Less jargon. More understanding.
Short explanations for the terms you’ll meet in a bank statement, a fund document, or the headlines.
Annual percentage rate
An annualized measure of borrowing cost. Which fees are included depends on the product and applicable disclosure rules.
Annual percentage yield
Effective annual growth including compounding. An APY is a quoted yield under specified assumptions, not a promise about future variable rates.
Asset allocation
How a portfolio is divided among categories such as stocks, bonds, and cash. Appropriate allocations depend on risk capacity and time horizon.
Bear market
A period of broadly falling market prices. A decline of 20% from a recent high is a common convention, rather than a guarantee of what happens next.
Bond
A debt investment: the issuer borrows money and owes payments under the bond’s terms. Issuers can default, and prices can change when rates move.
Budget
A plan connecting income to spending, saving, and debt payments over a defined period. A useful budget reflects real cash flow and can be revised.
Capital gain
The increase between an asset’s cost basis and its sale value, subject to applicable tax adjustments. Tax treatment varies by jurisdiction and account.
Cash flow
Money coming in and going out during a period. Positive cash flow does not automatically mean high net worth; timing and existing obligations matter.
Compound interest
Interest calculated on both principal and previously accumulated interest. Reinvestment makes the interest-bearing balance grow over time.
Credit report
A record of credit activity and reported account information used in lending and other permitted decisions. It can contain errors and can be disputed.
Credit score
A number calculated from credit-report information by a scoring model. Models, legal systems and lender requirements differ across countries; there is no universal score or approval threshold.
Cryptocurrency
A digital asset using cryptography and a distributed record system. Value, custody, liquidity, and regulatory risks vary significantly by asset.
Debt avalanche
A repayment approach directing extra payments toward the highest interest rate first while keeping other required payments current.
Debt snowball
A repayment approach directing extra payments toward the smallest balance first. It emphasizes visible progress rather than minimizing interest.
Deposit insurance
Protection for eligible deposits if a covered bank fails, where a deposit-protection scheme applies. Coverage, aggregation, currencies and eligible products depend on local rules; investment losses are a separate risk.
Diversification
Spreading exposure across investments to reduce concentration risk. It does not eliminate market risk or ensure a profit.
Regular investing (cost averaging)
Investing equal amounts at regular intervals regardless of market movements. It does not guarantee profits or protection in falling markets.
Emergency fund
Money set aside for unplanned expenses or income interruptions. The appropriate amount depends on expenses, income stability, and other resources.
Exchange-traded fund
A pooled investment whose shares trade on an exchange. ETFs can differ widely in holdings, costs, strategy, and risk.
Expense ratio
Annual fund operating expenses expressed as a percentage of fund assets. It is one cost among others that can affect investor returns.
Index fund
A mutual fund or ETF designed to track a specified index. Costs, tracking differences, and the index’s composition affect outcomes.
Inflation
A broad increase in prices over time, usually measured using a price index. Your own spending basket may experience different changes.
Interest
The cost paid for borrowing money, or income received for lending it. The calculation depends on the contract and timing.
Liquidity
How readily an asset can be converted into usable cash without a substantial price concession. Access restrictions and market conditions affect liquidity.
Minimum payment
The smallest contractual payment due for a statement period. Paying only the minimum can extend repayment and increase total interest.
Net worth
The value of assets minus outstanding liabilities at a point in time. It is a balance-sheet measure, not a monthly cash-flow measure.
Nominal return
An investment return before adjusting for changes in purchasing power. It may also exclude taxes and costs depending on the calculation.
Principal
The original amount invested or borrowed, excluding interest. Contributions and repayments change the outstanding balance over time.
Real return
A return adjusted for inflation. The exact relationship is (1 + nominal return) / (1 + inflation) − 1.
Rebalancing
Adjusting a portfolio back toward a target allocation after values or goals change. Transactions can create costs or tax consequences.
Risk tolerance
Willingness to accept uncertain outcomes and losses. It differs from risk capacity, which concerns your ability to absorb a loss.
Time horizon
The period before money is expected to be needed. A short horizon can limit the ability to recover from market losses.