Investing jargon, translated.
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Common terms, already translated
Each section below covers a different corner of the market. The plain-English version is the only thing you need to read — the jargon label is there so you can search for it.
Valuation & metrics
The numbers analysts use to size up a company.
What does P/E ratio mean?
Price-to-earnings ratio: the stock price divided by the company's yearly profit per share. A P/E of 20 means investors are paying $20 for every $1 of yearly profit. Higher numbers mean people expect future profits to grow.
What is EPS in plain English?
Earnings per share. Take the company's total profit for a quarter or year, divide it by the number of shares that exist, and you get EPS. It's how much profit a single share represents.
What does market cap mean?
Market capitalization. The stock price multiplied by the number of shares that exist. A company with 1 billion shares trading at $50 has a market cap of $50 billion — that's roughly what the whole company is worth at today's price.
What does dividend yield mean?
The yearly dividend payment divided by the stock price, shown as a percent. A stock at $100 paying $3 a year in dividends has a 3% yield. It's the cash return you get from holding the stock, separate from price changes.
What is the price-to-book ratio?
Stock price divided by the company's book value per share — book value being roughly what the company would be worth if you sold everything and paid off all debts. A P/B of 1 means the market is valuing the company at exactly its accounting value.
What does beta mean for a stock?
A number that measures how much a stock moves compared to the overall market. Beta of 1 means it moves in line with the market. Beta of 2 means it tends to move twice as much, up or down. Beta below 1 means it's less jumpy than the market.
What is free cash flow?
The cash a company has left over after paying for everything it needs to run and grow the business. It's the real money available to pay dividends, buy back shares, or pay down debt — and it's harder to fake than accounting profit.
What does enterprise value mean?
The full price you'd pay to take a whole company private: market cap plus debt, minus the cash on the balance sheet. It's used to compare companies with very different debt levels on an apples-to-apples basis.
What does TTM mean in finance?
Trailing twelve months — the last four quarters added up. "TTM revenue" means the company's sales over the past year, regardless of where the calendar year falls. It's a way to get a fresh annual number without waiting for year-end.
ETFs, funds & fees
How baskets of investments are packaged and priced.
What is an ETF in plain English?
Exchange-traded fund. A basket of many stocks (or bonds) that trades as a single share on the stock exchange, just like a regular stock. One share of an S&P 500 ETF gives you a tiny slice of 500 large U.S. companies at once.
How is a mutual fund different from an ETF?
Like an ETF, it's a basket of investments managed as one product. The difference: mutual funds only price once a day after markets close, while ETFs trade live throughout the day. Mutual funds usually have higher fees and require minimum purchases.
What is an index fund?
A fund that copies a published list of investments — like the S&P 500 — instead of trying to pick winners. Because nobody is paid to choose the holdings, fees are typically very low.
What does expense ratio mean?
The yearly fee a fund charges, shown as a percent of what you have invested. An expense ratio of 0.04% means $4 a year on every $10,000 you hold. Lower is generally cheaper to own; the fee is taken out of fund returns automatically.
What does NAV mean for a fund?
Net asset value. The total value of everything the fund owns, divided by the number of fund shares. For mutual funds, NAV is the official price you trade at, set once a day after markets close.
What is a REIT?
Real estate investment trust. A company that owns and rents out real estate — apartments, malls, warehouses, data centers — and trades on the stock exchange like any other stock. By law, REITs pay out most of their profit as dividends.
What does dollar-cost averaging mean?
Investing the same amount of money on a regular schedule — for example, $200 every two weeks — regardless of price. It removes the need to time the market and smooths out the average purchase price over time.
What does AUM stand for?
Assets under management — the total dollar value a fund, ETF, or investment firm is responsible for. A fund with $50B in AUM is managing $50 billion of investor money.
The Fed, inflation & growth
The economy-wide forces that move every market.
What does the Federal Reserve do?
The U.S. central bank. Its main job is to keep prices stable and unemployment low, and it does that mostly by raising or lowering short-term interest rates. When the Fed moves rates, mortgages, car loans, and stock prices usually react.
What is the FOMC?
The Federal Open Market Committee — the group inside the Federal Reserve that meets eight times a year to decide whether to raise, lower, or hold short-term interest rates. The announcement after each meeting is one of the biggest scheduled market events.
What does CPI mean?
Consumer Price Index — the headline measure of inflation in the U.S. Each month, the government tracks the price of a basket of common goods and services and reports how much it changed. A rising CPI means everyday things are getting more expensive.
What is the PPI report?
Producer Price Index. It tracks the prices businesses charge each other for goods and services — the prices "upstream" from what shoppers pay. PPI often moves before CPI, so it's watched as an early signal for inflation.
What does GDP mean?
Gross domestic product — the total value of everything a country produced in a given period. When people say "the economy grew 2.4% last quarter," they're quoting GDP. It's the broadest single measure of how an economy is doing.
What is a Fed rate hike?
The Federal Reserve raising its target short-term interest rate. Higher rates make borrowing more expensive for banks, which feeds through to mortgages, business loans, and credit cards. Rate hikes are typically used to slow down inflation.
What is the yield curve?
A chart that plots the interest rate the U.S. government pays to borrow money for different lengths of time — from a few months to thirty years. Normally, longer borrowing pays a higher rate. When the curve "inverts," short-term rates are higher than long-term, which has historically signaled a recession ahead.
What does soft landing mean in finance?
The economy slowing down enough to bring inflation back down, but not so much that it tips into a recession. The Federal Reserve's ideal outcome when it raises rates.
What counts as a recession?
A meaningful, broad decline in economic activity that lasts more than a few months. The official caller in the U.S. (the NBER) looks at jobs, income, production, and spending together. The shorthand most people use — two quarters in a row of falling GDP — is a rough rule, not the formal definition.
Corporate actions
What companies announce, and what those announcements mean.
What does IPO mean?
Initial public offering — the first time a private company sells shares to the public on a stock exchange. Before the IPO, only employees and private investors owned pieces of the company; after, anyone with a brokerage account can.
What is a stock split?
A company chops each existing share into multiple smaller shares. A 4-for-1 split turns one $400 share into four $100 shares — the total value you hold is unchanged, the price per share is just smaller. Often done to make shares feel more accessible.
What is a stock dividend?
A cash payment a company sends to shareholders, usually every three months, out of its profits. If you own 100 shares of a stock that pays a $0.50 quarterly dividend, you receive $50 that quarter.
What does share buyback mean?
A company uses its own cash to buy back its own stock from the open market. The shares are then retired, leaving fewer shares in existence — which means each remaining share owns a slightly bigger slice of the company.
What does M&A stand for?
Mergers and acquisitions — companies combining (merger) or one company purchasing another (acquisition). When a public company gets acquired, shareholders typically receive cash, shares of the acquirer, or a mix of both at a negotiated price.
What is a corporate spinoff?
A large company carves out one of its divisions and sets it up as a separate, independently traded company. Existing shareholders usually get shares of the new company for free, in proportion to what they already own.
What does it mean when a company beats earnings?
The company's reported quarterly profit came in higher than the average forecast from Wall Street analysts. A "miss" is the opposite. Stock prices often react to the size of the beat or miss, not just the absolute number.
What is forward guidance?
When a company tells investors what it expects revenue or profit to look like next quarter or next year. Stocks often react more to the guidance than to the actual reported numbers, because the market is forward-looking.
Options, leverage & risk
Higher-octane tools — and what they can do to a portfolio.
What is a stock option?
A contract that gives the holder the right — but not the obligation — to buy or sell a stock at a specific price by a specific date. Options can magnify gains or losses sharply compared to owning the stock directly, and most expire worthless.
What does a call option mean?
A contract that gives the holder the right to buy a stock at a set price before a set date. The buyer of a call is betting the price will go up. If it doesn't, the most they lose is what they paid for the contract.
What is a put option?
A contract that gives the holder the right to sell a stock at a set price before a set date. Puts gain value when the stock falls. They're often used as insurance against a holding losing value.
What does shorting a stock mean?
Borrowing shares of a stock, selling them right away, and hoping to buy them back later at a lower price to return them. The profit is the difference. Losses on a short have no ceiling, because a stock can theoretically rise forever.
What does buying on margin mean?
Borrowing money from your broker to buy more stock than your cash alone would allow. It magnifies both gains and losses, and if the position falls too far the broker can demand more cash — a "margin call" — or sell the position automatically.
What does leverage mean in investing?
Using borrowed money — or instruments like options and futures — to control a larger position than your cash alone would buy. Leverage multiplies returns in both directions, which is why it can wipe out an account faster than ordinary investing.
What is a futures contract?
An agreement to buy or sell something — oil, wheat, an index — at a set price on a set future date. Originally used by farmers and producers to lock in prices, futures are now also widely traded by speculators.
What is the VIX index?
A market index that measures how much swing investors expect in the S&P 500 over the next thirty days. Often called the "fear gauge" — VIX tends to spike when stocks fall sharply and fade back down when markets calm.
SEC filings & disclosures
The official documents that anchor every honest source.
What is a 10-K filing?
The annual report every U.S. public company files with the SEC. It contains audited financial statements, a description of the business, the main risks, and what management thinks happened during the year. It's the most thorough single document a company publishes.
What does a 10-Q filing contain?
A public company's quarterly report to the SEC — a lighter, unaudited version of the 10-K covering the latest three months. Filed three times a year (the fourth quarter's details get rolled into the 10-K).
What is an 8-K filing?
A "current report" filed by a public company within four business days of certain material events — a CEO leaving, an acquisition agreement, a big lawsuit, results being released. It's the SEC's way of making sure investors learn important news on a fixed clock.
What is a 13F filing?
A quarterly disclosure that any investment manager handling more than $100 million must file with the SEC, listing the U.S. stocks they hold at quarter-end. It's how the public sees what large funds — Berkshire, Bridgewater, big hedge funds — were holding 45 days earlier.
What is a Form 4 filing?
A disclosure executives, directors, and large shareholders must file within two business days when they buy or sell shares of their own company. It's the official source for "insider buying" and "insider selling" data.
What is an S-1 filing?
The registration document a company files with the SEC before going public. It includes the business overview, historical financials, risk factors, and details about the upcoming share sale. Reading the S-1 is how you learn what an IPO is actually offering.
What is a proxy statement?
A document a public company sends shareholders before the annual meeting, asking for their votes on board members, executive pay, and other matters. It also discloses how much top executives are paid and what conflicts of interest exist.
What does EDGAR stand for?
Electronic Data Gathering, Analysis, and Retrieval — the SEC's free public database of every filing every public company has made. It's the official, primary source for 10-Ks, 13Fs, Form 4s, and the rest.
What is insider trading?
There are two meanings. The legal one: company insiders (executives, directors, large holders) buying or selling their own company's shares and reporting those trades on Form 4. The illegal one: trading on important non-public information, regardless of who you are.
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