Asset Allocation
The percentage split of a portfolio across broad asset groups such as equities, bonds and cash.
REFERENCE
Investment Word Bank
Search the most useful investing, markets and portfolio terms in one place.
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Bond
A loan made by an investor to a government or company in exchange for interest payments and repayment at maturity.
Bull Market
A period in which prices generally rise and investor sentiment is optimistic.
Bear Market
A period in which prices generally fall and sentiment becomes negative or defensive.
Cash Flow
The movement of money into and out of a person, project or business.
Compounding
Growth generated when returns begin to earn additional returns over time.
Correlation
A measure of how closely two assets move in relation to each other.
Diversification
Spreading investments across different holdings or asset classes to reduce concentration risk.
Dividend
A cash payment some companies distribute to shareholders.
Drawdown
The decline from a portfolio or investment peak to a later low point.
Earnings
A company’s profit over a period.
ETF
Exchange-traded fund: a pooled investment vehicle traded on an exchange, often used for diversified exposure.
Expense Ratio
The annual fee charged by a fund, expressed as a percentage of assets.
Fundamental Analysis
Studying a company’s business quality, financial statements and valuation.
Inflation
A general rise in prices over time, which reduces purchasing power.
Index
A benchmark that tracks a selected group of assets according to defined rules.
Liquidity
How easily an asset can be bought or sold without significantly affecting its price.
Market Capitalisation
The total market value of a company’s outstanding shares.
P/E Ratio
Price-to-earnings ratio: a valuation measure comparing share price to earnings per share.
Portfolio
The complete collection of investments held by an investor.
Real Return
Investment return after adjusting for inflation.
Rebalancing
Adjusting portfolio holdings to return to target asset weights.
Risk Capacity
The financial ability to absorb losses without harming important goals.
Risk Tolerance
How comfortable an investor feels with uncertainty and market swings.
Volatility
The degree to which prices fluctuate over time.
Yield
Income received from an investment, usually expressed as a percentage of its price or value.