Investing Terms

A reference guide to the key terms and concepts behind stock market investing. Whether you're opening your first brokerage account, trying to understand what a P/E ratio means, or learning the difference between a bull and bear market, these definitions cover the vocabulary every investor needs. Understanding investing terminology helps you make better decisions, evaluate financial news more critically, and manage your portfolio with confidence.

• Asset Allocation Asset allocation is how you divide your investment portfolio among different asset classes — like stocks, bonds, and cash — to match your risk tolerance, goals, and time horizon.
• Bear Market A bear market is a sustained decline in stock prices of 20% or more from recent highs, typically accompanied by economic weakness, falling corporate earnings, and declining investor confidence.
• Blue-Chip Stock A blue-chip stock is a share in a large, well-established, and financially stable company with a strong reputation, consistent earnings history, and often a history of paying dividends.
• Bonds A bond is a fixed-income security in which an investor loans money to a government or corporation, which pays regular interest in return and repays the principal amount when the bond matures.
• Brokerage Account A brokerage account is a taxable investment account held at a financial firm that lets you buy and sell stocks, ETFs, bonds, mutual funds, and other securities.
• Bull Market A bull market is a sustained period of rising stock prices — typically defined as a 20% or more gain from a recent low — driven by strong economic growth and investor confidence.
• Day Trading Day trading is the practice of buying and selling financial assets — usually stocks — within the same trading day, aiming to profit from short-term intraday price movements.
• Dividend Yield Dividend yield is the annual dividend a company pays per share expressed as a percentage of its current stock price — a key metric for investors seeking income from their investments.
• Earnings Per Share Earnings per share (EPS) is a company's net income divided by its outstanding shares of stock — one of the most widely used metrics for measuring a company's profitability on a per-share basis.
• Fundamental Analysis Fundamental analysis is a method of valuing a security by studying a company's financial statements, business model, competitive position, and broader economic conditions to estimate its intrinsic value.
• Growth Stock A growth stock is a share in a company expected to grow revenue and earnings at a significantly above-average rate, typically reinvesting profits into expansion rather than paying dividends.
• Limit Order A limit order is an instruction to buy or sell a security only at a specified price or better, giving the investor price control but no guarantee that the order will be filled.
• Margin Trading Margin trading is the practice of borrowing money from your brokerage to buy more securities than your cash balance would allow, amplifying both potential gains and potential losses.
• Market Capitalization Market capitalization is the total market value of a company's outstanding shares of stock, found by multiplying the current share price by the total number of shares outstanding.
• Market Order A market order is an instruction to buy or sell a security immediately at the best available current price — execution is nearly guaranteed, but the exact price is not.
• Options Trading Options trading involves buying or selling contracts that grant the right — but not the obligation — to buy or sell an underlying asset at a specified price before the contract expires.
• Portfolio Rebalancing Portfolio rebalancing is the process of buying and selling assets to restore your investment portfolio to its original target allocation after market gains or losses have caused it to drift.
• Price-to-Earnings Ratio The price-to-earnings ratio (P/E ratio) measures how much investors pay per dollar of a company's earnings. It's one of the most widely used tools for evaluating whether a stock is overvalued, undervalued, or fairly priced.
• Recession A recession is a significant, widespread, and sustained decline in economic activity — commonly defined as two consecutive quarters of negative GDP growth — that affects employment, spending, and financial markets.
• Short Selling Short selling is a strategy where an investor borrows shares of stock, sells them at the current price, and aims to repurchase them later at a lower price — profiting from the decline.
• Stock Split A stock split increases the number of shares outstanding while reducing the price per share by the same ratio — the total value of an investor's holdings stays the same.
• Technical Analysis Technical analysis is a trading discipline that evaluates securities by analyzing price charts, trading volume, and historical patterns to identify trends and predict future price movements.
• Value Investing Value investing is a strategy of buying stocks that appear underpriced relative to their intrinsic value — based on fundamentals like earnings, assets, and dividends — and holding them until the market recognizes their worth.