Financial Glossary

APR (Annual Percentage Rate)

APR is the yearly cost of borrowing, including interest and most mandatory fees, expressed as a percentage.

APY (Annual Percentage Yield)

APY is the yearly return on savings including compound interest.

Amortization

Amortization is the process of repaying debt over time through scheduled payments.

Asset Allocation

Asset allocation is how you divide investments across asset classes like stocks, bonds, and cash.

B

Bear Market

A bear market is a prolonged market decline, often defined as a drop of 20% or more from recent highs.

Budget

A budget is a spending and saving plan that assigns your income to clear categories and goals.

Bull Market

A bull market is a sustained period of rising prices and positive investor sentiment.

C

Tax

Capital Gain

A capital gain is the profit from selling an asset for more than its purchase price.

Tax

Capital Gains Tax

Capital gains tax is tax applied to profits made when selling appreciated assets.

Cash Flow

Cash flow is the net movement of money in and out of your accounts over a period.

Compound Interest

Compound interest is interest earned on both the original amount and previously earned interest.

Credit Score

A credit score is a numeric estimate of creditworthiness used by lenders.

D

Debt Avalanche

Debt avalanche prioritizes extra payments toward the highest-interest debt first.

Debt Snowball

Debt snowball prioritizes extra payments toward the smallest balance first.

Debt-to-Income Ratio (DTI)

DTI is the percentage of gross monthly income used to pay debt obligations.

Diversification

Diversification means spreading investments to reduce concentration risk.

Dividend Yield

Dividend yield is annual dividends per share divided by the share price.

Dollar-Cost Averaging

Dollar-cost averaging is investing a fixed amount at regular intervals.

Drawdown

Drawdown is the decline from a portfolio peak to its lowest point before recovery.

E

ETF (Exchange-Traded Fund)

An ETF is an investment fund traded on exchanges that usually tracks an index or strategy.

Emergency Fund

An emergency fund is cash reserved for unexpected essential expenses.

Expense Ratio

Expense ratio is the annual fee charged by a fund, shown as a percentage of assets.

F

Fixed Expense

A fixed expense is a recurring cost that stays relatively stable each period.

I

Inflation

Inflation is the general rise in prices over time, reducing purchasing power.

Interest Rate

An interest rate is the percentage charged for borrowing or paid for saving over time.

L

Liquidity

Liquidity is how quickly an asset can be converted to cash without major price impact.

Loan Term

Loan term is the total length of time to repay a loan.

M

Market Capitalization

Market capitalization is a company’s share price multiplied by total shares outstanding.

N

Net Worth

Net worth is total assets minus total liabilities.

O

Open Banking

Open Banking lets customers securely share banking data with licensed third-party apps via APIs.

Opportunity Cost

Opportunity cost is the value of the next best alternative you give up when making a choice.

P

P/E Ratio (Price-to-Earnings)

P/E ratio compares a company’s share price to its earnings per share.

Principal

Principal is the original amount borrowed or invested before interest or returns.

R

Real Return

Real return is investment return after adjusting for inflation.

Rebalancing

Rebalancing is adjusting your portfolio back to target asset weights.

Risk Tolerance

Risk tolerance is your ability and willingness to accept investment losses.

S

Sinking Fund

A sinking fund is money set aside regularly for a known future expense.

V

Variable Expense

A variable expense changes from month to month based on usage or behavior.