Glossary

An index fund is a pooled investment vehicle designed to track the performance of a specific market benchmark, such as a broad stock or bond index, rather than trying to beat it.

Inflation is the rate at which the general level of prices for goods and services rises over time, gradually reducing the purchasing power of money.

Investor protection refers to the rules, structures, and safeguards designed to keep account holders' money and interests secure when dealing with financial firms and markets.

An IPO (Initial Public Offering) is the first time a private company sells shares to the public, listing its stock on an exchange so anyone with a brokerage account can buy or sell it.

A financial account owned by two or more people, where each owner typically shares access rights and responsibility for the account.

A junk bond is a corporate bond rated below investment grade, offering higher yields to compensate investors for a higher risk of default.

KYC (Know Your Customer) is the identity-verification process financial firms use to confirm who a client is before allowing them to open an account, deposit funds, or trade.

Leverage is the use of borrowed funds to control a market position larger than the trader's own capital, amplifying both potential gains and potential losses.

Liquidity describes how quickly and cheaply an asset can be converted into cash without significantly affecting its price.

Lot size is the standardized quantity of a currency or instrument traded in one position, such as a standard lot of 100,000 units in forex, which determines how much each price movement is worth.

A low-spread broker is a trading provider that offers relatively narrow differences between bid and ask prices, reducing the built-in cost traders pay each time they open or close a position.

The minimum amount of equity an investor must keep in a margin account to continue holding a leveraged position; falling below it can trigger a margin call.

A brokerage account that lets you borrow money from your broker to buy investments, using your existing assets as collateral.

A margin call is a broker's demand that a trader deposit additional funds or securities into a margin account after the account's equity falls below the required maintenance level.

Margin trading means borrowing money from a broker to buy or short securities, using your account assets as collateral. It can amplify both gains and losses, and positions can be forcibly closed if equity falls too low.

Market capitalization is the total market value of a company's outstanding shares, calculated by multiplying the current share price by the number of shares outstanding.

Maturity is the date on which a bond's issuer repays the bond's face value to the holder, ending the bond's life and its regular interest payments.

Net Asset Value (NAV) is the per-share value of a fund's holdings, calculated by subtracting liabilities from total assets and dividing by the number of shares outstanding.

Nominal return is the raw percentage gain on an investment before inflation, while real return adjusts that figure for inflation to show change in purchasing power.

A contract giving the holder the right, but not the obligation, to buy or sell an underlying asset at a set price before or at a specific expiration date.

Options trading is the buying and selling of contracts that give the right, but not the obligation, to buy or sell an underlying asset at a set strike price before or at expiration.

A pip is the smallest standard price increment in a forex quote, typically 0.0001 for most currency pairs and 0.01 for pairs quoted in Japanese yen.

The price an option buyer pays to the seller for the rights the contract provides, quoted per share and typically multiplied by the contract size.

The original amount of money you invest, deposit, or borrow, separate from any interest, returns, or fees earned or added over time.