Knowledge cluster
Investing Basics
The foundations: what investing is, how markets work, and the core concepts (risk, return, compounding and diversification) that every other term builds on.
Definition
Asset Allocation
Asset allocation is the way a portfolio is divided across asset classes such as stocks, bonds and cash. It describes the mix, not which individual investments to pick.
4 min read
Definition
Bond
A bond is a loan in security form: the buyer lends money to a government or company, which promises to pay periodic interest and return the principal on a set maturity date.
6 min read
Definition
Capital Gain
A capital gain is the profit from selling an asset for more than it cost. Most tax systems tax it only at the moment of sale.
4 min read
Definition
Compound Interest
Compound interest is interest calculated on both the original amount and the interest already earned, so a balance grows faster over time than with simple interest.
6 min read
Definition
Diversification
Diversification is the practice of spreading investments across different assets, sectors or regions so that no single holding can dominate the outcome of a portfolio.
4 min read
Definition
Dollar-Cost Averaging (DCA)
Dollar-cost averaging is an investing approach in which a fixed amount is invested at regular intervals, regardless of price, so purchases average out across market highs and lows.
4 min read
Definition
Hedge Fund
A hedge fund is a privately offered investment fund for institutions and wealthy investors that can use leverage, short selling and derivatives in pursuit of returns.
4 min read
Definition
Know Your Customer (KYC)
Know Your Customer is the legally required process by which banks and brokers verify who their clients are, to prevent money laundering, fraud and sanctions evasion.
4 min read
Definition
Liquidity
Liquidity is how quickly and cheaply an asset can be converted into cash without moving its price. Cash is perfectly liquid; real estate and private businesses are not.
4 min read
Definition
Mutual Fund
A mutual fund pools money from many investors into one professionally managed portfolio. Orders execute once a day at the fund's net asset value.
4 min read
Definition
Options Contract
An option is a contract giving the right, but not the obligation, to buy (call) or sell (put) an asset at a fixed price before a set date. Buyers pay a premium for that right.
4 min read
Definition
Portfolio
A portfolio is the complete collection of investments someone holds: stocks, bonds, funds, cash and other assets, viewed as one whole.
3 min read
Definition
Risk (Investing)
In investing, risk is the chance that outcomes differ from what you expected, especially the chance of losing money. It comes in distinct flavours that behave differently.
4 min read
Definition
Unrealized Gain (Paper Profit)
An unrealized gain or loss is the change in value of an investment you still hold. It becomes "realized", and usually taxable, only when you sell.
4 min read
Definition
Value Investing
Value investing is an approach that seeks to buy securities for less than an estimate of their intrinsic worth, using fundamental analysis and a deliberate margin of safety.
6 min read
Definition
Volatility
Volatility measures how much and how fast prices swing. It is the standard statistical proxy for investment risk, and the VIX is its most famous gauge.
4 min read
Definition
Xenocurrency
A xenocurrency is a currency deposited, lent or traded outside its home country, such as dollars held in European banks. The broader modern term is eurocurrency.
4 min read
Definition
Yield
Yield is the income an investment produces per year, expressed as a percentage of its price: dividends for stocks, interest for bonds, rent for property.
4 min read