Learn the terms and definitions every investor should know
Bear market, stock volatility, DeFi, blue chips, diversification of assets... An average investor's lexicon contains so many terms that would make a beginner want to abandon the world of investments altogether! Luckily, Fintech Compass is here to help. Below you will find very simple and down-to-Earth explanations for the most common terms you are bound to run into when talking with fellow investment enthusiasts. Can not find what you are looking for? We are always open to suggestions - do not hesitate to let us know and we will make sure to add the missing explanations to this very page.
The glossary includes terms related to stocks and funds, general financial definitions an investor should have in their lexicon and short explanations of a handful of cryptocurrency-related words. The terms are presented in alphabetical order for your convenience.
Warning! Investment is never without risk. You may lose your investment due to market risks involved.
The Investment Lexicon
Asset Any item that could have value in an exchange. Examples include: the funds in your bank account, a home, cryptocurrency wallet or shares of stock.
Bear Market A situation in which the market experiences extended periods of decreasing prices. Frequently accompanied by general pessimism among investors and negative forecasts.
Bonds Bonds are what is called a debt security, something similar to an IOU. Borrowers (for example, governments) issue bonds to raise money from investors willing to lend them money for a certain amount of time. Investors get an interest rate on their funds at the end of the term.
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Bull Market An opposite of a bear market, the market is characterized as "bullish" whenever securities are on the rise, investor sentiment is positive and the forecasts are favorable, attracting more funds across the board.
Commodity A tangible, physical asset frequently used as a component of the production process. Examples could include oil, gas, beef or grains. Most commodities are traded in spot markets or on organized exchanges, sold as futures contracts.
Dividend Dividends represent a portion of a company's profit for the period that is paid to shareholders based on the amount of stock they own. Public companies frequently pay out dividends on a fixed schedule, however, these can be issued at any time.
IPO An initial public offering (IPO) is a process of issuing stocks of a private company with a goal of offering shares of the business to the public through a stock exchange.
Laissez-Faire French for "leaving someone alone", Laissez-Faire is an economic theory originating in the 18th century that was critical of any intervention in business affairs on behalf of the government.
Market Index A collection of securities with the average values reflecting an overall asset performance of a particular market for financial assets. An example of these is the S&P500 Index that tracks the average performance of securities of the market's 500 most common stocks.
Option Contracts between a pair of parties that grant holders an option to buy (or sell) an underlying asset at a certain predefined price within a set time frame.
S&P 500 Also known as Standard & Poor's Index. It is a composite measurement of changes in stock market prices based on the averaged out performance of 500 most common stocks on the market. Frequently used to assess the market's overall trends.
Share Represents a unit of ownership in an investment, such as a share of a stock or a mutual fund. Sometimes used interchangeably with "stock" in conversations.
Stockholder Denotes an owner of common or preferred stock of a company. Alternative term that is frequently used is 'shareholder.'
Volatility Stock's volatility represents an amount and frequency with which an asset fluctuates in price. Higher volatility assets usually bear more risk, but can be quite profitable if the timing is right for the investor.
Yield-to-maturity A value that represents the rate of return an investor will receive if a long-term, interest-bearing asset, such as a bond, is held to its maturity date.
Obviously, your learning does not stop here. Make sure to check out our Guides section to learn more about digital banking, fintechs in Europe, cryptocurrencies and investments.
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