Glossary

Financial Glossary

Simple explanations of investing, personal finance, and wealth-building concepts.

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20

Clear, beginner-friendly explanations of the concepts behind long-term investing.

5 min readCAGRCompound Annual Growth RateUnderstand how CAGR measures the smoothed annual growth rate of an investment over time.

6 min readCompound InterestInterest earning interestUnderstand how compound interest lets your money grow on its own growth over time.

6 min readInflationThe rising cost of livingUnderstand how inflation raises prices over time and quietly reduces what your money can buy.

5 min readROIReturn on InvestmentUnderstand how ROI measures the profit or loss of an investment relative to its cost.

5 min readTotal ReturnPrice change plus incomeUnderstand how total return captures both price gains and income like dividends.

5 min readAnnualized ReturnYour return expressed as a yearly rateUnderstand how annualized return turns a total gain into a comparable yearly rate.

6 min readReal ReturnReturn after inflationUnderstand how real return shows your growth in purchasing power after inflation.

4 min readRule of 72Estimate years to double your moneyUnderstand the mental-math shortcut that estimates how long an investment takes to double.

6 min readDollar Cost AveragingInvesting a fixed amount on a scheduleUnderstand how investing a fixed amount on a regular schedule averages your purchase price over time.

7 min readAsset AllocationHow you divide your investmentsUnderstand how dividing money across asset classes balances risk and return.

7 min readRisk vs ReturnThe core investing trade-offUnderstand why higher expected returns generally require accepting more risk.

6 min readDiversificationNot putting all your eggs in one basketUnderstand how spreading investments across assets reduces the risk of any single one.

5 min readCorrelationHow much investments move togetherUnderstand how correlation measures whether investments move together — and why that's the engine behind diversification.

5 min readVolatilityHow much returns swingUnderstand how volatility measures the size of an investment's ups and downs — and what it means for risk.

5 min readDividend YieldAnnual income vs. priceUnderstand how dividend yield measures the income an investment pays relative to its price.

5 min readDividend Reinvestment (DRIP)Using dividends to buy more sharesUnderstand how reinvesting dividends buys more shares and compounds returns over time.

4 min readYield on CostToday's dividend vs. your original priceUnderstand how yield on cost measures today's dividend against the price you originally paid.

6 min readETFExchange-traded fundUnderstand how an ETF bundles many investments into one that trades like a stock.

6 min readIndex FundOwns the whole indexUnderstand how an index fund tracks a whole market index at low cost, instead of trying to beat it.

6 min readXIRRReturn with irregular cash flowsUnderstand how XIRR measures the true annualized return when money goes in and out at irregular times.