Short, plain definitions of the words that come up most in our articles. Each article links here the first time it uses one of these terms.
- Inflation
- The rate at which prices rise over time. If inflation is 3%, something that cost 100 a year ago costs about 103 today, so the same money buys a little less.
- Consumer Price Index (CPI)
- The US government’s main inflation gauge. It tracks the prices of a fixed basket of goods and services that households buy and is published every month by the Bureau of Labor Statistics.
- Core CPI
- CPI without food and energy, whose prices jump around a lot. Central banks watch it to see the underlying trend of inflation.
- Producer Price Index (PPI)
- Prices that businesses receive for what they sell. It can hint at where consumer prices are heading.
- Federal funds rate
- The overnight interest rate at which US banks lend to each other. The Federal Reserve sets a target range for it, and it drives most other interest rates.
- FOMC
- The Federal Open Market Committee, the Federal Reserve group that meets eight times a year to set the federal funds target range.
- Interest rate
- The price of borrowing money, shown as a yearly percentage of the amount borrowed. Savers earn it; borrowers pay it.
- Bond yield
- The yearly return a bond pays if you buy it at today’s price and hold it. When bond prices fall, yields rise, and the other way round.
- Treasury
- A bond issued by the US government. The 10-year Treasury yield is a benchmark for mortgages and many other loans.
- Recession
- A broad, lasting fall in economic activity: lower output, jobs and spending. A common rule of thumb is two quarters in a row of shrinking GDP.
- GDP
- Gross domestic product: the total value of goods and services an economy produces in a period. Its growth rate is the headline measure of how the economy is doing.
- Unemployment rate
- The share of people in the labor force who want a job and do not have one.
- Nonfarm payrolls
- The monthly count of US jobs added or lost outside farming, the headline number of the jobs report.
- ETF
- Exchange-traded fund: a fund that holds many assets (for example all S&P 500 stocks) and trades on an exchange like a single share.
- Index fund
- A fund that copies a market index instead of picking stocks, usually at a low cost.
- Dividend
- A share of company profits paid to shareholders, usually in cash, often every quarter.
- Dividend yield
- Yearly dividends per share divided by the share price. A 100 share paying 3 a year yields 3%.
- Expense ratio
- The yearly fee a fund charges, as a percentage of what you hold in it. 0.10% means 1 per 1,000 invested each year.
- Compound interest
- Earning returns on your earlier returns, not only on what you put in. Over long periods it makes savings grow faster each year.
- Dollar-cost averaging
- Investing the same amount at regular intervals, whatever the price, instead of all at once.
- Diversification
- Spreading money across many investments so that one bad result does not sink the whole portfolio.
- Bull market
- A long period of rising prices, often described as a rise of 20% or more from a recent low.
- Bear market
- A long period of falling prices, often described as a fall of 20% or more from a recent high.
- Market capitalization
- The total value of a company’s shares (share price x number of shares) or of all coins of a cryptocurrency.
- Bitcoin
- The first and largest cryptocurrency, a digital money with a fixed maximum supply of 21 million coins, run by a public network instead of a bank.
- Stablecoin
- A cryptocurrency designed to keep a steady price, usually one US dollar, backed by cash, bonds or other assets.
- Blockchain
- A shared public record of transactions kept by many computers at once, so no single party can change it alone.
- Staking
- Locking up coins to help run a proof-of-stake blockchain in return for rewards, with the risk of price falls and lock-up periods.
- Volatility
- How much and how fast a price moves up and down. Higher volatility means bigger swings and more risk.
- Emergency fund
- Cash kept aside for surprises such as job loss or repairs, often three to six months of essential spending.