Bear Market

A sustained decline of 20% or more in a broad market index from its recent high.

Compound Interest

Interest calculated on both the initial principal and the accumulated interest from prior periods.

Diversification

Spreading investments across assets to reduce exposure to any single risk.

Dollar-Cost Averaging

Investing a fixed amount on a regular schedule, regardless of price.

Exchange-Traded Fund

A basket of securities that trades on an exchange like a single stock.

Fiduciary

A legal duty to act in a client’s best interest, stricter than a suitability standard.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Liquidity

How quickly and cheaply an asset can be converted to cash without affecting its price.

Net Worth

Total assets minus total liabilities — everything you own minus everything you owe.

Opportunity Cost

The value of the next-best alternative given up when making a choice.

Price-to-Earnings Ratio

A valuation metric comparing a company’s share price to its earnings per share.

Quantitative Easing

A central bank tool of buying large quantities of securities to inject liquidity and lower long-term rates.

Simple Interest

Interest calculated only on the original principal amount, producing steady, linear growth.

Volatility

A measure of how much and how quickly an asset’s price fluctuates.

Yield Curve

A plot of interest rates across bond maturities of equal credit quality.