A

Asset allocation

How your money is split across asset classes such as stocks, bonds and cash.

Asset class

A group of investments that behave in similar ways, like stocks or bonds.

Ask price

The lowest price a seller is willing to accept for a security.

B

Bear market

A market decline of 20% or more from a recent high.

Bid–ask spread

The gap between the highest price a buyer will pay and the lowest price a seller will accept.

Bond

A loan to a government or company that pays interest and returns your principal at maturity.

Bull market

A sustained rise in market prices, often 20% or more from a recent low.

C

Capital gain

The profit when you sell an investment for more than you paid.

Compound interest

Earning returns on your original money and on the returns it has already made.

D

Diversification

Spreading money across different investments to reduce risk.

Dividend

A share of a company’s profits paid to shareholders.

Dollar-cost averaging

Investing a fixed amount on a regular schedule, whatever the price.

E

ETF

An exchange-traded fund: a basket of investments that trades like a single stock.

Expense ratio

The yearly fee a fund charges, as a percentage of your investment.