Investment Encyclopedia
Comprehensive investment terminology and concepts explained in plain language.
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Active Management
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Investment approach involving frequent trading to outperform benchmarks.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with active management as part of their financial education.
Understanding active management helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
ADRs
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Asset Allocation
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Strategic distribution of investments across asset classes.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with asset allocation as part of their financial education.
Understanding asset allocation helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Beta
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Measure of a security's volatility relative to the market.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with beta as part of their financial education.
Understanding beta helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Bond Duration
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Sensitivity of bond prices to interest rate changes.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with bond duration as part of their financial education.
Understanding bond duration helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Capital Preservation
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Investment strategy focused on protecting principal.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with capital preservation as part of their financial education.
Understanding capital preservation helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Catastrophic Risk
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Company Risk
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Correlation
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Statistical measure of how investments move together.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with correlation as part of their financial education.
Understanding correlation helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Currency Risk
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Data Sources
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Dividend Yield
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Annual dividends as percentage of stock price.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with dividend yield as part of their financial education.
Understanding dividend yield helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Dollar Cost Averaging
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Investing fixed amounts at regular intervals.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with dollar cost averaging as part of their financial education.
Understanding dollar cost averaging helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Equity (Stock) Risk
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ESG Investing
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Environmental, social, governance focused investing.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with esg investing as part of their financial education.
Understanding esg investing helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
ESG Risk
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ETFs/ETNs
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Expense Ratio
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Annual fee charged by funds as percentage of assets.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with expense ratio as part of their financial education.
Understanding expense ratio helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Fiduciary Duty
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Legal obligation to act in client's best interest.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with fiduciary duty as part of their financial education.
Understanding fiduciary duty helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Financial Risk
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Foreign Securities Risk
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Fundamental Analysis
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Growth Investing
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Strategy focusing on companies with high growth potential.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with growth investing as part of their financial education.
Understanding growth investing helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Hedge
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Investment to reduce risk of adverse price movements.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with hedge as part of their financial education.
Understanding hedge helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Index Investing
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Passive strategy tracking market indices.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with index investing as part of their financial education.
Understanding index investing helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Market Capitalization
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Total value of company's outstanding shares.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with market capitalization as part of their financial education.
Understanding market capitalization helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Modern Portfolio Theory
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Framework for building optimal portfolios.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with modern portfolio theory as part of their financial education.
Understanding modern portfolio theory helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Rebalancing
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Adjusting portfolio to maintain target allocation.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with rebalancing as part of their financial education.
Understanding rebalancing helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Risk Tolerance
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Investor's ability to handle investment volatility.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with risk tolerance as part of their financial education.
Understanding risk tolerance helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Sharpe Ratio
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Risk-adjusted return measurement.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with sharpe ratio as part of their financial education.
Understanding sharpe ratio helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Tax Loss Harvesting
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Selling losses to offset capital gains.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with tax loss harvesting as part of their financial education.
Understanding tax loss harvesting helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Value Investing
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Strategy seeking undervalued securities.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with value investing as part of their financial education.
Understanding value investing helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Volatility
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Degree of price fluctuation in investments.
This concept is fundamental to understanding modern investment management and portfolio construction. Investors should familiarize themselves with volatility as part of their financial education.
Understanding volatility helps investors make more informed decisions and better manage their portfolios in alignment with their financial goals and risk tolerance.
Yield Curve
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The yield curve illustrates the different yields investors can earn for investing in bonds at different maturities.
Resources like ustreasuryyieldcurve.com illustrate the entire curve, while professionals more commonly use "spreads" like this series from FRED which relate specific points on the yeild curve to each other, to visualize changes in the relationship between short and long term interest rates over time.
Related Terms
Bonds, Fixed Income, Term Premium,
Zero-Coupon Bond
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Bond sold at discount with no periodic interest.