47 terms you need to understand by 30

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47 Terms every investor needs to understand by age 30

(If you want to have a shot at being a millionaire by 40):

1. Asset allocation - the percentage of each asset you own
   

2. Diversification - when you own different types of assets
   

3. Mutual fund - a pool of money from investors to invest in groups of assets
   

4. Index fund - a type of mutual fund that tracks a list of stocks
   

5. ETF - a fund that trades like a stock
   

6. Annualized returns - overall returns averaged to year over year returns
   

7. Dividend - distributed profits to shareholders
   

8. Stock option - the right, but not obligation, to buy/sell a stock at a price and date that’s agreed upon
   

9. Market cap - total value of a public company
   

10. Large cap - company valued at least $10B
    

11. Mid cap - company valued between $3B - $10B
    

12. Small cap - company valued between $250M - $3B
    

13. Prospectus - a disclosure document for an investment
    

14. Basis point - a unit of measurement. One-hundredth of a percent
    

15. Blue chip - a well established company that ranks in the top of its sector
    

16. Penny stock - a stock worth $5 / share or less
    

17. Stop loss order - a trigger to sell a stock when it reaches a certain price
    

18. Ask - how much sellers want for a stock
    

19. Bid - how much buyers are willing to pay for a stock
    

20. Balance sheet - shows assets and liabilities
    

21. Income statement - shows revenue and expenses
    

22. Cash flow statement - tracks how a business uses cash
    

23. Bear market - a market decline of 20% or more

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24. Recession - 2 consecutive quarters of declining GDP
    

25. Bull market - when the market goes up without falling 20%
    

26. Capital gain - when you sell an asset and profit
    

27. Capital loss - when you sell an asset and lose money
    

28. DCA - (dollar cost averaging) when you invest periodically with a fixed dollar amount
    

29. Equity - a stock/ownership of assets
    

30. Expense ratio - the fee associated with investment funds
    

31. Fixed income investments - fixed payments you receive from an investment
    

32. Bond - a loan to an company/government
    

33. Liquidity - how fast an asset can be bought/sold
    

34. Margin - a loan for investing
    

35. IPO - when a company can be bought/sold on an exchange
    

36. Stock split - when shares are split to create multiple shares
    

37. Earnings report - a businesses financial results from a specific period
    

38. Short selling - when you bet an investment will decline in value
    

39. Taxable account - investment account without tax advantage
    

40. Tax advantaged account - investment account that saves money on taxes
    

41. S&P 500 - top 500 companies in US
    

42. Alpha - a way to measure excess returns against an investment
    

43. Beta - measurement of volatility
    

44. Inflation - when stuff gets more expensive over time
    

45. Value investing: when you invest in undervalued companies
    

46. Growth investing: when you invest in companies with a high growth potential
    

47. Compound interest - when your money makes you more money

There you have it!

47 terms every investor should know by age 30.

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