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Learn to invest

Understand investing, simply. Short lessons written for people starting from zero.

48
lessons
2 min
average read
152
tricky terms

Start here

3 lessons · about 6 minutes
01

What is a share, really?

Not a lottery ticket, but a small piece of ownership in a real business.

2 min · Beginner
02

What is an ETF?

A fund that holds many companies at once, bought and sold like a single share.

2 min · Beginner
03

Inflation on one page

What the CPI really measures, why the target is 2%, and why prices never come back down.

2 min · Beginner

The Basics

12 lessons

Stocks & ETFs

12 lessons

Markets & the Economy

12 lessons

Risk and Costs

12 lessons

Jargon buster

Words you'll run into in today's news — one line each.

152 terms in total
Accumulating fund
A fund that reinvests your dividends instead of paying them out in cash.
Active fund
A fund where a manager picks the investments and gets paid for the picking.
Anchoring
Tying a decision to an arbitrary number, usually the price you paid.
Annualised return
The steady yearly rate that would have produced the same final result.
Asset allocation
How you split your money across types of investments. The decision that explains most of your result.
Assets
Everything a company owns that has value.
Basis point
One hundredth of a percentage point. 25 basis points = 0.25%.
Bear market
A decline of 20% or more from the peak.
Behaviour gap
The difference between a fund's return and the return its investors actually earned.
Benchmark
The index an investment's performance is compared against.
Bond
A tradeable loan with a fixed coupon and a fixed maturity date.
Broker
The firm through which your orders reach the exchange.
Bull market
A long period of rising prices.
Business cycle
The repeated alternation of expansion and contraction in an economy.
Buyback
A company buying its own shares, which are then cancelled.
Capital gain
The difference between the selling price and the purchase price of an asset.
Capitulation
Mass selling out of despair, which often marks the end of a decline.
Central bank
The institution that sets interest rates and safeguards price stability in an economy.
Commodity
A standardised raw material, like oil, gold or wheat, where one unit is the same everywhere.
Compounding
Earning returns on your previous returns, not just on the amount you started with.
Concentration
How much your portfolio depends on a single factor, regardless of how many names are in it.
Concentration risk
The risk that a large share of your wealth depends on a single factor.
Consensus estimate
The average of analysts' forecasts — the bar a result has to clear to count as good news.
Consumer spending
Household spending, the largest part of GDP in developed economies.
Core and satellite
A broad, cheap base, plus small positions for everything else.
Core inflation
Inflation excluding food and energy, the most volatile items.
Correction
A decline of about 10% from the most recent peak.
Correlation
How often two investments move in the same direction. Low correlation is what makes diversification work.
Counterparty risk
The risk that the party who made you a promise is unable to keep it.
Coupon
The fixed annual interest payment on a bond.
CPI
The consumer price index — the main measure of inflation.
Currency risk
The risk that exchange-rate moves change your return in your home currency.
Custodian
The institution that physically or legally holds the securities in your name.
Cyclical
A company whose profits follow the economic cycle, like steelmakers or airlines.
Deflation
A general fall in prices. Rarely a good thing: it delays spending and slows the economy.
Dilution
The shrinking of your slice when the company issues new shares.
Discount rate
How much less future money is worth today. It climbs along with interest rates and risk.
Discounted cash flow
A valuation that adds up a company's future cash, each amount discounted for time.
Distributing fund
A fund that pays your dividends out in cash instead of reinvesting them.
Diversification
Spreading money across many assets so no single one decides your fate.
Dividend
A slice of profit paid out to shareholders in cash.
Dividend yield
The annual dividend as a percentage of the share price.
Dollar-cost averaging
Putting in the same amount at regular intervals, regardless of the price.
Drawdown
How far an investment fell from its own peak before recovering.
Duration
How sensitively a bond's price reacts to a change in rates.
Earnings per share
The company's profit divided by the number of shares outstanding.
Economic calendar
The schedule of economic data releases, with expectations for each one.
Edge
Something you know or can do that the market hasn't priced in yet.
Emergency fund
Money you can reach instantly, so an unexpected expense never forces you to sell your investments.
Ex-dividend date
The day from which buying the share no longer entitles you to the next dividend.
Exchange rate
What one currency is worth, expressed in another.
Expected return
The average result you would expect if you repeated the same investment many times.
Expense ratio
The fund's annual fee, taken automatically out of what you hold.
Factsheet
The two-page document summarising a fund's strategy, costs, and performance.
Flow
Buying or selling driven by rules and needs, not by any view on the company.
Forced liquidation
The sale of your position by the lender when you fail to meet a margin call.
Forward guidance
Deliberately signalling what the central bank expects to do later.
Fractional shares
The ability to buy just part of a share, which makes splits less necessary.
Free cash flow
The cash a company has left after paying for everything it needs to keep running.
FX spread
The hidden cost of converting currency when you buy something priced in another one.
Gating
When a fund temporarily halts withdrawals because it cannot sell its own assets.
GDP
Gross domestic product — the value of everything produced inside a country.
Growth stock
A company whose price rests on the expectation of much bigger profits in the future.
Guidance
A company's own forecast of its future results.
Hawkish
Leaning towards higher rates to fight inflation. The opposite is dovish.
Hedged
A fund that removes the exchange-rate effect, in return for an annual cost.
Human capital
The value of your future earnings from work — for most people, the largest part of their wealth.
Idiosyncratic risk
The risk that belongs to a single company, removed by holding many others.
Index
A published list of companies used to measure a market, like the S&P 500.
Index fund
A fund that holds everything in an index, without choosing between them.
Index weighting
How an index is divided among companies. Weighting by size concentrates it in the largest ones.
Inflation
The general rise in prices and the loss of purchasing power that comes with it.
Inflation-linked bond
A bond whose coupon and principal rise along with inflation.
Intrinsic value
What a business is worth based on the cash it produces, regardless of the market price.
Inversion
When short-term yields exceed long-term ones — historically a recession warning.
Investment thesis
The written reason you bought something — and therefore the only way to know when to sell it.
IPO
Initial public offering — the first time a company's shares are sold to the wider investing public.
Leading indicator
A measure that moves before the economy as a whole, like new orders or the yield curve.
Leverage
How much debt a company uses. It multiplies profits and losses alike.
Liabilities
Everything a company owes to others.
Limit order
An order that only executes at the price you set, or better.
Liquidity
How easily you can buy or sell without moving the price yourself.
Liquidity risk
The risk of not being able to sell quickly without accepting a noticeably worse price.
Lock-up period
The time after a listing during which insiders cannot sell their shares.
Loss aversion
The tendency to feel a loss roughly twice as strongly as an equal gain.
Margin call
A lender's demand for extra cash when your position falls below a threshold.
Market capitalisation
A share's price multiplied by the number of shares — the market's valuation of the whole company.
Market maker
A firm that always keeps both a buy offer and a sell offer open, so you can buy or sell instantly.
Market order
An order that executes immediately at the best available price.
Market timing
Trying to get out before a fall and back in before a rise.
Monetary policy
The central bank's decisions about interest rates and the amount of money in circulation.
Mutual fund
A fund bought directly from the fund company, usually at one price per day.
Nominal return
The return before inflation is subtracted. The number that gets advertised.
Nonfarm payrolls
The number of jobs created in a month, outside farming. The most watched release in the US.
Operating margin
Profit from the core business, as a percentage of revenue.
P/E ratio
The share price divided by annual earnings per share.
Participation rate
The share of the working-age population that is employed or looking for work.
Pass-through
The process by which a higher input cost ends up in consumer prices.
Passive fund
A fund that copies an index with no human judgement about individual companies.
Payout ratio
What percentage of profit goes to the dividend. Above one hundred means it is being paid out of reserves.
Physical replication
When the fund actually owns the securities in the index.
Policy rate
The interest rate set by the central bank, on top of which everything else is priced.
Ponzi scheme
A fraud in which earlier investors' "profits" are paid with the money of new ones.
Portfolio
Everything you own, viewed as a single whole.
Pump and dump
Artificially inflating an asset's price in order to sell it to those who come after.
Purchasing power
What an amount of money can actually buy, not what the number says.
Quantitative easing
Buying bonds with newly created money to push down long-term rates.
Real GDP
GDP after stripping out inflation — whether more things were actually produced.
Real return
Your return after inflation is stripped out — how much more you can actually buy.
Rebalancing
Bringing your portfolio back to its target proportions by selling what grew and buying what fell behind.
Recency bias
The tendency to assume that whatever happened recently will continue.
Recession
A broad, prolonged decline in economic activity.
Regulator
The authority that licenses and supervises financial firms in a country.
Reserve currency
A currency held by central banks and used to invoice world trade.
Revenue
All the money from sales, before any costs.
Reverse split
Merging several shares into one, usually to lift a very low price.
Revision
A correction to a previously published figure, once fuller data comes in.
Risk tolerance
How big a fall you can sit through without changing the plan. Measured by behaviour, not by intention.
Safe haven
An asset money flees to when fear rises, like American bonds or gold.
Sector
A group of companies that depend on the same economic forces.
Sector rotation
Money moving from one sector to another as the economic cycle changes phase.
Sequence risk
The risk that the order of returns, not their average, wrecks your plan while you are withdrawing money.
Share
A unit of ownership in a company, giving you a claim on a slice of its profits.
Shareholder
Anyone who owns at least one share of a company.
Shareholders' equity
Assets minus liabilities — what is left for shareholders on paper.
Shares outstanding
The total number of shares that exist and are held by investors.
Shortfall risk
The chance of not having the amount you need on the day you need it.
Soft landing
Slowing inflation without causing a recession. Rare and difficult.
Spread
The gap between the highest price someone will pay and the lowest price someone will accept.
Stock split
Turning each share into several smaller shares, with no change in total value.
Sunk cost
Money already spent, which should not influence any future decision.
Supply shock
A sudden interruption of supply that pushes prices up without demand rising.
Surprise
The gap between the actual figure and the expected one. This is what moves prices.
Synthetic replication
When the fund holds a contract with a bank that promises it the index's return.
Systematic risk
The risk that hits everything at once and that diversification cannot remove.
Tail risk
Very rare, very damaging events that models routinely underestimate.
Target weight
The percentage you have set for each part, and the one you return to when rebalancing.
Tax deferral
Paying tax later, which leaves the full amount to keep compounding.
Term premium
The extra reward for holding a longer-term bond.
Time horizon
How long you can leave the money untouched. It decides how much risk makes sense.
Tracking error
How far a fund has drifted from the index it promised to follow.
Underwriter
The bank that sets the offer price and sells the first shares.
Unemployment rate
The share of people looking for work who cannot find it. It does not count those who have given up.
Value stock
A company that costs little relative to the profits it already produces.
Value trap
A company that looks cheap because its business keeps shrinking.
Volatility
How much a price swings up and down. High volatility means a wider range of outcomes.
Volatility decay
The slow loss of value in daily leveraged products when the market bounces up and down.
Volume
How many units trade on an average day. A direct indicator of liquidity.
Wage growth
How fast wages are rising. When it outpaces productivity, it feeds into prices.
Withholding tax
Tax deducted automatically from foreign dividends before they reach you.
Yield
The annual income from an asset, as a share of its current price.
Yield curve
The chart of government bond yields across maturities.