Money glossary
One line each. If a term on this site confuses you, it should be here.
- Accumulating fund
- A fund that reinvests dividends for you instead of paying them out.
- Asset
- Anything you own that has value: cash, shares, property.
- Bond
- A loan you give to a government or company in exchange for interest.
- Break-even win rate
- The share of winning trades you need to neither win nor lose, given your average win and loss sizes.
- Broker
- The company that buys and sells investments on your behalf.
- CFD
- Contract for difference: a leveraged bet on a price without owning the asset.
- Compound interest
- Earning returns on your earlier returns, not just on what you put in.
- Diversification
- Spreading money over many investments so one failure doesn't sink you.
- Dividend
- Part of a company's profit paid to its shareholders.
- Dollar-cost averaging
- Investing the same amount at regular intervals, whatever the price.
- Drawdown
- How far your account falls from its highest point before it recovers.
- Emergency fund
- Cash kept only for real surprises, usually 3–6 months of essential costs.
- ETF
- Exchange-traded fund: a fund you buy and sell on the stock exchange like a share.
- ETP
- Exchange-traded product: a wider family that includes ETFs and notes, such as leveraged products.
- Expectancy
- The average result per trade, often measured in R.
- Index
- A list of companies tracked as one number, such as a country's biggest firms.
- Inflation
- The general rise in prices, which makes the same money buy less over time.
- KID
- Key Information Document: a short EU summary of a product's costs and risks.
- Leverage
- Using borrowed money so gains and losses are bigger than your own stake.
- Liquidity
- How quickly you can turn something into cash without losing value.
- Margin
- The money you must keep with a broker to hold a leveraged position.
- Net income
- Take-home pay: what's left after tax and social contributions.
- Position size
- How much of one investment you hold.
- PRIIPs
- EU rules requiring a KID for investment products sold to retail investors.
- R (risk unit)
- The money you'd lose on a trade if your stop is hit.
- Rebalancing
- Moving money between investments to bring them back to your planned mix.
- Reward:risk
- How much you aim to win compared with how much you risk on one trade.
- Spread
- The difference between the price you can buy at and the price you can sell at.
- Stop-loss
- A price at which you sell to limit a loss.
- TER
- Total expense ratio: the yearly cost of a fund, as a % of your money in it.
- UCITS
- The EU framework for funds sold to ordinary investors.
- Volatility
- How much and how fast a price moves up and down.
- Volatility decay
- The loss daily-reset leveraged products suffer in up-and-down markets.
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Education, not advice. I'm not a financial adviser and I don't know your situation. These tools show the maths behind common rules of thumb; check important decisions with a qualified professional. Full disclaimer.