General

43 concepts in this category.

• Diversification

  If you put all your money in one stock and it crashes, you lose everything. Spread it across 20 different stocks, sectors, and even countries — when one falls, others may rise, protecting your overall wealth.

• Compounding

  If you earn 10% on $1,000, you have $1,100. Next year, you earn 10% on $1,100 = $110. Over 30 years, $1,000 becomes $17,449. Einstein called compounding the 'eighth wonder of the world.' Time is your greatest advantage.

• Dollar-Cost Averaging

  Instead of trying to pick the perfect time to invest, invest $200 every month regardless of price. When prices are low, you buy more shares. When high, you buy fewer. Over time, this averages out your cost and removes timing anxiety.

• Rebalancing

  Rebalancing forces you to sell what's risen (expensive) and buy what's fallen (cheap) to restore your target mix. It's systematic discipline — the opposite of the emotional tendency to chase winners.

• Asset Allocation

  Asset allocation is how you divide your money between different types of investments. A classic '60/40' portfolio is 60% stocks, 40% bonds. It's the most important decision in investing — determines most of your long-term returns and risk.

• Risk Tolerance

  Risk tolerance is how well you can sleep when your portfolio drops 30%. Some investors can stay the course; others panic-sell. High risk tolerance = more stocks. Low risk tolerance = more bonds and defensive assets.

• Time Horizon

  Investing for 30 years? You can weather market crashes because you have time to recover. Investing for 3 years? You need safer investments because a crash could derail your goals. Time horizon is the single biggest factor in portfolio design.

• Benchmark

  A benchmark is your measuring stick. If you earned 12% but the S&P 500 (your benchmark) earned 15%, you actually underperformed despite making money. Most active managers struggle to consistently beat their benchmark.

• Index Fund

  An index fund automatically owns every stock in an index (like the S&P 500). No stock picking. Very low fees. You get the market's return. Studies show 80-90% of active fund managers underperform index funds over 15 years.

• ETF (Exchange-Traded Fund)

  An ETF is like a basket of stocks that trades on the stock exchange just like a share. Buy one ETF and you might own 500 companies. They combine the diversification of mutual funds with the trading flexibility of stocks.

• Mutual Fund

  A mutual fund pools money from many investors and a professional manager buys stocks on everyone's behalf. Unlike ETFs, they trade only at end-of-day prices. Many are actively managed (trying to beat the market) and charge higher fees.

• Market Capitalization

  Market cap = share price × shares outstanding. Apple at $200/share with 15B shares = $3T market cap. Large caps (>$10B) are stable. Small caps (<$2B) are riskier but have more growth potential.

• Sector

  Sectors group companies by industry: Technology, Healthcare, Financials, Energy, etc. Diversifying across sectors means a crash in tech won't destroy your whole portfolio. Different sectors perform well in different economic conditions.

• Bull Market

  A bull market is when prices are rising and investors are optimistic. Officially, a bull market begins when the market rises 20% from its low. Bull markets are historically much longer than bear markets.

• Bear Market

  A bear market is when prices fall 20% or more from their peak and investors are pessimistic. Bear markets are typically shorter than bull markets (average 9-10 months) but feel much longer emotionally.

• Correction

  A correction is a drop of 10-20% — smaller and more common than a bear market. Corrections happen roughly once a year on average. They're painful but healthy — they prevent bubbles from inflating too far.

• Rally

  A rally is when prices bounce back up strongly after falling. Dead cat bounces (brief rallies in a continuing downtrend) can trap buyers. A confirmed rally breaks above key resistance and is accompanied by rising volume.

• Volatility

  Volatility measures how wildly a stock's price swings. A stable utility stock might move 1% per day. A small biotech might move 10%. Higher volatility = higher risk but also higher potential reward.

• Liquidity

  A liquid asset can be sold quickly at close to its value. Cash is perfectly liquid. A rare painting is illiquid. Stocks in big companies are very liquid. Stocks in tiny companies may have few buyers, so selling quickly requires accepting a lower price.

• Fundamental Analysis

  Fundamental analysis digs into a company's financial statements, business model, and competitive position to figure out what it's really worth. If the stock price is below intrinsic value, it might be a buy.

• Technical Analysis

  Technical analysis reads charts and price patterns to predict future price moves. It assumes all information is already in the price. Unlike fundamental analysis, it doesn't care about earnings — just supply and demand dynamics.

• Passive Investing

  Passive investing means buying index funds and holding them forever. No stock picking, no market timing. You get exactly what the market returns, minus tiny fees. Research consistently shows it beats most active strategies over the long run.

• Active Investing

  Active investing means trying to pick stocks or time the market to outperform the index. It requires research, analysis, and discipline. Most active managers fail to beat their benchmark after fees over 15 years.

• Growth Investing

  Growth investors buy companies growing fast — even if the stock seems expensive today. The bet is that rapid revenue and earnings growth will justify the high price. Think early Amazon or Tesla. High risk, potentially high reward.

• Value Investing

  Value investors hunt for companies the market has mispriced — cheap relative to their true worth. Like finding a $100 bill selling for $70. The strategy requires patience: sometimes the market stays wrong for years.

• Momentum Investing

  Momentum investing buys stocks that have been going up, betting they'll keep going up. Research shows winning stocks keep winning for 3-12 months on average. It's the opposite of contrarian value investing — you follow the trend, not fight it.

• Income Investing

  Income investors focus on stocks that pay regular dividends and bonds that pay interest. Instead of waiting for a stock to rise, you collect cash payments. Useful for retirees who need regular income from their portfolio.

• ESG Investing

  ESG investing considers not just profits but how a company treats the environment, its employees, and whether it's run ethically. Some investors avoid tobacco, weapons, or companies with poor environmental records for personal or financial reasons.

• Order Types

  When you buy or sell investments, you choose an order type. Market orders fill immediately at any price. Limit orders wait for your target price. Stop orders trigger automatically to protect from losses. Each has trade-offs between speed and price control.

• Portfolio

  Your portfolio is everything you own as an investment — all your stocks, bonds, cash, ETFs, and crypto combined. Portfolio management is about how you combine these investments to meet your goals with acceptable risk.

• Equity

  Equity means ownership. When you buy a stock, you own a tiny piece of that company — including a claim on its future profits. If the company succeeds, your equity grows. If it fails, you can lose everything.

• Fixed Income

  Fixed income investments (bonds) lend money to governments or companies and receive regular interest payments. Less exciting than stocks but provide stability and income. When stocks crash, bonds often rise — they're a safety net.

• Commodity

  Commodities are physical goods — oil, gold, wheat, copper. They often rise when inflation spikes (because they ARE what causes inflation). Gold specifically is a safe-haven asset that many investors hold as insurance against financial crises.

• Forex (Foreign Exchange)

  Forex is where currencies are exchanged. If you think the Euro will rise against the Dollar, you buy EUR/USD. The forex market trades $7.5 trillion per day — larger than all stock markets combined. Highly leveraged and 24/5.

• Real Estate

  Real estate investments include buying property directly or through REITs (Real Estate Investment Trusts) — companies that own properties and pay dividends. Real estate provides rental income, tax benefits, and inflation protection.

• Alternative Investments

  Alternative investments are anything outside stocks, bonds, and cash — real estate, hedge funds, private equity, commodities, and crypto. They often have low correlation to traditional markets, improving portfolio diversification.

• Hedge Fund

  Hedge funds are investment pools that use complex strategies: short selling, leverage, derivatives. They're only available to wealthy accredited investors. Most charge '2 and 20' — 2% management fee plus 20% of profits.

• Private Equity

  Private equity invests in companies that aren't publicly traded. Typically 10-year investments where firms buy companies, improve them, and sell them for a profit. High potential returns but money is locked up for years.

• Venture Capital

  Venture capital funds startups at early stages (Seed, Series A, B, C). Most startups fail, but one success like Google or Uber can return 1000x. VC is extremely illiquid — investments are tied up for 7-10 years.

• IPO (Initial Public Offering)

  An IPO is when a private company sells shares to the public for the first time. It's how companies like Google, Amazon, and Apple 'went public.' IPO shares can pop on day one or drop — the first day price is notoriously unpredictable.

• Compound Annual Growth Rate (CAGR)

  Imagine you planted a tree that grew 50% in 3 years. CAGR tells you it grew about 14.5% each year on average — not 16.7% (50÷3), because growth compounds. It's like saying 'if my investment grew at a steady rate, what would that rate be?'

• Total Return

  If you bought a stock for £100, it went up to £110, and you also received £5 in dividends, your total return is £15 or 15%. It counts EVERYTHING — not just the price going up, but any cash the investment paid you along the way.

• Annualised Return

  If your investment made 5% in 6 months, the annualised return is about 10.25% (not exactly 10%, because of compounding). It's like translating different languages into English — it converts returns from any time period into a yearly number so you can compare apples to apples.