Key Terms in Personal Finance and Investing

Investment Portfolio

A collection of assets such as stocks, bonds, and real estate that an individual or institution holds to achieve financial goals.

Diversification

The strategy of spreading investments across different asset classes, sectors, or geographic regions to reduce risk.

Brokerage Account

A type of account that allows individuals to buy and sell securities like stocks, bonds, and mutual funds.

Index Fund

A type of mutual fund or ETF that aims to replicate the performance of a specific index, such as the S&P 500.

Mutual Fund

An investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

Exchange-Traded Fund (ETF)

A type of investment fund that is traded on stock exchanges, much like individual stocks.

S&P 500

An index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

Compound Interest

The interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Risk Management

The process of identifying, assessing, and controlling threats to an individual's or organization's capital and earnings.