The investment phrases are meant to be decoded, but they’re often misinterpreted.

The short message about investment is a phrase that has been used by the media to represent various financial investments. These phrases are often used in the context of stocks, bonds, and other types of securities.

Any new activity, whether it’s rock climbing or investing, necessitates learning new terms and phrases. Some financial words may seem complicated, but this list will help you decipher the most prevalent jargon so you can feel more secure as you begin your investing adventure.

Is there such a thing as a risk-free investment? Related: Is there such a thing as a risk-free investment? is the source of this image.

1. Alpha

50 investment phrases, decoded

When compared to a suitable benchmark, alpha is used to determine the performance of an investing strategy, portfolio, portfolio manager, or trader. Alpha is also known as “excess return” since it refers to results that may be ascribed to active management above and beyond market returns. is the source of this image.

2. Assets

50 investment phrases, decoded

An asset is something that has worth and can be exchanged for money. Your house, vehicle, and other items are examples of personal assets. Machinery and patents are examples of business assets. Assets are usually the securities you invest in when it comes to investing. is the source of this image.

3. Asset type

50 investment phrases, decoded

A collection of assets with comparable characteristics that are expected to perform differently in the market than other asset classes is referred to as an asset class. Stocks, bonds, real estate, currencies, and other asset classes are examples of asset classes. Stocks and bonds often move in opposing ways under the same market circumstances. To create a well-diversified portfolio and reduce risk, most financial advisors suggest investing in various asset types.

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4. A fund for asset allocation

50 investment phrases, decoded

A diversified portfolio of different asset types makes up an asset allocation fund. Stocks, bonds, and cash equivalents make up the majority of asset allocation funds. These funds are popular because some advisers emphasize the necessity of diversifying one’s portfolio to reduce the risk of losing money.

GaudiLab / istockphoto is the source of this image.

5. Beta

50 investment phrases, decoded

When compared to the market as a whole, beta refers to how risky or volatile a security or portfolio is. The beta of the stocks in your portfolio may be used to predict how your portfolio will react to market volatility. The beta of a stock may also be used to estimate how much risk it will bring to your portfolio.

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6. Negative market

50 investment phrases, decoded

When broad market indices lose 20% or more in two months or less, the market is said to be in a bear market. Bear markets are sometimes associated with recessions, though not always. They often indicate that investors are pessimistic about the profitability of their investments and the market’s capacity to recover.

monsitj / istockphoto / monsitj / istockphoto / istockphoto / istockphoto / ist

7. There is a bull market.

50 investment phrases, decoded

A bull market is the polar opposite of a bear market, implying that prices are increasing or are anticipated to increase for a long time. Bull markets occur when the price of an asset rises for months or even years at a time.

gopixa / istockphoto / gopixa / istockphoto / gopixa / istockphoto /

Blue chip #8

50 investment phrases, decoded

Blue chip corporations are often regarded as well-established, financially stable, and therefore high-quality investments. Large businesses are usually represented by blue chip stocks, and many of them are well-known. Blue chips may be more costly to invest in in certain instances since they are believed to be more stable and likely to expand.

Image credit: istockphoto / zimmytws

9. Bonds

50 investment phrases, decoded

Bonds are issued when governments or businesses need to borrow money. Investors that purchase bonds are essentially lending money to the company, which will be returned according to the bond’s conditions (e.g. a 10-year bond with an interest rate of 3 percent ). When opposed to stocks, bonds are generally seen to be more stable and lower-risk investments. is the source of this image.


50 investment phrases, decoded

An investment broker, whether a person or a company, serves as a go-between for investors looking to purchase and sell stocks. Because certain securities exchanges only enable members of that exchange to place investment orders, brokers may be required. Although many brokers additionally assist customers with market research and investment planning, the main role of a broker is to assist clients in placing transactions.

Antonio Diaz / istockphoto contributed to this image.

Diversification is number eleven.

50 investment phrases, decoded

You’ve undoubtedly heard that having a diverse portfolio is a good idea. To reduce risk, this involves investing in a variety of asset types that are expected to perform differently under various market circumstances. A portfolio consisting only of stocks, for example, may be more susceptible to market volatility than one consisting of bonds, real estate, commodities, and other assets.

SARINYAPINNGAM / istockphoto contributed to this image.

Dividends (12.)

50 investment phrases, decoded

Dividends are paid out when a business distributes its earnings with its shareholders. Dividends are often handed out in cash (although they can be paid in stocks). Some businesses, such as many blue chip companies, pay dividends, but not all. Ordinary dividends are taxed differently than qualified dividends, so if you hold dividend-paying stocks, you should contact a tax expert.

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13. Investing with US dollars

50 investment phrases, decoded

Dollar based investment, often known as fractional share investing, allows investors to purchase half shares of companies. You invest a monetary amount rather than purchasing stock in a business. Smaller investors may use dollar-based investment to get into popular businesses that they would otherwise be priced out of.

solarseven/ istockphoto is the source of this image.

EBITDA (Earnings Before Interest and Taxes

50 investment phrases, decoded

EBITDA is a more detailed method of evaluating a company’s success than just looking at net income. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is an acronym for earnings before interest, taxes, depreciation, and amortization. Use the following formula to compute EBITDA: Net Income + Interest + Taxes + Depreciation + Amortization. is the source of this image.

15. EBIT

50 investment phrases, decoded

Because EBIT is just one element of the EBITDA equation (literally! ), it is a simpler method to determine a company’s earnings than EBITDA. “Earnings before interest and taxes” is what it stands for. This formula is used to compute it: Net Income + Interest + Taxes. is the source of this image.

16. EPS

50 investment phrases, decoded

Earnings per share, or EPS, is a popular method for investors to gauge how well a company is doing. The earnings per share (EPS) of a business is determined by dividing its quarterly or yearly net income by the number of outstanding shares of stock. Increases in EPS may indicate that the company’s profit performance is improving, while a drop might signal to investors that the company’s profit performance is declining.

SlavkoSereda / istockphoto / SlavkoSereda / istockphoto / SlavkoSereda / istockphoto

17. ETF

50 investment phrases, decoded

ETFs are similar to mutual funds in that the fund’s portfolio may include dozens or even hundreds of different assets, and investors purchase shares of the fund. ETF shares, unlike mutual funds, may be exchanged like stocks at any time of day (mutual fund shares are traded once a day). Although there are actively managed ETFs, most ETFs are considered low-cost, passive investments since they follow an index.

TimArbaev / iStock / TimArbaev / iStock / TimArbaev / I

18. Cost-to-income ratio

50 investment phrases, decoded

An expense ratio is a yearly charge paid by investors to cover the expenses of running mutual funds, index funds, exchange-traded funds, and other kinds of funds. Costs are usually taken automatically from your investments (you don’t have to pay anything extra), and they may decrease your returns over time, so it’s a good idea to search around for cheaper fees. Total Funds Costs / Total Fund Assets Under Management is the method for calculating expense ratios.

Bet Noire / istockphoto contributed to this image.

19. FCF

50 investment phrases, decoded

The money left over after a company’s expenditures have been paid is known as free cash flow. This figure is significant to investors because it may indicate whether a business has enough cash to pay dividends or buy back shares. A steady decline in free cash flow over many years may potentially be a warning sign for investors.

jat306 / istockphoto / jat306 / istockphoto / jat306 / istockphoto /

20. High-yielding stock

50 investment phrases, decoded

Growth stocks are shares in a business that is expanding at a quicker rate than its rivals, indicating the possibility of increased revenue or sales. Growth stock firms are often regarded as industry leaders.

Depositphotos is the source of this image.

Hedge Fund (number 21)

50 investment phrases, decoded

Hedge funds are often run by a limited liability company (LLC) or limited partnership, which invests in securities and other assets using money from a number of different investors. Hedge funds are more hazardous and costly than mutual funds or exchange-traded funds, making them more accessible to affluent investors.

g-stockstudio/istockphoto is the source of this image.

22. Index mutual fund

50 investment phrases, decoded

Index funds invest in assets that closely resemble a certain index, such as the S&P 500 Index or the MSCI World Index. Indexes monitor a wide range of industries, from tiny U.S. businesses to large worldwide corporations and numerous types of bonds. The related index funds represent the performance of each index as a proxy for how that market sector is doing.

Image credit: istockphoto/William Potter

23. The rate of interest

50 investment phrases, decoded

The interest rate is the cost of borrowing money from a lender, but it may also refer to the amount your money earns in a savings, money market, or CD account. The Federal Reserve sets the benchmark interest rate in the United States. Savings rates, mortgage rates, credit card rates, and other rates are all influenced by this rate. The stock market usually rises when the Federal Reserve reduces interest rates.

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24. A big hat

50 investment phrases, decoded

A large-cap firm has a market valuation of $10 billion or more. These firms are often regarded as industry leaders and are considered conservative, low-risk, and secure investments. The stock of a business may be classified as big cap, mid cap, or small cap.

Image courtesy of istockphoto/Fokusiert.

25. Market capitalization

50 investment phrases, decoded

The value of a company’s total outstanding shares is known as market capitalization, or market cap. It’s often used to assess a company’s worth and construct a well-diversified portfolio. Market capitalization is calculated by multiplying the number of outstanding shares by the current share price. Companies with smaller market capitalization often have more space to develop and are more likely to be linked with younger businesses, making them riskier.

Image courtesy of лекcе елоерски/ istockphoto.


50 investment phrases, decoded

Mid-cap businesses have a market value of $2 billion to $10 billion, placing them in the middle of the small- and large-cap categories. Many mid-cap businesses are in growth mode, which appeals to certain investors who think the company will eventually develop into a large-cap, but this is not assured.

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27. Megacapacity

50 investment phrases, decoded

Mega-cap businesses have a market value of $1 trillion or more, and are the biggest corporations you may invest in. Mega-cap stocks are usually market leaders and well-known names, such as Apple or Microsoft.

oxtain / istockphoto / oxtain / istockphoto / oxtain / istockphoto

28. Investment trusts

50 investment phrases, decoded

Mutual funds may invest in a variety of assets, including stocks, bonds, and other securities, or a mix of these (e.g. a blended fund). Industry-specific mutual funds are also available (such as a mutual fund consisting only of energy stocks, green bonds, or tech companies and so on). is the source of this image.

29. Net Profit

50 investment phrases, decoded

When it comes to investment, net income refers to how much money a business earns (or loses) after all of its costs have been paid. In most cases, net income is determined by deducting a company’s expenditures from its revenue. Although EBITDA (described above) is another metric, investors may be interested in a company’s net income since it may assist evaluate how lucrative it is.

SARINYAPINNGAM / istockphoto contributed to this image.

30. Stocks traded over the counter

50 investment phrases, decoded

Not all equities are traded on the open market. Typically, these “private” equities, also known as over-the-counter stocks, must be exchanged via a broker. If a company’s stock does not satisfy the criteria to be traded publicly, it may issue OTC stock. Startups and other small businesses often fall under this category. While these businesses may ultimately be allowed to trade openly, investing in them involves the danger of their going bankrupt or engaging in fraudulent activities since the market is much less regulated than publicly listed marketplaces.

Victoria Gnatiuk / istockphoto / Victoria Gnatiuk / istockphoto / istockphoto / istockphoto / ist

31. Earnings-to-Price Ratio

50 investment phrases, decoded

P/E, or price-to-earnings ratios, are widely used by investors to determine how lucrative a business is in comparison to its stock price. In other words, price-to-earnings ratios may assist investors determine if a stock’s price is justified based on its profits.

gopixa / istockphoto / gopixa / istockphoto / gopixa / istockphoto /

32. The prime rate of interest

50 investment phrases, decoded

Banks are more inclined to give prime interest rates to their best clients, those with the greatest credit histories and the lowest chance of defaulting on a loan. The prime interest rate is the lowest rate a bank will typically give. The parameters used by a bank to determine its prime interest rate may differ, although most banks take the federal funds rate into account when establishing any interest rate.


Portfolio management is number 33.

50 investment phrases, decoded

Portfolio management is the process of choosing and managing the assets in your portfolio. There are many management styles to choose from, such as aggressive or passive management, growth or value management. You may also choose to manage your portfolio yourself or pay someone or a group to do it for you.

William Potter / istockphoto contributed to this image.

Preferred stock (number 34)

50 investment phrases, decoded

A preferred stock is a kind of stock that allows investors to hold shares in a business and receive dividends on a regular basis, similar to how bond interest is paid. Preferred stockings are less volatile and riskier than common stocks since their prices do not change as much. is the source of this image.

35. A profit and loss statement is a financial statement that shows how much money has been made and

50 investment phrases, decoded

You certainly understand what profit and loss are, but do you understand how to interpret a company’s profit and loss statement? It may assist you in determining a company’s bottom line by demonstrating how well it is doing in comparison to its rivals in the same industry. This article on profit and loss statements may help you understand what to look for if you’ve never seen one before.

tiny smiles/ istockphoto is the source of this image.

36. Proposal

50 investment phrases, decoded

Companies that sell stocks, bonds, or mutual funds to investors must submit a prospectus with the Securities and Exchange Commission, which contains information on the investment (e.g. the expense ratio, the constituents of a fund and more). Investors may use the prospectus to learn more about a security and whether or not it is a good match for their portfolio. is the source of this image.

Recession is number 37.

50 investment phrases, decoded

A recession is a time in which the economy contracts. A recession, according to the National Bureau of Economic Research (NBER), is defined as a drop in monthly employment, personal income, and industrial output. A recession may cause a decrease in the value of your portfolio as an investor, but this is only temporary: When looking at the history of U.S. recessions, the stock market has always recovered following a downturn. is the source of this image.

38. REIT

50 investment phrases, decoded

REITs (real estate investment trusts) are a method for investors to diversify their holdings further. You may invest in REITs, which are large-scale real estate developments that investors can help finance in return for partial ownership, rather than taking on the burden of managing an investment property yourself. The majority of REITs are publicly listed and pay dividends to their shareholders. is the source of this image.

Retained profits (number 39)

50 investment phrases, decoded

When reading at a company’s net income statement, you may come across the phrase “retained profits,” which is also known as “unappropriated profit,” “uncovered loss,” “member capital,” “earning excess,” or “accumulated earnings.” In general, retained profits refers to the money a business retains and perhaps reinvests after paying a dividend to its shareholders.

Knowing if a business has positive retained profits as an investor may help you figure out how much money it has to keep expanding. If the company’s retained earnings are negative, it may indicate that it is in debt and is not a suitable investment.

artisteer / istockphoto / artisteer / istockphoto / artisteer / istockphoto /

40. Return on investment

50 investment phrases, decoded

Return on equity, also known as return on net worth, may assist investors evaluate how effectively businesses manage the contributions of its shareholders. This formula may be used to calculate it: Average shareholder equity/net income A greater return on equity may indicate to investors that a business is effectively managing its funds.

Depositphotos is the source of this image.

41. ROI

50 investment phrases, decoded

The return on investment (ROI) is simply the amount of money you receive after investing in a stock, bond, mutual fund, or other financial instrument. Investors usually aim for a good return on investment (ROI), which means that their money has earned money. While a decent return on investment varies depending on the kind of investment, some investors use the stock market’s historical return (about 7%) as a benchmark.


Small cap 42.

50 investment phrases, decoded

The market capitalization of a small-cap business ranges from $250 million to $2 billion. A small-cap business may attract investors because they think it has growth potential or is cheap. is the source of this image.

43. SPAC

50 investment phrases, decoded

The acronym SPAC refers to a special purpose acquisition corporation. SPACs are shell businesses that list their stock on a stock market in order to obtain funds in order to combine with a privately owned firm. When the public SPAC and the private business combine, the private company becomes a public corporation, which is why a SPAC is often referred to as a backdoor IPO. Because SPACs are typically quicker and less costly than conventional IPOs, many businesses may choose to utilize them instead of traditional IPOs.

iQoncept / istockphoto / iQoncept / istockphoto / iQoncept / istockphoto

Stocks are number 44.

50 investment phrases, decoded

If you’ve read this far, you’re undoubtedly familiar with the term “stock.” To summarize, a stock is a means to purchase a portion of a company’s ownership. You may purchase and sell stocks based on whether you think the value of your holdings will fall or rise.

AUDINDesign / istockphoto / AUDINDesign / istockphoto / AUDINDesign / istockphoto /

45. Stock market

50 investment phrases, decoded

A stock exchange is a marketplace for buying, selling, and trading equities. The New York Stock Exchange (NYSE) and the Nasdaq are two of the most well-known stock exchanges in the United States.

NicoElNino / istockphoto contributed to this image.

Stop-loss order (number 46)

50 investment phrases, decoded

Investors may use a stop-loss order to have greater control over their assets. Your broker will sell, purchase, or exchange a stock when it hits a particular price that you choose. A stop-loss order may assist you in limiting the amount of money you gain or lose in the stock market.

insta photos/istock/istock/istock/istock/istock/istock/istock/istock/i

47. Fund with a specific expiration date

50 investment phrases, decoded

A target date fund is a kind of mutual fund that invests in a variety of asset classes and changes its portfolio over time to become more conservative as investors grow older. Investors often utilize target date funds to help them prepare for their retirement. Goal funds are usually built around several target retirement years (e.g. 2030, 2040, 2050) so that investors may choose a date that corresponds to their desired retirement.

Deposit Photos provided the image.

Stocks with a high value

50 investment phrases, decoded

A value stock is one that investors think is undervalued and/or cheap as compared to its previous stock market values or those of its rivals. The price-to-earnings ratio may be used by investors to evaluate if a company is a value investment.

Deposit Photos provided the image.

Venture capital is number 49.

50 investment phrases, decoded

A startup’s venture capital is money used to help it expand. Private investors or venture capital companies are the most common sources of funding. Investors may choose to put their money into companies that they think have the potential to become lucrative over time.

Ahmetov Ruslan/istock/Ahmetov Ruslan/istock/Ahmetov Ruslan/istock

50. Yield

50 investment phrases, decoded

The return on an investment over a given length of time, represented as a percentage, is referred to as yield. Although you may hear the phrase in connection to bonds (e.g., high-yield bonds), yield is a more accurate measure of the cash flow an investor receives on the amount they put in a security during that time period, as opposed to total return.

HAKINMHAN/istockphoto contributed to this image.

The Remainder

50 investment phrases, decoded

When you’re new to investing, knowing a few essential investment terms and phrases may go a long way toward boosting your confidence. Acquiring investing vocabulary is similar to learning any other skill: there’s a learning curve at first, but as you progress and begin investing consistently, the words will become more natural.

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SoFi Invest is a company that invests in small businesses. This material is not intended to be used as investing or financial advice. Individual financial requirements, objectives, and risk profiles should all be considered while making investment choices. SoFi cannot guarantee its financial success in the future. SoFi Wealth, LLC provides advisory services. SoFi Securities, LLC is a FINRA/SIPC member. SoFi Invest refers to Social Finance, Inc. and its affiliates’ three investing and trading platforms (described below). Individual client accounts may be bound by the terms of one or more of the platforms listed below.

1) Automated Investing—Sofi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth”), owns the Automated Investing platform. SoFi Securities LLC, an associated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities”) provides brokerage services to SoFi Wealth LLC.

2) Active Investing—SoFi Securities LLC owns the Active Investing platform. APEX Clearing Corporation is in charge of clearing and custody of all securities. 3) SoFi Digital Assets, LLC, a FinCEN-registered Money Service Business, offers cryptocurrency.

Visit for more information on the SoFi Invest platforms mentioned above, including state licensing of SoFi Digital Assets, LLC. For the sale of any product or service offered via any SoFi Invest platform, neither the Investment Advisor Representatives of SoFi Wealth nor the Registered Representatives of SoFi Securities are paid. This information on lending products is not intended to be an offer or a pre-qualification for any loan product provided by SoFi Lending Corp and/or its affiliates.

Fees for Funds These funds will have their own management fees if you invest in Exchange Traded Funds (ETFs) via SoFi Invest (either by purchasing them directly or through SoFi Invest’s automatic investments, previously SoFi Wealth). You are not responsible for these costs; instead, the fund is responsible for them. The fund’s returns are lowered as a result of these costs. For further information, see the prospectus for each fund. For investing ETFs on behalf of advising customers, SoFi Invest does not collect sales commissions, 12b-1 fees, or other fees from ETFs, but it may earn management fees if it develops its own funds.

ETFs: Investors should read the prospectus carefully, which includes the Fund’s investment goals, risks, charges, costs, and other pertinent information. A prospectus is available on the Fund’s website or by emailing customer care at [email protected]. Before investing, please read the prospectus carefully. ETF shares must be purchased and sold at market value, which may differ substantially from the Fund’s net asset value (NAV). Market volatility affects investment returns, and shares may be worth more or less than their initial value when redeemed. An ETF’s diversification will not prevent you from losing money. It’s possible that an ETF won’t meet its declared investment goal. Tax implications may be incurred as a result of rebalancing and other fund operations.

Investment Risk: Diversification may assist to mitigate some of the risks associated with investing. It cannot guarantee profit or provide complete protection in a down market.

SoFi Wealth, LLC, an SEC-registered investment adviser, provides advisory services. SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is accessible upon request and at, contains information about the firm’s advisory operations, services, and fees. is the source of this image.


50 investment phrases, decoded

Farley, Kaitlyn

MediaFeed’s writer/editor is Kaitlyn Farley. She is pursuing her master’s degree in journalism at Northwestern University, with a focus on social justice and investigative reporting. She has covered higher education, local politics, natural catastrophes, and investigative and watchdog topics relating to Title IX and transparency concerns at different radio stations and newsrooms.

The return on investment quotes is a list of 50 investment phrases, decoded. It is a list of the most important and popular investment phrases with their definitions.

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