Investing Dictionary
Quick definitions of 173 essential investing terms, built for US stock market investors and international markets like India. Covers valuation, profitability, taxes (LTCG, wash-sale rule, tax-loss harvesting, 401(k)/IRA), market structure (S&P 500, NASDAQ, Dow, VIX, Nifty, Sensex), derivatives, behavioral finance, and more.
Valuation
P/E Ratio (Price-to-Earnings Ratio)The P/E ratio measures how much investors pay for each dollar (or rupee) of a company's earnings....P/B Ratio (Price-to-Book Ratio)P/B ratio compares a stock's market price to its book value per share. It shows whether you're pa...EV/EBITDA (Enterprise Value to EBITDA)EV/EBITDA is a valuation metric that compares a company's total enterprise value to its operating...PEG Ratio (Price/Earnings to Growth)The PEG ratio adjusts the P/E ratio for expected earnings growth. It helps determine if a high P/...P/S Ratio (Price-to-Sales Ratio)P/S ratio compares a company's stock price to its revenue per share. Useful for valuing companies...Enterprise Value (EV)Enterprise value represents the total theoretical takeover price of a company, including its equi...Market CapitalizationMarket cap is the total market value of a company's outstanding shares. It determines whether a s...Book Value Per ShareBook value per share is the net asset value of a company on a per-share basis, total assets minus...Intrinsic ValueIntrinsic value is the estimated true worth of a stock based on fundamental analysis, typically d...DCF (Discounted Cash Flow)DCF is a valuation method that estimates the present value of a company based on projected future...Margin of SafetyMargin of safety is the difference between a stock's intrinsic value and its market price, the bu...Dividend YieldDividend yield measures the annual dividend income as a percentage of the current stock price, sh...Free Cash Flow (FCF)Free cash flow is the cash a company generates after accounting for capital expenditures, the mon...EPS (Earnings Per Share)EPS represents the portion of a company's profit allocated to each outstanding share, the most wi...EV/Sales (Enterprise Value to Sales)EV/Sales compares a company's enterprise value to its total revenue, useful for valuing companies...Dividend Payout RatioThe payout ratio shows what percentage of earnings a company distributes as dividends, revealing ...
Profitability
ROE (Return on Equity)ROE measures how effectively a company uses shareholders' equity to generate profits, the ultimat...ROA (Return on Assets)ROA shows how efficiently a company uses its total assets to generate profit, measuring managemen...ROIC (Return on Invested Capital)ROIC measures how well a company generates returns on ALL capital invested in the business, both ...ROCE (Return on Capital Employed)ROCE measures profit earned on all capital employed in the business, including both equity and lo...Gross Profit MarginGross margin shows the percentage of revenue remaining after deducting the direct cost of produci...Operating Profit Margin (OPM)Operating margin measures the profit remaining after all operating expenses, revealing how effici...Net Profit MarginNet profit margin is the percentage of revenue that becomes actual profit after ALL expenses, tax...EBITDAEBITDA strips out non-cash charges and financing effects to show pure operating performance, earn...EBIT (Earnings Before Interest and Tax)EBIT measures operating profit before the effects of financing and tax, showing how much a compan...NOPAT (Net Operating Profit After Tax)NOPAT is the profit a company would earn from operations if it had no debt, used as the numerator...
Liquidity
Current RatioThe current ratio measures a company's ability to pay short-term obligations with its short-term ...Quick Ratio (Acid-Test Ratio)The quick ratio is a stricter liquidity test than the current ratio, it excludes inventory, showi...Working CapitalWorking capital is the difference between current assets and current liabilities, measuring the s...Cash Conversion Cycle (CCC)The CCC measures how many days it takes a company to convert its inventory and receivables into c...Cash RatioThe cash ratio is the most conservative liquidity measure, showing only cash and cash equivalents...
Leverage
Debt-to-Equity RatioThe D/E ratio shows how much debt a company uses relative to its equity, measuring financial leve...Interest Coverage RatioInterest coverage shows how easily a company can pay interest on its debt, a critical indicator o...Net DebtNet debt subtracts cash holdings from total debt to show a company's true indebtedness, the amoun...Net Debt/EBITDANet Debt/EBITDA measures how many years of operating earnings it would take to pay off a company'...Financial Leverage (Equity Multiplier)Financial leverage measures how much a company amplifies returns (and risks) by using debt, the e...
Efficiency
Asset Turnover RatioAsset turnover measures how efficiently a company uses its assets to generate revenue, higher tur...Inventory Turnover RatioInventory turnover shows how many times a company sells and replaces its inventory in a year, mea...Days Sales Outstanding (DSO)DSO measures how many days on average it takes a company to collect payment after making a sale, ...Days Payable Outstanding (DPO)DPO measures how many days a company takes to pay its suppliers, longer DPO means the company hol...Fixed Asset TurnoverFixed asset turnover measures how efficiently a company generates revenue from its property, plan...
Growth
CAGR (Compound Annual Growth Rate)CAGR is the annualized growth rate that smooths out yearly fluctuations, showing the steady rate ...Revenue Growth RateRevenue growth measures the percentage increase in a company's sales over a period, indicating ma...EPS Growth RateEPS growth shows how quickly a company is growing its per-share profitability, the metric most di...Sustainable Growth RateThe sustainable growth rate is the maximum growth a company can achieve without raising external ...Net Profit Growth RateNet profit growth tracks the year-over-year change in bottom-line profits, reflecting the combine...
Risk
Beta (Ξ²)Beta measures how much a stock's price moves relative to the overall market, a stock with beta > ...Standard Deviation (Volatility)Standard deviation measures how widely a stock's returns fluctuate around its average, the most c...VaR (Value at Risk)VaR estimates the maximum potential loss of a portfolio over a given time period at a specific co...Maximum DrawdownMaximum drawdown measures the largest peak-to-trough decline in a portfolio's value, showing the ...Risk-Reward RatioRisk-reward ratio compares the potential loss to the potential gain of a trade or investment, hel...
Portfolio
Sharpe RatioThe Sharpe ratio measures return earned per unit of risk, helping you compare whether a portfolio...Sortino RatioThe Sortino ratio improves on the Sharpe ratio by only penalizing downside volatility, recognizin...Alpha (Ξ±)Alpha measures the excess return of an investment relative to a benchmark, it represents the valu...XIRR (Extended Internal Rate of Return)XIRR calculates the annualized return of an investment with irregular cash flows, the most accura...CorrelationCorrelation measures how two assets move relative to each other, the foundation of diversificatio...SIP (Systematic Investment Plan)SIP is the Indian term for a Systematic Investment Plan, a fixed amount invested regularly (month...Index FundAn index fund is a mutual fund or ETF that passively replicates a market index (like Nifty 50) at...Asset AllocationAsset allocation is the strategic distribution of investments across asset classes, equities, bon...Rupee Cost Averaging (RCA) - IndiaRupee Cost Averaging is the Indian term for the strategy of investing a fixed amount at regular i...Dollar-Cost Averaging (DCA)Dollar-Cost Averaging is the US standard term for investing a fixed dollar amount at regular inte...ETF (Exchange-Traded Fund)An ETF is a basket of securities (stocks, bonds, commodities) that trades on an exchange like a s...Target-Date Fund (TDF)A Target-Date Fund automatically shifts its asset allocation from aggressive (mostly stocks) to c...
Market Structure
Nifty 50 IndexNifty 50 is the benchmark index of the National Stock Exchange (NSE), comprising the 50 largest a...Sensex (BSE 30)Sensex is the benchmark index of the Bombay Stock Exchange, tracking 30 of the largest and most a...NAV (Net Asset Value)NAV represents the per-unit value of a mutual fund, calculated by dividing the total value of all...AUM (Assets Under Management)AUM is the total market value of all investments managed by a fund house or asset manager, a meas...FII/DII (Foreign & Domestic Institutional Investors)FIIs (Foreign Institutional Investors) and DIIs (Domestic Institutional Investors like mutual fun...Promoter HoldingPromoter holding is the percentage of a company's shares held by its founders, promoter group, or...Promoter PledgePromoter pledge refers to shares pledged by promoters as collateral for loans, a major red flag i...Face Value (Par Value)Face value is the nominal value of a share as stated in the company's charter, in India, most com...Expense RatioThe expense ratio is the annual fee charged by a mutual fund or ETF as a percentage of assets, th...Demat AccountA demat (dematerialized) account holds securities in electronic form in India, mandatory for trad...Circuit Breaker / Circuit LimitsCircuit breakers are automatic trading halts triggered when a stock or index moves beyond a defin...S&P 500 IndexThe S&P 500 tracks 500 of the largest US-listed companies across 11 sectors, the world's most wid...Nasdaq Composite & Nasdaq-100The Nasdaq Composite tracks all ~3,000+ stocks listed on the Nasdaq exchange. The Nasdaq-100 is a...Dow Jones Industrial Average (DJIA)The Dow Jones Industrial Average tracks 30 large, blue-chip US companies hand-selected by the WSJ...Russell 2000 IndexThe Russell 2000 tracks ~2,000 small-cap US stocks (the bottom two-thirds of the Russell 3000), t...VIX (CBOE Volatility Index), 'Fear Gauge'The CBOE VIX measures the market's 30-day forward-looking expectation of S&P 500 volatility, deri...Pattern Day Trader (PDT) Rule - USFINRA's PDT rule requires US margin-account holders who execute 4 or more day trades within 5 bus...Short SellingShort selling means borrowing shares from a broker, selling them at the current price, and buying...Pre-Market & After-Hours Trading - USUS extended-hours trading lets investors trade NYSE/Nasdaq stocks before the 9:30 AM ET open (pre...
Economics
GDP (Gross Domestic Product)GDP measures the total value of all goods and services produced in a country over a period, the s...Inflation (CPI)Inflation measures the rate at which prices of goods and services rise over time, eroding purchas...Repo RateThe repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commer...Fiscal DeficitFiscal deficit is the gap between what the government spends and what it earns from taxes and non...
Tax & Regulation
SEBI (Securities and Exchange Board of India)SEBI is India's capital markets regulator, responsible for protecting investor interests, regulat...LTCG Tax (Long-Term Capital Gains Tax) - IndiaIn India, LTCG tax applies to profits from selling equity held for more than 12 months. Gains abo...STCG Tax (Short-Term Capital Gains Tax) - IndiaSTCG tax in India applies to profits from selling equity held for less than 12 months, taxed at a...Dividend Taxation in IndiaDividends in India are taxed as income in the hands of the investor at their applicable slab rate...NPS (National Pension System)NPS is India's government-backed retirement savings scheme offering tax benefits under Section 80...Long-Term Capital Gains Tax - USIn the US, Long-Term Capital Gains (LTCG) tax applies to profits from selling stocks, ETFs, mutua...Short-Term Capital Gains Tax - USIn the US, Short-Term Capital Gains (STCG) tax applies to profits from selling investments held f...Wash Sale Rule - USThe IRS Wash Sale Rule disallows a tax loss if you buy the same (or 'substantially identical') se...Qualified vs Non-Qualified Dividends - USIn the US, 'qualified' dividends from US corporations and many foreign corporations are taxed at ...Tax-Loss Harvesting - USTax-loss harvesting is the strategy of intentionally selling investments at a loss to offset capi...401(k), Traditional IRA & Roth IRA - USThe US offers three core tax-advantaged retirement accounts: 401(k) (employer-sponsored, often wi...SEC (US Securities and Exchange Commission)The SEC is the primary US capital markets regulator, established in 1934 after the 1929 crash. It...
Technical
RSI (Relative Strength Index)A 0β100 momentum oscillator comparing the size of recent gains against recent losses, typically o...Moving Average (SMA)The average closing price over a fixed number of trading days, recalculated daily as the window r...MACD (Moving Average Convergence Divergence)A trend-following momentum indicator built from the gap between a fast (12-day) and slow (26-day)...Bollinger BandsA 20-day moving average flanked by bands two standard deviations above and below β an envelope th...Support and Resistance LevelsSupport is a price level where buying pressure tends to prevent further decline. Resistance is wh...EMA (Exponential Moving Average)A moving average that weights recent prices more heavily, responding faster to new information th...VWAP (Volume-Weighted Average Price)The average price paid per share over a period, weighting each day by its traded volume β the mar...Golden CrossThe 50-day moving average crossing above the 200-day β the classic long-term bullish trend-change...Death CrossThe 50-day moving average crossing below the 200-day β the bearish mirror of the Golden Cross, hi...Silver CrossA shorter-horizon bullish crossover β the 20-day moving average crossing above the 50-day β catch...Moving Average Ribbon (Bullish / Bearish)A stack of several moving averages of increasing length read together β 'bullish' when layered in...Price Near Moving Average (Proximity Signals)A condition flag that fires when price closes within a small band β such as 0.5% or 1.5% β of a k...Stochastic Oscillator (%K / %D)A 0β100 oscillator locating today's close within the highβlow range of the past 14 days; %K is th...CCI (Commodity Channel Index)An unbounded oscillator measuring how far price has strayed from its own statistical average, typ...ROC (Rate of Change)The percentage change in price over a fixed lookback β commonly 10 or 20 days β plotted as an osc...Williams %RA β100 to 0 oscillator measuring where today's close sits relative to the 14-day high β effective...ADX (Average Directional Index)A 0β100 gauge of trend strength β deliberately blind to direction. It answers whether a market is...Awesome Oscillator (AO)The gap between a 5-period and 34-period simple moving average of the bar midpoint, plotted as a ...Momentum Divergence (Bullish / Bearish)A disagreement between price and a momentum oscillator: price makes a new extreme, but the indica...ATR (Average True Range)The average size of an asset's daily trading range over 14 days, including any overnight gaps β r...Keltner ChannelsAn EMA-centered envelope whose width is set by a multiple of ATR rather than standard deviation β...Donchian ChannelsThe highest high and lowest low over the past N days, drawn as an envelope β the simplest channel...Historical Volatility (HV)The annualized standard deviation of daily returns over a lookback window (commonly 20 days), exp...TTM SqueezeA compression signal that fires when Bollinger Bands contract entirely inside Keltner Channels β ...Gap Up / Gap Down (1%+)A session opening at least 1% above the prior day's high (gap up) or below its low (gap down), le...OBV (On-Balance Volume)A running total that adds the day's full volume on up days and subtracts it on down days β cumula...A/D Line (Accumulation/Distribution)A cumulative volume line like OBV, but weighting each day by where price closed within its range ...CMF (Chaikin Money Flow)The A/D Line's logic compressed into a bounded oscillator: volume-weighted close-position average...MFI (Money Flow Index)RSI rebuilt with volume: a 0β100 oscillator comparing volume-weighted up-days against down-days o...VWMA (Volume-Weighted Moving Average)A 20-day moving average where each day's price is weighted by its volume β heavy days pull the av...Volume Surge (3Γ)A session trading at least three times its average recent volume β an attention spike where somet...Price Up Vol Up / Price Down Vol UpPaired confirmation signals: a meaningful price move accompanied by above-average volume, in eith...OBV BreakoutThe OBV line itself breaking above its own recent range β a volume-flow breakout, whether or not ...Parabolic SAR (PSAR)A trailing stop-and-reverse system that plots dots below price in uptrends and above it in downtr...SuperTrendAn ATR-based trailing band that sits below price in uptrends and above in downtrends, flipping si...Ichimoku TK Cross (Bull / Bear)The Tenkan line (9-period midpoint) crossing the Kijun line (26-period midpoint) β the Ichimoku s...New 20-Day High / LowPrice printing its highest high (or lowest low) of the past 20 trading days β roughly one calenda...New 52-Week HighPrice reaching its highest level of the past year β the most widely tracked breakout milestone, e...Inside DayA session whose entire range fits within the previous day's high and low β contraction and indeci...Outside DayA session that engulfs the prior day's entire range β a higher high AND a lower low β a violent e...Consecutive Red / Green Days (3+)Three or more sessions closing lower (red) or higher (green) in an unbroken run β one side winnin...DojiA candle whose open and close land at (or almost at) the same price, leaving a cross-shaped bar w...Hammer / Inverted HammerSmall-bodied candles with one long wick: the hammer's wick points down (sellers pushed hard, buye...Engulfing (Bullish / Bearish)A candle whose body completely swallows the previous candle's body, in the opposite color β a one...Harami (Bullish / Bearish)The engulfing pattern's mirror: a small candle whose body sits entirely inside the prior candle's...MarubozuA candle with a full body and no wicks β the session opened at one extreme and closed at the othe...Piercing Line / Dark Cloud CoverTwo-candle reversal prints: after a decline, a green candle opens below the prior red close but r...Morning Star / Evening StarThree-candle reversal structures: a big trend candle, then a small-bodied pause (the 'star'), the...Three White Soldiers / Three Black CrowsThree consecutive full-bodied candles in the same direction, each opening within the prior body a...
Fixed Income
Yield to Maturity (YTM)YTM is the total return anticipated on a bond if held until maturity, accounting for coupon payme...Bond DurationDuration measures a bond's sensitivity to interest rate changes, expressed in years, it shows how...Credit RatingCredit ratings assess the likelihood that a bond issuer will repay its debt obligations, assigned...Yield CurveThe yield curve plots interest rates of bonds with equal credit quality across different maturiti...Coupon RateThe coupon rate is the annual interest rate paid by a bond on its face value, the fixed income co...
Accounting
DepreciationDepreciation is the systematic allocation of a tangible asset's cost over its useful life, it red...GoodwillGoodwill is the premium a company pays above the fair value of net assets when acquiring another ...Deferred Tax Asset & LiabilityDeferred tax arises from timing differences between accounting profits and taxable profits, a def...Revenue RecognitionRevenue recognition determines when a company records revenue in its income statement, the rules ...Off-Balance Sheet ItemsOff-balance sheet items are financial obligations or assets that don't appear on the balance shee...10-K, 10-Q & 8-K Filings - USPublic US companies are required by the SEC to file: 10-K (annual report, audited, ~70 days after...
Derivatives
Call OptionA call option gives the buyer the right (but not the obligation) to buy an asset at a predetermin...Put OptionA put option gives the buyer the right to sell an asset at a predetermined price before expiry, u...Futures ContractA futures contract is a standardized agreement to buy or sell an asset at a predetermined price o...Open Interest (OI)Open interest is the total number of outstanding derivative contracts (futures or options) that h...Implied Volatility (IV)Implied volatility is the market's forecast of how much a stock's price will fluctuate, derived f...Options Greeks (Delta, Gamma, Theta, Vega)The Greeks measure how an option's price changes in response to different factors: Delta (price),...LEAPS (Long-Term Equity Anticipation Securities)LEAPS are exchange-traded options with expirations longer than one year (up to ~3 years out), use...Covered Call StrategyA covered call is selling a call option against shares you already own, generating premium income...
Mutual Fund Structure
Behavioral Finance
Loss AversionLoss aversion is the well-documented behavioral finding (Kahneman & Tversky) that the psychologic...Recency BiasRecency bias is the tendency to overweight recent events and assume they will continue indefinite...Herd BehaviorHerd behavior is the tendency to follow the crowd, buying when everyone is buying and selling whe...FOMO (Fear of Missing Out)FOMO is the anxiety-driven urge to buy an asset that has already rallied sharply, fearing that pr...Anchoring BiasAnchoring is the cognitive habit of fixating on a specific reference number, your purchase price,...