Investing glossary, A to Z
Short, sourced definitions of the words you meet in fund documents, stock quotes and bond tables. Each term has a worked example calculated in code and links to the full guides.
B
- Basis point
A basis point (bp or bps) is one one-hundredth of a percentage point, or 0.01%. For example, 8% equals 800 basis points.
- Beta
Beta measures how a stock has moved relative to the overall market, usually a benchmark index. A beta of 1 moves in line with the benchmark; above...
- Bid-ask spread
The bid-ask spread is the difference between the bid, the highest price a buyer will pay, and the ask, the lowest price a seller will accept. A...
- Blue-chip stock
Blue-chip stocks are shares in large, well-known companies with a solid history of growth, and they generally pay dividends. The label is...
- Book value
Book value is the accounting value of a company: total assets minus total liabilities. It equals shareholders' equity, the amount that would be...
C
- Capital gain
A capital gain is the profit when an investment is sold for more than the price the investor paid for it. Selling for less than your cost is a...
D
- Dividend yield
Dividend yield is the yearly dividend a stock pays divided by its current share price, shown as a percentage. It describes income relative to...
- Duration (bonds)
Duration is a measure of how much a bond's value is likely to change if interest rates rise or fall. As a rough rule, a 1 percentage-point rate...
E
- Earnings per share (EPS)
Earnings per share (EPS) is a public company's net profit divided by the number of its common shares. It shows how much profit the company earned...
- Ex-dividend date
The ex-dividend date is the cutoff for a stock's next dividend. If you buy on the ex-dividend date or after it, you will not receive that payment;...
- Expense ratio
An expense ratio is the percentage of a fund's average net assets used each year to pay its operating expenses, such as management fees and 12b-1...
L
- Liquidity
Liquidity is how easily or quickly a security can be bought or sold in a secondary market at a fair market price when you want to. Liquidity risk...
M
- Market capitalization
Market capitalization (market cap) is the total market value of a company's outstanding shares: the current price of one share multiplied by the...
N
- Net asset value (NAV)
Net asset value (NAV) is an investment company's total assets minus its total liabilities. Per-share NAV is that figure divided by the number of...
S
- Sharpe ratio
The Sharpe ratio is the average return of an investment above a benchmark, usually a riskless rate, divided by the standard deviation of that...
- Short selling
Short selling is generally the sale of a stock you do not own, using shares borrowed for delivery, in the hope of buying them back later at a...
- Standard deviation
Standard deviation is the square root of the variance, the average squared distance of values from their mean. In investing it measures how far...
T
- Ticker symbol
A ticker symbol is a short abbreviation that identifies a publicly traded security, such as a U.S. common stock, for trading. It is also called a...
V
- Volatility
Volatility describes how much an investment's price moves up and down over time. FINRA describes it simply: some days indexes and stock prices go...
Y
- Yield to maturity
Yield to maturity (YTM) is the annual return on a bond if you hold it until it matures, taking into account the price you paid and when you bought...