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Feb 10, 2022

Financial Terms: A Handy Glossary

By Stash Team

Investing resources are full of acronyms and jargon—learning the lingo can be tough for new investors! This glossary of financial terms can help.

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Do you ever feel confused about financial acronyms, such as APR and IRA? Or you may find yourself a little fuzzy on the difference between stocks and bonds. If you’re like most people, when you start planning your financial life, you encounter a lot of words and phrases that can leave you scratching your head.

That’s where this alphabetical list of common financial terms comes in. Whether you’re mixing up credit limits and credit scores or wracking your brain to remember what EPS means, this financial glossary, featuring dozens of definitions and links to deeper dives, can help clear the fog.


An employer-sponsored retirement plan that lets you put money away on a pre-tax basis.

52-week range

The highest and lowest price at which a stock has traded over the course of the previous year.

Annual Percentage Rate (APR)

The percentage of an unpaid loan balance that the lender charges as interest. This is how much interest you pay on your loans each year. (This may also be referred to as an “interest rate.)

Asset allocation

Division (allocation) of investments (assets) among different types of assets in your portfolio, such as stocks, bonds, cash, mutual funds, exchange-traded funds (ETFs), and more.


An amount owed, typically on a loan, purchase, or service.


A bond is a kind of debt—that someone else owes to you. You can think of it as an IOU from a company, city, or the federal government. Bond issuers promise to pay your investment back in full, according to a specific schedule, with regular interest payments. 


An estimate of your income and expenses for the month or year, used to plan your financial life.


The return earned on principal plus any past earnings and returns. 

Credit limit

The maximum amount you can borrow on a given credit card.

Credit report

A document created by a credit agency that contains information about your loan and credit account history.

Credit score

A three-number score intended to express how responsible you have been with loans and debt over time.


A person or financial institution that lends money.


Money contractually owed by one party to another. In investing, governments and companies borrow money by issuing debt in the form of bonds, notes, and mortgages. Investors buy the debt in exchange for repayment plus interest.

Discretionary income

Money left over after you’ve paid for your monthly essentials, such as rent or mortgage, student loans, and utilities.


Spreading out risk by putting money into a variety of different investments that are not subject to the same risks, such as stocks, bonds, ETFs, mutual funds, cash, and commodities. 


A payout from a company to its shareholders that represents a portion of the company’s profits. Dividends are a per-share return on an investment and are typically distributed as cash on a quarterly or annual basis. 

Dividend yield

A mathematical formula that measures a company’s annual dividend payment compared to its share price.

Dollar-cost averaging

Investing a fixed dollar amount in an investment (or investments) on a regular schedule over time.

Earnings per share (EPS)

A mathematical formula that calculates profit by dividing it among each share of common stock outstanding.


Investor ownership of a company, which is represented by stock (aka shares) owned.

Exchange traded fund (ETF)

A basket of investments bundled into a single fund. ETFs trade on an exchange, much like stocks. 

Expense ratio

The percentage of your investment in a fund that the fund uses to cover its operational expenses. 


The total amount of money invested in any one kind of investment. This represents the amount of money an investor could lose in that kind of investment. 

FAANG stocks

An acronym for the five tech stocks that have historically performed well compared to the rest of the market: Facebook, Amazon, Apple, Netflix, and Google.


A person, financial institution, or brokerage that is ethically and legally bound to act in the best interest of a person whose assets they manage.

Financial literacy

The ability to assess your financial situation so you can make smart decisions about money.

Fixed expenses

Ongoing living costs that typically remain the same each month, like your rent or mortgage, health insurance premiums, phone bill, and car payments.

Gross pay

The amount you get paid prior to taxes being taken out of your paycheck.

Impulse spending

An unplanned, on-the-spot decision to buy something.


A group of securities whose price performance is used to gauge the ups and downs of a market or a segment of a market.

Interest rate

The percentage of an unpaid loan balance that the lender charges as interest. This is how much interest you pay on your loans each year. (This may also be referred to as an “Annual Percentage Rate” or “APR.”)

Individual retirement account (IRA)

A retirement account funded with pre-tax income that lets your earnings grow on a tax-deferred basis.

Lifestyle creep

The tendency to spend more as you earn more, particularly on non-essential items.


A measure of how quickly a financial asset can be converted into cash. The more “liquid” an asset, the faster it can be sold without affecting its price.

Lock-up period

An agreement that prohibits company insiders from selling their shares for a specified period of time following an Initial Public Offering (IPO).

Long-term savings

Savings in an investment or high-yield savings account for bigger goals such as retirement or buying a house.

Market capitalization

The equity value of a company, defined as the total dollar value of its outstanding shares in the market.


A loan from a financial institution for a house or some other property.

Net pay

The amount left over in your paycheck after state and federal taxes have been taken out, as well as deductions for things like Medicare and Social Security.

Net worth

The total of your assets (what you own) minus liabilities (what you owe).

P/E ratio

A mathematical formula that measures a company’s stock price compared to its earnings per share.

Passive income

Income generated without the owner’s active participation, such as rental income, stock earnings or dividends, and royalties.

Pay gap

The difference between what people in different social groups—like race and gender—are typically paid for doing the same work. Within racial groups, women tend to earn less than men, but racial pay gaps can transcend gender. For example, white women tend to earn more than Hispanic women as well as Hispanic men.


The combined investments you hold, such as stocks, bonds, and cash. A portfolio can help you diversify and reduce risk.

Power of attorney

A legal document that authorizes one person to take over for another person if that person is unable to make day-to-day decisions, often related to money and property, due to mental incapacity.


Principal is the original amount borrowed on a loan. It’s different from interest, which is a percentage charged periodically and added to the principal.


An investment strategy that attempts to bring a portfolio back to its target asset allocation by buying or selling stocks, bonds, or funds.


Return is the gain or loss on an investment, such as a stock, bond, fund, or an entire portfolio. It can be calculated as both a dollar amount and a percentage.


The potential for an investment to lose value or money. More risk can mean greater potential gains, but it can also mean a higher chance of losing money.

Risk level

The likelihood that a particular investment could lose money based on historical performance. The three labels typically used to describe risk level are “conservative,” “moderate,” and “aggressive.”

Roth IRA

A retirement account that lets you contribute money after taxes, allowing earnings to grow tax-free.

Security deposit

Money a landlord requires a renter to pay prior to moving in, which is held by the landlord for the duration of tenancy. The purpose is to protect the landlord from losses due to unpaid rent and property damage beyond normal wear and tear.

Set Schedule

Set Schedule is one of the Auto-Stash strategies to help you automatically save. It lets you build a schedule to save and invest a set amount on a weekly, biweekly, or monthly basis.


A unit, or percentage, of ownership of a company; also called a “stock.”

Short-term savings

Money set aside for upcoming expenses, such as vacations or holiday gifts, that you keep in an easily accessible account.


A unit, or percentage, of ownership of a company; also called a “share.”


Letters used to identify a security on an exchange for trading purposes.

Top fund holdings

The investments with the greatest market value in any exchange-traded fund (ETF) or mutual fund. Typically, the fund will highlight its top 10 holdings and their weighting in the fund by percentage.

Tracking error

The difference between a portfolio’s performance (aka, return) and the benchmark or index it attempts to track.

Traditional IRA

A retirement savings account that lets you put money away on a pre-tax basis. 

Variable expenses

Ongoing living costs that change from month to month. These may include necessities like food and utility bills as well as discretionary spending like entertainment. 


The tendency for the returns of stocks, bonds, and markets to fluctuate up and down. It’s a measure of how risky investments could be and is a normal part of investing.

YTD change

The performance of an investment from the beginning of the calendar year up to the most recent trading day.

And there you have it—some common financial terms from A to Z! With this financial glossary at your fingertips, the veritable blizzard of acronyms and financial terms that investors contend with might seem a bit less overwhelming. You may even feel your confidence growing along with your investing vocabulary.

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Written by

Stash Team


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