44 Finance Terms Students Need to Know Before Investing

illustrated checklist

It’s every finance student’s goal to learn how to invest. But the financial world can be intimidating as there is a lot to learn, especially when it comes down to the knowledge needed to talk the talk of the industry.

Your journey towards investing starts with studying the jargon. Mastering the vocabulary will help you to hit the ground running as soon as you step foot in the field. Use this guide to familiarize yourself with 44 fundamental finance terms.

Learn the lingo before investing…

1. Annual percentage rate (APR)

The rate that is earned from investing over the length of a year, expressed in a percentage.

2. Asset allocation

An investment strategy in which your portfolio is divided among different investments in order to balance risk and reward for a given timeframe.

3. Assets

Also known as capital or capital assets, assets refer to anything you own with financial value (e.g., shares, bonds, certificates of deposit.)

4. Bond

Money an investor loans to a company, city or government with the promise to be paid back in full with regular interest payments.

5. Capital gain

The profit that’s made when an asset is sold for more than its original purchase price.

6. Capital growth

When an asset or investment increases in value over a period of time.

7. Certificate of deposit (CD)

A sum of money deposited in a bank which accumulates interest over time. Unlike a savings account, the money cannot be accessed until an agreed-upon date.

8. Concentration

A strategy that focuses all investments in a single stock or sector.

9. Diversification

Investing in different types of assets, companies or stocks in a variety of sectors or industries.

10. Dividends

The distribution of profits a company pays to its shareholders.

11. Earnings per share (EPS)

The portion of a company’s earnings allocated to each outstanding share of common stock.

12. Inflation

The gradual rise in cost of goods or services, measured as an annual percentage increase.

13. Interest

A fee charged by a lender to a borrower for the use of assets, usually in the form of an annual percentage rate.

14. Investing

The practice of committing money to something with the expectation of earning additional income or profit.

15. Mutual fund

A pool of funds collected from several individuals to invest in a shared asset in which dividends are split between members.

16. Net income (NI)

The amount of earnings or profit for an individual or company after all expenses have been subtracted.

17. Net worth

A business or individual’s total assets subtracted by their liabilities.

18. Option

The ability to sell or buy an asset at a predetermined price for a set period of time.

19. Portfolio

All of an investor’s financial assets: shares, bonds, CD’s, etc.

20. Return

Capital gains and other forms of income from investments, usually quoted as a percentage.

21. Revenue

The total amount of money an individual or company earns during a period of time.

22. Security

A catch-all term for investments such as stocks, bonds, mutual funds, etc.

23. Shareholder

Any individual who owns at least one share of a company’s stock, entitling them to a portion or percentage of the company’s profits.

24. Stock exchange

A physical or electronic marketplace where securities are traded. Common exchanges include the New York Stock Exchange and NASDAQ.

25. Stock market

The general term referring to the act of trading and exchanging of stocks

26. Share

A share is a unit of ownership in a corporation or financial asset.

27. Stock

An investor’s portfolio of shares.

28. Volatility

A measure of risk that refers to the frequency an investment rises or falls in value or the amount the value varies.

29. Volume

The number of shares or other assets that have been traded in a specific time period.

30. Yield

This term is used to refer to the specific dividends or income earned by an investor.

Now that it’s time to start investing…

31. Bear market

When prices of securities in a market are falling, causing pessimism among investors.

32. Blue chip

Companies that are notorious for being financially sound and enduring the ups and downs of the economy.

33. Bottom-up investing

When an investor focuses on the activity of individual stocks rather than the overall economic or market trends.

34. Budget

An estimation of how much can be spent as a result of how much is earned during a future period.

35. Bull market

When prices of securities in a market are rising or projected to rise, resulting in optimism and confidence among investors.

36. Dow Jones Industrial Average

An index that consists of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ; also known as the Dow or DJIA.

37. Index

A combination of stocks that is used as a benchmark to reflect the overall performance of all investments within a sector.

38. Large cap stocks

A term referring to companies that have a market capitalization of more than $10 billion.

39. Liquidity

The ability to quickly convert an asset to cash.

40. Market capitalization

The overall dollar value of a company’s outstanding shares, used to determine a company’s size.


An international electronic marketplace where securities can be bought and sold.

42. Penny stocks

Shares that sell for less than $1.00.

43. Top down investing

An investment strategy that focuses on the “big picture economy,” investing in industries or sectors that align with the successes of the economy.

44. Small cap stocks

A term for companies with a small market capitalization, usually between $300 million to $2 billion.

Invest in your future

Now that you can talk the talk, you’re one step closer to walking the walk. Working in finance can be an exciting and rewarding way to make a living. Learn more about the benefits of working in finance.

Aaron Lawrence

Aaron is a freelance writer for Collegis education who writes student-focused articles on behalf of Rasmussen College. His interest in writing articles for students stems from his passion for poetry and fiction and the belief that all words can educate.

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