Investment Glossary
Finance is full of jargon. We promise to never use a term without explaining it. Bookmark this page — it's your go-to reference whenever you hit an unfamiliar word.
Asset Allocation
How you divide your investment portfolio across different asset classes like stocks, bonds, and cash. The mix determines your risk-return profile.
Assurance Vie
A French tax-advantaged investment wrapper ('life insurance'). After 8 years of holding, you benefit from reduced income tax rates on gains. Popular for long-term savings and estate planning.
Read related article →Bear Market
A market condition where prices fall 20% or more from recent highs. Usually accompanied by widespread pessimism and negative investor sentiment.
Bond
A loan you make to a government or company. They pay you regular interest and return your money at a set date. Generally lower risk than stocks.
Broker
A platform or company that lets you buy and sell investments. Online brokers like Trade Republic or Degiro have made investing accessible with low or zero fees.
Bull Market
A market condition where prices are rising or expected to rise. Generally defined as a 20%+ increase from recent lows.
Capital Gains
The profit you make when you sell an investment for more than you paid. In France, capital gains are taxed at 30% (flat tax/PFU) unless held in a tax-advantaged envelope.
CFD (Contract for Difference)
A derivative product that lets you speculate on price movements without owning the underlying asset. High risk - most retail investors lose money trading CFDs.
Read related article →Compound Interest
Interest earned on both your original investment and on previously earned interest. Over time, this 'interest on interest' effect accelerates your growth dramatically.
Read related article →CTO (Compte-Titres Ordinaire)
A standard French securities account with no investment restrictions but no tax advantages. All gains are subject to the 30% flat tax (PFU) from day one.
Read related article →DCA (Dollar-Cost Averaging)
Investing a fixed amount at regular intervals regardless of market conditions. Reduces the impact of volatility and removes the pressure of trying to 'time the market'.
Read related article →Diversification
Spreading your investments across different asset classes, sectors, and regions to reduce risk. The idea: when one investment falls, others may hold steady or rise.
Read related article →Dividend
A payment made by a company to its shareholders, usually from profits. Not all companies pay dividends - growth companies often reinvest profits instead.
ETF (Exchange-Traded Fund)
A fund that tracks an index (like the S&P 500) and trades on a stock exchange like a regular share. Low fees, instant diversification, and the favourite tool of passive investors.
Read related article →Expense Ratio (TER)
The annual percentage fee charged by a fund to cover its operating costs. A typical ETF charges 0.1-0.3%. Traditional bank funds often charge 1.5-2.5%.
Flat Tax (PFU)
France's 30% flat tax on investment income and capital gains, composed of 12.8% income tax + 17.2% social charges. Applies to gains in a standard CTO account.
Forex (Foreign Exchange)
The global market for trading currencies. Extremely liquid but also high-risk for retail traders. Often paired with high leverage.
Read related article →Index Fund
A fund designed to replicate the performance of a market index (e.g., CAC 40, MSCI World). Very low fees because there's no active management.
Inflation
The rate at which the general price level rises, reducing your money's purchasing power. A key reason to invest: cash in a savings account often loses value to inflation over time.
IPO (Initial Public Offering)
When a private company first sells shares to the public on a stock exchange. Often surrounded by hype, but historically a risky time to buy.
Leverage
Using borrowed money to increase the size of your investment. Amplifies both gains and losses. Common in CFD and forex trading - and a major source of retail losses.
Liquidity
How easily you can buy or sell an investment without significantly affecting its price. Stocks and ETFs on major exchanges are highly liquid. Real estate is not.
Market Capitalisation
The total market value of a company's outstanding shares (share price × number of shares). Used to classify companies as large-cap, mid-cap, or small-cap.
MSCI World Index
A stock index covering ~1,500 companies across 23 developed countries. The most popular benchmark for globally diversified passive investing.
P/E Ratio (Price-to-Earnings)
A company's share price divided by its earnings per share. A rough measure of how 'expensive' a stock is relative to its profits.
Passive Investing
An investment strategy that aims to match market performance rather than beat it. Typically done through index funds or ETFs with minimal trading.
Read related article →PEA (Plan d'Épargne en Actions)
A French tax-advantaged account for investing in European stocks and ETFs. After 5 years, gains are only subject to 17.2% social charges (vs 30% flat tax). Deposit limit: €150,000.
Read related article →Portfolio
The collection of all your investments - stocks, bonds, ETFs, cash, real estate. A well-constructed portfolio balances risk and return for your specific goals.
Rebalancing
Periodically adjusting your portfolio back to your target asset allocation. If stocks have grown to 80% of your portfolio but your target is 70%, you'd sell some stocks and buy bonds.
Risk Tolerance
Your ability and willingness to endure drops in the value of your investments. Affects which asset allocation is appropriate for you.
Read related article →Robo-Advisor
An automated investment service that builds and manages a diversified portfolio for you based on your profile. Low fees (typically 0.25-0.75%), minimal effort required.
Read related article →S&P 500
A stock index of the 500 largest US companies by market cap. Often used as a benchmark for US stock market performance. Average historical return: ~10% per year.
Spread
The difference between the buying price and selling price of an investment. A hidden cost of trading - wider spreads mean higher effective fees.
Stop-Loss
An order to automatically sell an investment if it falls below a certain price. Used to limit potential losses. Essential for active traders.
Read related article →Tax-Loss Harvesting
Selling investments at a loss to offset capital gains taxes on other investments. A strategy used to reduce your overall tax bill.
Ticker Symbol
The short code used to identify a specific investment on an exchange. For example, AAPL = Apple, IWDA = iShares MSCI World ETF.
Volatility
How much an investment's price fluctuates over time. Higher volatility means bigger swings - both up and down. Stocks are more volatile than bonds.
Read related article →Yield
The income return on an investment, expressed as a percentage. For stocks, it's the annual dividend divided by the share price. For bonds, it's the annual interest payment divided by the price.
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