Stock
A share of ownership in a company. Its value can rise or fall.
YOUR FINANCIAL DICTIONARY
Less jargon. More clarity.
Plain-English definitions to keep your learning moving.
16 terms
ETF
An exchange-traded fund: a basket of assets whose shares trade on an exchange.
Diversification
Spreading exposure across investments with different sources of risk. It cannot eliminate losses.
Inflation
An increase in the broad price level over time, reducing the purchasing power of money.
Interest rate
The cost of borrowing or reward for lending, usually expressed as an annual percentage.
GDP
Gross domestic product: the value of final goods and services produced within an economy during a period.
Dividend
A distribution a company may pay to its shareholders. Payments are not guaranteed.
Volatility
The degree to which a price fluctuates over a period.
Expense ratio
Annual fund operating expenses expressed as a percentage of fund assets.
Call option
A contract giving its buyer the right to buy an underlying asset at a strike price under specified terms.
Put option
A contract giving its buyer the right to sell an underlying asset at a strike price under specified terms.
Premium
The price paid by an option buyer to an option seller.
Strike price
The agreed price at which an option’s underlying asset can be bought or sold under its terms.
Liquidity
How easily an asset can be traded without substantially affecting its price.
Bond
Debt issued by a borrower, typically with agreed interest and repayment terms. Default is possible.
Bid-ask spread
The difference between the highest quoted buying price and lowest quoted selling price.