Glossary
Terms, defined plainly
- Asset allocationPortfolio
- How a portfolio is split between asset classes such as stocks, bonds and cash.
- Lesson: Asset allocation: the biggest portfolio decision
- Asset classPortfolio
- A broad group of investments that behave in similar ways, such as stocks, bonds or cash equivalents.
- Lesson: Asset allocation: the biggest portfolio decision
- Blended benchmarkPortfolio
- A weighted mix of indexes that matches a portfolio's allocation, such as 70% stock index + 30% bond index.
- Lesson: Reviewing performance against the right benchmark
- CouponPortfolio
- The fixed interest a bond pays, stated as a percentage of its face value.
- Lesson: Bonds and interest-rate risk
- Credit riskPortfolio
- The risk that a bond issuer fails to pay interest or principal.
- Lesson: Bonds and interest-rate risk
- DurationPortfolio
- A bond's approximate price sensitivity to rates: price change ≈ −duration × yield change.
- Lesson: Bonds and interest-rate risk
- Initial marginFutures
- The deposit required to open a futures position — a performance bond, not a cost or a loss limit.
- Lesson: Margin is not risk
- Interest-rate riskPortfolio
- The risk that bond prices fall because interest rates rise.
- Lesson: Bonds and interest-rate risk