Money glossary
The words that trip beginners up - in one plain line each. Search for the one you need.
- Brokerage account
- An account that lets you buy and hold investments like stocks and ETFs.
- ETF
- A fund that holds many stocks or bonds but trades like a single stock - a simple way to own a slice of the whole market.
- Fractional shares
- Buying a piece of a share by dollar amount, so you can invest $10 even if one share costs $300.
- Commission
- A fee charged per trade. Many brokers now charge $0 on US stocks and ETFs.
- Expense ratio
- The yearly % a fund charges to run it. Lower is better - 0.03-0.20% is common for index funds.
- Robo-advisor
- Software that builds and manages a diversified portfolio for you, usually for about 0.25% a year.
- IRA
- A tax-advantaged US retirement account. Traditional defers tax; Roth grows tax-free.
- Dollar-cost averaging
- Investing a fixed amount on a schedule, so you buy more when prices are low and less when they're high.
- Mid-market rate
- The 'real' exchange rate banks use between themselves. Transfer fees are often hidden as a markup on top of it.
- FX markup
- The hidden fee baked into a worse exchange rate - usually the biggest cost in an international transfer.
- Spread
- The gap between the buy and sell price. On a crypto 'simple buy', a wide spread can be the real cost.
- Stablecoin
- A crypto designed to hold a steady value (often $1). Still carries risk - not the same as cash in a bank.
- APY / yield
- The annual % return on savings or a crypto 'earn' product. Higher yield almost always means higher risk.
- Counterparty risk
- The risk that the company holding or lending your money fails. Central to crypto 'earn' and lending products.
- KYC
- 'Know Your Customer' - the identity checks a regulated platform must run before you can fund an account.
- ACAT transfer
- The standard US process to move investments from one broker to another without selling them.
- Custody
- Who actually holds your assets. 'Not your keys, not your coins' is the crypto version of this question.
- Volatility
- How much a price swings. Crypto is highly volatile - it can drop fast and far.