Let’s face it—investing has a lingo all its own. Here’s a cheat sheet that breaks down different terms you might encounter as you read through our investing content.

INVESTING TYPES

Assets:

An asset is something you own that has monetary value. Stocks, mutual funds, ETFs, bonds, etc., are often referred to as financial assets.

Annuity:

An annuity is a contract you make with an insurance company. You make a payment (or payments) and they agree to provide you with a guaranteed income for life.

Bonds:

A bond is a loan you give to a corporation or government agency for a set amount of time. In return, they pay you back with interest.

Certificates of Deposit (CDs):

CDs are kind of like a savings account that you agree not to withdraw from for a set amount of time. In exchange, they typically offer slightly higher interest rates than the average savings account.

Cryptocurrency:

Cryptocurrency is digital money that exists solely in a computer network. You exchange real money to buy “coins” or “tokens” that aren’t tied to a bank or government.

Exchange-Traded Funds (ETFs):

ETFs are very similar to mutual funds because they allow you to invest in a portfolio of assets. The main difference is that they can be traded throughout the day like stocks.

Money Market Funds:

A money market fund is a type of mutual fund that invests in super short-term, low-risk debt securities.

Mutual Funds:

Mutual funds collect money from a large group of investors and invest it in a collection of assets. Think of it like investing in a professionally managed portfolio.

Real Estate Investment Trusts (REITs):

REITs (pronounced “reets”) are similar to mutual funds, only they invest in income-producing real estate instead of stocks.

Stocks:

Stocks, also known as shares or equities, stocks are small pieces of ownership in a company.

INVESTING TERMS

Asset Allocation:

Asset allocation describes the way your investments are divided between different types of assets (like mutual funds, bonds and cash).

Bear Market:

A bear market is when the stock market’s overall value is declining, usually by at least 20% from a recent high.

Bull Market:

A bull market is when the value of the overall stock market is rising or expected to rise.

Capital Gains:

Capital gains are simply profits from assets you sell.

Capital Gains Tax:

Taxes you pay on the profit from an investment you sell.

Diversification:

Diversification is the strategy of spreading out your money into different types of investments. It’s basically the art of not putting all your eggs in one basket.

Dividends:

Some companies share their profits with their stakeholders in the form of payments called dividends.

Index Fund:

An index fund is a kind of mutual fund that mimics the performance of a market index, like the S&P 500.

Liquidity:

Liquidity measures how easy it is to access your money or sell an asset and turn it into cash. For example, money in a savings account is very liquid, while real estate is a less liquid investment.

Market Capitalization (Market Cap):

Market capitalization, or “market cap,” basically means the total value of a company’s stock.

Market Index:

A market index is like a report card for a certain set of stocks. For example, the S&P 500 index measures the performance of the top 500 American companies on the stock market.

Volatility:

Volatility measures the unpredictability of an investment’s price swings over time.

TYPES OF MUTUAL FUNDS

Aggressive Growth (Small Cap) Funds:

Aggressive growth funds, or small cap funds, invest in companies with a market cap between $300 million and $2 billion. They offer the most potential growth but are also the riskiest.

Balanced Funds:

Balanced funds invest in a mixture of stocks and bonds.

Bond Funds:

Bond funds invest in (yep) bonds. While among the least risky investments, they also offer very little growth.

Growth (Mid Cap) Funds:

Growth funds, or mid-cap funds, invest in companies with a market cap between $2 billion and $10 billion. They offer more potential growth but a bit more risk than large cap funds.

Growth and Income (Large Cap) Funds:

Growth and income funds, or large-cap funds, invest in shares of companies with a market cap of $10 billion or more. They tend to offer slow and steady growth.

Income Funds:

Income funds invest in stocks that pay regular dividends.

International Funds:

International funds invest in companies outside the U.S. (like LG, Mercedes and BMW).

Sector Funds:

Sector funds invest in stocks within a particular sector of the economy like technology, health care or energy.

Stock Funds:

Stock funds, also called equity funds, are made up of (you guessed it) stocks.

Target Date Funds:

A target date fund is an investment fund that gradually shifts your investments from high-risk, high-reward assets to low-risk, low-reward assets as you near retirement.

MUTUAL FUND TERMS

Actively Managed:

Actively managed funds are those run by a fund manager who attempts to beat the performance of a certain sector of the market.

Passively Managed:

Passively managed funds just try to replicate the returns of a certain sector of the market.

Front-End Load:

A front-end load is a one-time commission or fee that’s deducted from an investment when you buy it.

Back-End Load:

A back-end load is a fee that’s deducted from an investment when you sell it.

Level-Load:

Level-load funds charge an annual fee each year that you hold the fund.

No-Load:

No-load funds don’t charge any commission to buy, own or sell.