Reference
Glossary
We define every term the moment it appears in an article. This page collects them all in one place for quick lookup.
- 401(k)
- An employer-sponsored retirement account that lets you contribute pre-tax (traditional) or after-tax (Roth) income, often with an employer match.
- Asset Allocation
- How your portfolio is split across asset classes — usually stocks, bonds, and cash — based on your timeline and risk tolerance.
- Bear Market
- A sustained drop of 20% or more in a market index from its recent high.
- Bull Market
- A sustained rise in market prices, typically defined as a 20% gain from a recent low.
- Compound Interest
- Interest calculated on both the original principal and the interest already earned, causing growth to accelerate over time.
- Credit Utilization
- The percentage of your available credit you're currently using — a major factor in your credit score.
- Diversification
- Spreading investments across many assets so that no single one can sink your portfolio.
- Dividend
- A portion of a company's profits paid out to shareholders, usually on a quarterly basis.
- Dollar-Cost Averaging
- Investing a fixed amount at regular intervals regardless of price, which smooths out the impact of volatility.
- Emergency Fund
- Cash set aside in an accessible account to cover unexpected expenses or income loss, typically 3-6 months of essential spending.
- ETF (Exchange-Traded Fund)
- A fund that holds a basket of securities and trades on an exchange like a stock, often with low fees.
- Expense Ratio
- The annual fee a fund charges investors, expressed as a percentage of assets, to cover management costs.
- FIRE
- Financial Independence, Retire Early — a movement focused on aggressive saving and investing to reach financial independence well before traditional retirement age.
- HSA (Health Savings Account)
- A tax-advantaged account for medical expenses, available with high-deductible health plans, offering a triple tax benefit.
- Index Fund
- A fund designed to track the performance of a market index, like the S&P 500, rather than trying to beat it.
- IRA (Individual Retirement Account)
- A personal retirement account with tax advantages, available in Traditional and Roth varieties.
- Lifestyle Creep
- The tendency for spending to rise in step with income, quietly absorbing raises before they can be saved or invested.
- Liquidity
- How quickly and easily an asset can be converted to cash without losing significant value.
- Market Capitalization
- The total value of a company's outstanding shares, calculated as share price multiplied by shares outstanding.
- Mutual Fund
- A pooled investment vehicle managed by a professional firm, priced once per day after markets close.
- Net Worth
- The value of everything you own minus everything you owe.
- Principal
- The original amount of money invested or borrowed, before interest or returns.
- Rebalancing
- Periodically buying or selling assets to bring a portfolio back to its target allocation.
- Roth Account
- A retirement account funded with after-tax dollars, where qualified withdrawals in retirement are tax-free.
- Sequence-of-Returns Risk
- The danger that poor investment returns early in retirement can permanently damage a portfolio, even if average returns over time are fine.
- Sinking Fund
- A savings bucket built up gradually to pay for a known future expense, like a car repair or holiday gifts.
- Three-Fund Portfolio
- A simple, globally diversified portfolio built from just three low-cost index funds: total U.S. stock, total international stock, and total bond.
- Traditional Account
- A retirement account funded with pre-tax dollars, where withdrawals in retirement are taxed as ordinary income.
- Volatility
- The degree to which an investment's price swings up and down over time.
- Yield
- The income an investment generates, usually expressed as a percentage of its price.