Reference/
Finance Glossary
Plain-English definitions for common investing and personal finance terms — no jargon explaining jargon.
4
- 401(k)
- An employer-sponsored retirement account that lets you contribute a portion of your paycheck, often before tax, into investments that grow until retirement. Read more →
- 403(b)
- A retirement plan similar to a 401(k), typically offered by public schools, nonprofits, and certain government-adjacent employers. Read more →
5
- 50/30/20 Rule
- A budgeting framework that splits after-tax income into roughly 50% needs, 30% wants, and 20% savings or debt repayment. Read more →
A
- APR (Annual Percentage Rate)
- The yearly cost of borrowing money, typically used for loans and credit cards, generally without accounting for compounding. Read more →
- APY (Annual Percentage Yield)
- The actual amount a deposit account will earn in a year, including the effect of compounding — the standard figure for comparing savings accounts. Read more →
- Asset Allocation
- How your portfolio is divided among different types of investments — typically stocks, bonds, and cash — based on your goals, timeline, and risk tolerance. Read more →
B
- Bear Market
- A period of falling stock prices, commonly defined as a decline of 20% or more from a recent high. Read more →
- Brokerage Account
- An account that lets you buy, hold, and sell investments like stocks, bonds, and funds, separate from a bank account used for everyday spending. Read more →
- Bull Market
- A period of rising stock prices, commonly defined as a gain of 20% or more from a recent low. Read more →
C
- Catch-Up Contribution
- An additional amount people 50 and older are permitted to contribute to certain retirement accounts, beyond the standard annual limit. Read more →
- Compound Interest
- Interest earned on both your original investment and on interest that investment has already earned, causing growth to accelerate over time. Read more →
- Credit Score
- A number, typically 300-850, estimating how likely you are to repay borrowed money based on your credit history. Read more →
- Credit Utilization
- The percentage of your available credit (particularly on credit cards) that you're currently using — a key factor in most credit scoring models. Read more →
D
- Debt Avalanche
- A debt payoff method that directs extra payments toward the debt with the highest interest rate first, minimizing total interest paid. Read more →
- Debt Snowball
- A debt payoff method that directs extra payments toward the smallest balance first, prioritizing quick psychological wins. Read more →
- Diversification
- Spreading investments across many different assets to reduce the impact of any single one performing poorly. Read more →
- Dividend
- A portion of a company's profits distributed to shareholders, typically on a regular schedule. Read more →
- Dividend Yield
- A company's annual dividend expressed as a percentage of its current share price, used to compare dividend payments across stocks. Read more →
- Dollar-Cost Averaging (DCA)
- Investing a fixed amount at regular intervals regardless of price, rather than investing a lump sum all at once. Read more →
E
- Emergency Fund
- Money set aside specifically to cover unexpected expenses or income loss, kept safe and easily accessible rather than invested. Read more →
- Employer Match
- A contribution an employer adds to your retirement account based on your own contribution, up to a certain percentage of salary. Read more →
- Envelope Method
- A budgeting approach that allocates a set amount of money to specific spending categories, stopping when that category's "envelope" is empty. Read more →
- ETF (Exchange-Traded Fund)
- A basket of investments that trades on an exchange throughout the day, like a stock, often tracking a market index. Read more →
- Expense Ratio
- The annual fee a fund charges to cover its operating costs, expressed as a percentage of your investment. Read more →
F
- FDIC Insurance
- Federal deposit insurance that protects money in U.S. bank accounts up to a set limit per depositor, per bank, if the bank fails. Read more →
G
- Growth Stock
- Shares of a company expected to grow revenue and earnings faster than the broader market, often reinvesting profits rather than paying dividends. Read more →
H
- High-Yield Savings Account (HYSA)
- A savings account, often from an online bank, that pays meaningfully more interest than a standard savings account. Read more →
- HSA (Health Savings Account)
- A tax-advantaged account for medical expenses, available to those on a qualifying high-deductible health plan, which can also function as a retirement savings tool. Read more →
I
- Index Fund
- A fund holding a basket of stocks designed to track a specific market index, such as the S&P 500. Read more →
- Inflation
- The rate at which prices rise over time, which reduces the purchasing power of a fixed amount of money. Read more →
L
- Lifestyle Inflation
- The tendency for spending to rise in step with income, absorbing raises into a more expensive lifestyle rather than increased savings. Read more →
- Lump Sum Investing
- Investing a full amount of money immediately and all at once, rather than spreading it out over time. Read more →
M
- Market Capitalization
- The total value of a company's outstanding shares, calculated as share price multiplied by shares outstanding. Read more →
- Minimum Payment
- The smallest amount a lender requires you to pay on a debt each month, often barely covering accrued interest. Read more →
- Mutual Fund
- A pooled investment fund, similar to an ETF, but typically priced only once per day rather than trading throughout the day. Read more →
P
- P/E Ratio
- Price-to-earnings ratio: a company's share price divided by its earnings per share, used to gauge how expensive a stock is relative to its profits. Read more →
- Pay Yourself First
- A budgeting approach that automatically directs money to savings before any other spending, treating savings as a non-negotiable expense. Read more →
- Pension
- A traditional retirement plan where an employer promises a specific, predictable benefit in retirement and bears the investment risk. Read more →
R
- REIT (Real Estate Investment Trust)
- A company that owns or finances income-producing real estate, letting investors gain exposure to property through the stock market. Read more →
- Required Minimum Distribution (RMD)
- The minimum amount the IRS requires you to withdraw annually from certain tax-deferred retirement accounts, starting at a set age. Read more →
- Risk Tolerance
- Your capacity and willingness to endure fluctuations in investment value in exchange for potentially higher long-term returns. Read more →
- Roth IRA
- A retirement account funded with after-tax money, offering tax-free qualified withdrawals in retirement. Read more →
S
- Sinking Fund
- Money saved gradually for a specific, predictable future expense, like an annual insurance premium or holiday spending. Read more →
- Social Security
- A U.S. federal program providing retirement income based on lifetime earnings, funded through payroll taxes. Read more →
T
- Target-Date Fund
- A single fund that automatically shifts from more stocks to more bonds as a specified target retirement year approaches. Read more →
- Traditional IRA
- A retirement account funded with pre-tax money, offering an upfront tax deduction while withdrawals are taxed in retirement. Read more →
V
- Value Stock
- Shares of a company that appear undervalued relative to their fundamentals, often larger and more established with stable dividends. Read more →
- Vesting
- The process of earning full ownership of employer-contributed retirement funds over time, based on a plan's vesting schedule. Read more →
Z
- Zero-Based Budgeting
- A budgeting method where every dollar of income is assigned a specific job — spending, saving, or debt — until nothing is left unassigned. Read more →