A comprehensive reference of investment and financial terms. Whether you are just starting out or managing a complex portfolio, find clear explanations for the concepts that matter.
An ETF is a basket of securities that trades on an exchange like a stock. ETFs track an index, sector, commodity, or st…
The expense ratio is the annual fee charged by an ETF or mutual fund, expressed as a percentage of assets under managem…
NAV is the per-share value of a fund calculated by dividing total net assets by shares outstanding. It's used to price …
Tracking error measures how closely a fund or ETF follows its benchmark index. It's the standard deviation of the diffe…
A DRIP automatically reinvests dividend payments to purchase additional shares of the same stock, compounding returns o…
A Dividend Aristocrat is an S&P 500 company that has increased its dividend for at least 25 consecutive years. These co…
The dividend growth rate measures how quickly a company increases its dividend payments over time. Consistent dividend …
Dividend yield is the annual dividend payment divided by the stock price, expressed as a percentage. It indicates how m…
The ex-dividend date is the cutoff date by which you must own shares to receive the next dividend payment. If you buy o…
The payout ratio is the percentage of a company's earnings paid out as dividends. It indicates dividend sustainability …
Asset allocation is the process of dividing your portfolio among different asset classes (stocks, bonds, cash, real est…
A benchmark is a standard index used to measure portfolio performance. Comparing your returns to a benchmark tells you …
Diversification reduces risk by spreading investments across different asset classes, sectors, geographies, and time pe…
Rebalancing is the process of realigning portfolio weights back to target allocations. As some assets outperform others…
CAGR represents the smoothed annual rate of return that an investment would need to grow from its initial value to its …
IRR is the discount rate at which the net present value (NPV) of all cash flows equals zero. Unlike CAGR, IRR accounts …
NPV is the difference between the present value of future cash flows and the initial investment. A positive NPV means t…
TWR measures portfolio performance by eliminating the effect of cash flows (deposits and withdrawals). It's the standar…
Total return includes both capital appreciation (price changes) and income (dividends, interest). It's the most complet…
Alpha measures the excess return of an investment relative to a benchmark index. Positive alpha means the investment ou…
Beta measures a stock's volatility relative to the overall market. A beta of 1.0 means the stock moves in line with the…
Correlation measures how two assets move in relation to each other, on a scale from -1 (perfectly inverse) to +1 (perfe…
Maximum drawdown is the largest peak-to-trough decline in portfolio value before a new peak is reached. It measures the…
The Sharpe Ratio measures risk-adjusted return by calculating the excess return per unit of volatility. It tells you ho…
The Sortino Ratio is similar to the Sharpe Ratio but only considers downside volatility. It penalises negative deviatio…
Standard deviation measures the dispersion of returns around the mean. Higher standard deviation means more volatility …
Volatility measures how much an asset's price fluctuates over time. High volatility means large price swings (both up a…
A capital gain is the profit from selling an asset for more than you paid for it. Capital gains are classified as short…
Cost basis is the original value of an investment for tax purposes, including the purchase price plus commissions and f…
FIFO is a cost-basis method that sells the oldest shares first when calculating capital gains. It's the default method …
LIFO is a cost-basis method that sells the most recently purchased shares first. In a rising market, LIFO typically res…
Tax-loss harvesting is the strategy of selling investments at a loss to offset capital gains and reduce tax liability. …
Unrealised gains or losses exist on paper — they reflect the difference between your cost basis and the current market …
The wash sale rule disallows a tax deduction for a security sold at a loss if a substantially identical security is pur…
EPS is a company's net profit divided by its outstanding shares. It's the foundation for valuation ratios like PE and a…
The forward PE ratio uses estimated future earnings instead of trailing earnings. It reflects market expectations about…
Market capitalisation is the total market value of a company's outstanding shares. It's used to classify companies by s…
The PE ratio compares a company's stock price to its earnings per share. It indicates how much investors are willing to…
The PEG ratio adjusts the PE ratio by a company's earnings growth rate. A PEG of 1.0 suggests the stock is fairly value…
The price-to-book ratio compares a company's market price to its book value (assets minus liabilities). A P/B below 1.0…
The price-to-sales ratio compares a company's market cap to its revenue. It's useful for valuing unprofitable companies…
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