Active vs. Passive
Active investing attempts to beat market benchmarks through security selection; passive investing tracks an index at lower cost.
ADR
A US-traded certificate representing shares in a foreign company, allowing Americans to invest in foreign stocks on US exchanges.
Anchoring Bias
The tendency to rely too heavily on the first piece of information encountered when making financial decisions.
Bottom-Up Analysis
An investment research approach that focuses on individual company fundamentals regardless of broader macroeconomic conditions or sector trends.
Business Model
The framework describing how a company creates, delivers, and captures value — its revenue streams, cost structure, and customer strategy.
Buy and Hold
A passive long-term investing strategy of purchasing securities and holding them through market cycles rather than trading actively.
Competitive Moat
A durable competitive advantage that protects a company's market share and profitability from competitors over the long term.
Confirmation Bias
The tendency to seek out and favor information that confirms existing beliefs while ignoring contradictory evidence.
Contrarian Investing
An investment strategy that deliberately goes against prevailing market sentiment by buying out-of-favor assets and selling popular ones.
Disposition Effect
The behavioral tendency to sell winning investments too early and hold losing ones too long.
Dividend Growth Investing
An investment strategy that targets companies with a history of consistently growing their dividend payments over time.
Drawdown
The peak-to-trough percentage decline in the value of an investment or portfolio over a specific period.
DRIP
A program that automatically reinvests cash dividends into additional shares of the same stock, often without commissions and sometimes at a discount.
Efficient Market Hypothesis
The theory that asset prices fully reflect all available information, making consistent outperformance very difficult to achieve.
GARP
An equity strategy targeting companies with above-average earnings growth at valuations that have not fully priced in that growth.
Growth Investing
An investment strategy focused on companies expected to grow revenues or earnings significantly faster than the overall market.
Herd Mentality
The tendency for investors to follow the crowd rather than conduct independent analysis, amplifying market trends and bubbles.
HPR
The total return earned on an investment from purchase to sale, including all income and capital appreciation.
Home Bias
The tendency for investors to allocate a disproportionately large share of their portfolio to domestic assets, underweighting international opportunities.
Income Investing
An investment strategy focused on generating regular cash income from dividends, interest, and distributions rather than capital appreciation.
Index Fund
A fund designed to track the performance of a market index by holding the same securities in the same proportions.
Investment Horizon
The length of time an investor plans to hold assets before needing to liquidate them to meet a financial goal.
Loss Aversion
The behavioral tendency to feel the pain of losses roughly twice as intensely as the pleasure of equivalent gains.
Mutual Fund
A pooled investment vehicle that collects money from many investors to purchase a diversified portfolio of securities.
NAV
The per-share value of a mutual fund or ETF, calculated as total assets minus total liabilities divided by shares outstanding.
Overconfidence Bias
The tendency for investors to overestimate their knowledge, skills, and ability to predict market outcomes.
Passive Investing
An investment strategy that seeks to match market returns by holding diversified index funds rather than selecting individual securities.
Private Equity
Investment capital deployed in companies that are not publicly traded, typically through buyouts, growth investments, or venture capital.
Qualitative Analysis
An investment evaluation approach focused on non-numerical factors such as management quality, competitive positioning, brand strength, and business model durability.
Quantitative Analysis
An investment evaluation approach that uses mathematical models, statistics, and large data sets to identify pricing patterns and manage risk.
Rebalancing
The process of restoring a portfolio to its target asset allocation by selling outperforming assets and buying underperforming ones.
Recency Bias
The cognitive bias of giving excessive weight to recent events when making investment decisions, ignoring longer historical context.
Risk-Adjusted Return
A measure of investment return that accounts for the amount of risk taken to achieve it, enabling fair comparison across investments.
Sector Investing
An investment approach concentrating exposure in specific industries or economic sectors rather than holding a diversified market portfolio.
TWR
A performance measure that neutralizes the distorting effect of investor cash flows, enabling fair comparison of portfolio managers.
Top-Down Analysis
An investment research approach that begins with broad macroeconomic conditions, then narrows to sectors, and finally selects individual securities.
Value Investing
An investment strategy that involves buying securities trading below their estimated intrinsic value.