear markets →
Cost basis
What you paid for an investment, including commissions, used to calculate gains and taxes.
Current ratio
Current assets divided by current liabilities; a check on whether a company can pay bills due within a year. Financial statements →
D
Day order
An order that is cancelled automatically if it isn't filled by the end of the trading day. Order types →
DCF (discounted cash flow)
A valuation method that estimates what a business is worth by discounting its expected future cash flows to today. Intrinsic value and DCF →
Debt-to-equity ratio
Total debt divided by shareholders' equity; a measure of how much a company relies on borrowing. Debt-to-equity ratio →
Diluted EPS
Earnings per share counting shares that could be created from options and convertible securities. What is EPS? →
Diversification
Spreading money across many investments so no single one can do too much damage. How to diversify →
Dividend
A cash payment a company makes to shareholders, usually from profits. Dividend investing →
Dividend yield
Annual dividends per share divided by the share price. Dividend calculator →
Dollar-cost averaging
Investing a fixed amount on a regular schedule regardless of price. Dollar-cost averaging →
Dow Jones Industrial Average
A price-weighted index of 30 large, well-known US companies. Stock market indexes →
DRIP
Dividend reinvestment plan: automatically using dividends to buy more shares. How dividends are paid →
E
Earnings per share (EPS)
A company's net profit divided by its shares outstanding. What is EPS? →
Earnings report
A company's quarterly or annual release of financial results. Reading earnings reports →
EBITDA
Earnings before interest, taxes, depreciation and amortization; a measure of operating profit. What is EBITDA? →
Enterprise value (EV)
Market cap plus debt minus cash: the value of the whole business. Market cap →
ETF
Exchange-traded fund: a basket of investments that trades on an exchange like a single stock. What is an ETF? →
EV/EBITDA
Enterprise value divided by EBITDA; a valuation multiple that accounts for debt. What is EBITDA? →
Ex-dividend date
The date from which new buyers no longer receive the next dividend. Buy before it to get paid. How dividends are paid →
Expense ratio
The annual fee a fund charges, as a percentage of your investment. ETFs vs. mutual funds →
Extended-hours trading
Trading before the market opens or after it closes, usually with lower volume and wider spreads. Pre-market and after-hours →
F
Fractional shares
Portions of a single share, letting you invest a dollar amount rather than buying whole shares. Investing with little money →
Free cash flow
Operating cash flow minus capital expenditures; the cash left for dividends, buybacks, debt repayment or growth. What is free cash flow? →
Fundamental analysis
Evaluating a stock from its business and financial statements rather than its price chart. How to analyze a stock →
G
Good 'til cancelled (GTC)
An order that stays open until it fills or you cancel it, subject to your broker's time limit. Order types →
Gross margin
Gross profit divided by revenue; what's left after the direct cost of the product. Financial statements →
Growth stock
A company expected to grow revenue and earnings faster than the market, often at a high valuation. Growth vs. value →
I
Index
A basket of stocks chosen by set rules, used to measure a market, such as the S&P 500. What is the S&P 500? →
Index fund
A fund that aims to match the return of a market index. Index funds vs. stocks →
Inflation
The general rise in prices over time, which reduces what money can buy. Inflation and investing →
Interest coverage
Operating income divided by interest expense; how comfortably a company can pay its interest. Debt measures →
Intrinsic value
An estimate of what a business is actually worth, independent of its share price. Intrinsic value →
IPO
Initial public offering: the first time a private company sells shares to the public. What is an IPO? →
IRA
Individual retirement account with tax advantages. Comes in traditional and Roth versions. Roth vs. traditional IRA →
L
Large cap
A company with a market capitalization of roughly $10 billion to $200 billion. Market cap →
Limit order
An order to buy or sell only at a set price or better. Order types →
Liquidity
How easily an asset can be bought or sold without moving its price.
Lock-up period
The time after an IPO, often 90 to 180 days, when insiders agree not to sell shares. What is an IPO? →
Long position
Owning a security in the expectation that its price will rise.
M
Margin account
A brokerage account that lets you borrow against your investments, magnifying gains and losses. Brokerage accounts →
Market capitalization
Share price times shares outstanding: the stock market's value of a company. What is market cap? →
Market order
An order to buy or sell immediately at the best available price. Order types →
Mid cap
A company with a market capitalization of roughly $2 billion to $10 billion. Market cap →
Moving average
The average closing price over a set number of days, used to smooth out price trends. Reading stock charts →
Mutual fund
A pooled investment fund priced once a day at its net asset value. ETFs vs. mutual funds →
N
Nasdaq Composite
An index of nearly all stocks listed on the Nasdaq exchange, weighted toward technology. Stock market indexes →
Net asset value (NAV)
The value of a fund's holdings per share, calculated at the end of each trading day.
Net income
A company's profit after all expenses, interest and taxes. Financial statements →
O
Operating margin
Operating income divided by revenue; profit from the core business per dollar of sales.
Options
Contracts giving the right to buy (call) or sell (put) a stock at a set price before a set date. Options basics →
P
P/B ratio
Price-to-book: share price divided by book value per share. Price-to-book ratio →
P/E ratio
Price-to-earnings: share price divided by earnings per share. What is the P/E ratio? →
Payout ratio
The share of a company's earnings paid out as dividends. Dividend payout ratio →
PEG ratio
The P/E ratio divided by the expected earnings growth rate. PEG ratio →
Portfolio
The collection of investments a person or fund holds. Portfolio tracker →
Position sizing
Deciding how much to invest in one holding based on the risk you're willing to take. Position size calculator →
Pre-market
Trading before the regular session opens at 9:30 a.m. ET. Extended-hours trading →
Price-to-sales ratio
Market cap divided by annual revenue; useful for companies without profits.
Put option
A contract giving the right, but not the obligation, to sell a stock at a set price before a set date. Options basics →
R
Rebalancing
Selling some of what has grown and buying what has lagged to return to your target mix. Asset allocation →
REIT
Real estate investment trust: a company that owns or finances income-producing property and pays most income as dividends. What is a REIT? →
Return on equity (ROE)
Net income divided by shareholders' equity. Return on equity →
Return on invested capital (ROIC)
Operating profit after tax divided by the debt and equity capital invested in the business. ROE, ROA and ROIC →
Revenue
The total money a company brings in from sales before any costs.
Reverse split
Combining shares, for example 10 into 1, which raises the share price without changing total value. Stock splits →
Risk tolerance
How much volatility and loss an investor can handle, financially and emotionally.
Roth IRA
An IRA funded with after-tax money whose qualified withdrawals in retirement are tax-free. Roth vs. traditional IRA →
Russell 2000
An index of about 2,000 small US companies. Stock market indexes →
S
S&P 500
An index of about 500 of the largest US public companies, weighted by market value. What is the S&P 500? →
Sector
A group of companies in a similar line of business, such as technology or health care.
Shares outstanding
The total number of a company's shares held by all shareholders.
Short interest
The number of shares currently sold short, often shown as a percentage of the float. Short selling →
Short selling
Selling borrowed shares in the hope of buying them back later at a lower price. Short selling →
Small cap
A company with a market capitalization of roughly $300 million to $2 billion. Market cap →
Stock
A share of ownership in a company. How to buy stocks →
Stock screener
A tool that filters stocks by criteria such as market cap, P/E and dividend yield. Free stock screener →
Stock split
Dividing each share into several, lowering the share price without changing total value. Stock splits →
Stop-loss order
An order that becomes a market order to sell once a stock falls to a set price. Order types →
Support and resistance
Price levels where a stock has repeatedly stopped falling (support) or rising (resistance). Reading stock charts →
T
Target-date fund
A fund that shifts automatically from stocks toward bonds as a chosen retirement year approaches. Asset allocation →
Tax-loss harvesting
Selling investments at a loss to offset taxable gains. Capital gains tax →
Ticker symbol
The short code that identifies a stock on an exchange, such as AAPL.
Traditional IRA
An IRA whose contributions may be tax-deductible, with withdrawals taxed in retirement. Roth vs. traditional IRA →
V
Value stock
A stock trading at a low price relative to its earnings, assets or cash flow. Growth vs. value →
Volatility
How much and how quickly an investment's price moves up and down. What is beta? →
Volume
The number of shares traded in a given period. Reading stock charts →
W
Wash sale
Selling at a loss and buying a substantially identical security within 30 days, which defers the tax loss. Capital gains tax →
Y
Yield
The income an investment pays, as a percentage of its price.
Keep learning with our free investing guides, or put these terms to work with the stock screener and investing calculators.