Financial Glossary

Clear, simple definitions for financial terms. No jargon, just straightforward explanations.

4 A B C D E F I N R

4

401(k)

An employer-sponsored retirement savings plan with tax advantages.

retirement

A

APR

Annual Percentage Rate - The yearly interest rate charged on borrowed money or earned on investments.

credit

APY

Annual Percentage Yield - The real rate of return on savings or investments, accounting for compound interest.

saving

Asset Allocation

The strategy of dividing investments among different asset categories like stocks, bonds, and cash.

investing

B

Bull Market

A market condition where prices are rising or expected to rise, typically characterized by optimism.

investing

Bear Market

A market condition where prices are falling or expected to fall, typically by 20% or more.

investing

C

Compound Interest

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

saving

Credit Score

A numerical rating (typically 300-850) representing your creditworthiness based on your credit history.

credit

Credit Utilization

The ratio of your current credit card balances to your credit limits, expressed as a percentage.

credit

D

Diversification

Spreading investments across various assets to reduce risk and minimize the impact of any single investment.

investing

Dollar-Cost Averaging

Investing a fixed amount regularly regardless of market conditions, reducing the impact of volatility.

investing

E

Emergency Fund

Money set aside to cover unexpected expenses or financial emergencies, typically 3-6 months of expenses.

saving

ETF

Exchange-Traded Fund - A basket of securities that trades on an exchange like a stock.

investing

F

FICO Score

The most widely used credit scoring model, created by Fair Isaac Corporation.

credit

I

Index Fund

A mutual fund or ETF designed to track a market index, like the S&P 500.

investing

IRA

Individual Retirement Account - A tax-advantaged account for retirement savings.

retirement

N

Net Worth

The total value of your assets minus your liabilities (debts).

personal finance

R

Roth IRA

A retirement account funded with after-tax dollars, allowing tax-free growth and withdrawals.

retirement