Financial Dictionary -

Financial and investing dictionary

Learn commonly used business, financial and investment terms, and their definitions. Most of the information is available elsewhere, use it as you see fit.


A shares

A class of shares with specific rights as set out in the articles of association of a company. Generally, A shares have increased voting rights or other advantages over other classes of shares, such as B shares.

Accredited investor

An accredited investor is an investor with special status under financial regulation laws. The definition and benefits of an accredited investor vary from country to country.

Alternative finance

Alternative finance refers to financial channels, processes, and instruments emerging outside the traditional financial system, such as regulated banks and capital markets.

Reward-based crowdfunding, equity crowdfunding, revenue-based financing, online lenders, peer-to-peer lending, and invoice trading are examples of alternative financing.


Amortization is debt payment over time, in regular payments of interest and principal.

Angel investors

Investors that provide early-stage businesses with investment and other support. Angel investors are generally wealthy individuals with a significant amount of entrepreneurial, industry or investment experience.

Angel network (or Angel syndicate)

A group of angel investors who pool money and other resources together to invest in early-stage businesses and provide support.

Articles of association

One of the constitutional documents of a company that sets out its management and administrative structure. The articles dictate the internal affairs of the company, such as director and shareholder rights, the issue and transfer of shares, and the organization of meetings.

Asset class

A class of economic property with similar characteristics. Listed shares, government bonds, and real estate are all asset classes.


B shares

A class of shares with specific rights as set out in the company’s articles of association. Compared to A shares, B shares generally have no voting rights or other benefits.

Bear Market

A bear market is when securities fall from their recent highs by more than 20%. Bear markets are generally associated with market or index declines. Individual securities can be in a bear market as well.

Bitcoin ()

Bitcoin is a cryptocurrency, an electronic cash form. The most important feature of Bitcoin is that it is decentralized. The bitcoin network is not controlled by any single institution. Transactions are verified by network nodes through cryptography and recorded in a publicly distributed ledger called a blockchain.

Bitcoin offers lower transaction fees than traditional online payment mechanisms. This attracts individuals and groups that are uncomfortable with the control that banks or government institutions have over their money.


A blockchain, originally a block chain, is a growing list of records called blocks that are linked using cryptography. Each block contains the previous block’s cryptographic hash, timestamp, and transaction data.

By design, a blockchain is resistant to data modification. It is an open, distributed ledger that can record transactions between two parties in a verifiable and permanent way. A blockchain is handled by a peer-to-peer network. Once recorded, it is not possible to modify the data in a block without altering all the blocks, which requires a network majority consensus.


A bond represents a loan to a borrower made by a lender and includes the loan details and its payments. A bond has an end date when the principal is due to be paid and usually includes variable or fixed interest payments.

Book value

The book value is an asset’s value according to its balance sheet account balance. The value is based on the original cost of the asset minus any depreciation, amortization or impairment.


A person or company who has received money from another party with the agreement that the money will be repaid. Most borrowers borrow at interest, meaning they pay the lender a percentage as compensation for borrowing. Most loans also have a maturity date by which time the borrower has to repay the loan.

Bridge financing

Bridge financing is a financing option used to take care of short-term financial needs until a long-term financing option can be arranged.


A list of expected revenue and expenses, often in a spreadsheet. A budget can cover entire finances or a specific project, like buying a house or a new car.

Download a template for a monthly budget here

Bull Market

A bull market is the condition of a financial market of a group of securities, where prices are rising or expected to rise. A bull market is most commonly used to refer to the stock market but applies to anything traded, such as bonds, real estate, currencies, and commodities. A generally accepted definition of a bull market is a 20% rise in prices, that follows a previous 20% decline and is followed by another 20% decline.

Buyback Guarantee

A Buyback Guarantee is a guarantee granted on a specific loan by the loan originator. If repayment is delayed for more than a specified number of days, the loan originator is obliged to buy back the loan.

Read about Buyback Guarantee and P2P lending and here


Compound annual growth rate (CAGR)

The compound annual growth rate is a term for the geometric progression ratio that provides a constant rate of return over the time period.

Convertible equity

An investment in equity in which money is invested in a company in exchange for later issued shares. The conversion is generally triggered by the company raising funds from other investors. In return for their early investment, the convertible equity investors get a discount on the prices of the shares issued to the other investors.

Candlestick Patterns

A candlestick pattern is a type of price chart used that shows the high, low, open and closing prices of a security over a specific period. The wide part of the candlestick tells investors whether the closing price was higher or lower than the opening price. Black or red if the stock closed lower and white or green if the stock closed higher.


A creditor can be a bank, supplier, or person providing a company with credit. In other words, a business owes its creditors money.


Financing projects or ventures by raising money from a large number of people, usually online. The three main types of crowdfunding are equity, debt and rewards/donations.


A cryptocurrency is a digital currency, an electronic cash form. It uses cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.



Money owed by one person/company to another. The borrower has to repay the money a later date, and generally also has to pay interest.


A debtor is an entity that owes another entity (creditor) a debt. The entity may be an individual, a firm, a government, a company, or another legal person. The counterpart is a creditor.


A default is a failure to fulfill a loan’s legal obligations or conditions. For example, when a home buyer fails to make a mortgage payment.


A decrease in the percentage of ownership of a share in a company triggered by the issue of new shares.


An investment strategy that involves mixing the amount, values and types of investments within a portfolio to spread risk and minimize losses.


The distribution of a portion of a company’s profits to investors.


A downtrend exists when an asset’s price moves lower over a period of tim. While the price occasionally moves higher or lower, downtrends are defined by lower peaks and lower troughs over time.



An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, like stocks. An ETF holds assets such as stocks, commodities or bonds and constructed to keep it close to its net asset value, although deviations may occur. Most ETFs track an index, such as a stock index or an index of bonds. ETFs can be attractive as an investment because of low cost, diversity, tax efficiency and features resembling stocks.


Shares or other securities that represent an ownership interest in a company. The term refers to the value of a group of assets after deducting the value of liabilities

Equity crowdfunding

A type of crowdfunding that enables investors to buy shares, or other equity interests, in a company.


An event where investors can cash in and sell their shares, such as an initial public offering (IPO) or trade sale.


Financial Conduct Authority (FCA)

The UK’s financial services regulatory body, earlier called the Financial Services Authority (FSA).

Financial Independence, Retire Early (FIRE)

The FIRE movement’s goal is financial independence and early retirement by maximizing their savings rate and finding ways to increase income and decrease expenses. The goal is to accumulate assets until the resulting passive income provides enough money in continuity for living expenses. The movement advocates the 4% rule as a guide, setting a goal of at least 25 times estimated annual living expenses. When achieving financial independence, paid work becomes optional, allowing retirement from work decades earlier than the standard retirement age.


Fintech, a ‘financial technology’ abbreviation, describes new tech that seeks to improve and automate the delivery and use of financial services. ​​​It helps companies, business owners and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms.

The term Fintech describes any technological innovation in, and automation of, the financial sector. Including advances in financial literacy, advice, education, lending and borrowing, retail banking, fundraising, money transfers/payments, investment management, streamlining of wealth management and development and use of crypto-currencies.


The float is the actual number of shares available for trading. This is calculated by subtracting closely held shares, owned by insiders, employees, the company’s Employee Stock Ownership Plan or other major long-term shareholders, from the total outstanding shares.

Fully diluted

All the shares of a company in issue, plus all shares which are the subject of options or other contractual rights to be issued in the future.


An investment opportunity that aims to raise money across multiple companies.



The stage a business is in when it has passed its seed or initial stage, has established proof of concept and is looking to grow.

Growth investing

Growth investing focuses on capital appreciation, by investing in companies with signs of above-average growth, even though the price appears expensive in metrics such as price/earnings or price/book ratios.



Market Index (economics)

A Market Index indicates the value of publicly owned companies and how they trade in the stock market during various periods of time. The value represents the sum of one share for each component company. The sum adjusts to generate a consistent value any time one of the component stocks has a stock split or dividend.

Index Fund

An index fund is a mutual fund with a portfolio designed to match or track components of a market index. An index fund can provide broad market exposure, low operating expenses and low portfolio turnover. These funds follow specific rules or standards (e.g. efficient tax management or reduction of tracking errors) that remain regardless of the state of the markets.

Initial Coin Offering (ICO)

An Initial Coin Offering is the rough equivalent of an IPO in the mainstream investment world for the cryptocurrency space. ICOs act as a fundraiser when a company aims to create a new coin, app, or service.

Initial Public Offering (IPO)

The first time a company’s shares are available for public purchase through a listing on a stock exchange. This process is also known as floating or going public.


An IOU (an abbreviation from “I owe you”) is usually an informal document acknowledging debt. An IOU differs from a promissory note in that an IOU is not a negotiable instrument and does not specify terms such as the time of repayment. Usually, IOUs specify the debtor, the amount owed, and sometimes the creditor.



Know Your Customer (KYC)

The regulatory process that financial services and businesses must perform to verify the identity of their customers, to help prevent against money laundering and other financial crimes.



A lender makes funds available to another with the expectation that the funds will be repaid. Repayment includes payment of any interest or fee. Repayment can occur in increments (as in monthly mortgage payments) or a one time payment.

Loan-to-value ratio (LTV)

The loan-to-value ratio (LTV) is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. For example, if you buy a home for €100,000 and make a down payment of €10,000, you will borrow €90,000, resulting in a 90% LTV ratio (90,000/100,000). The remaining 10% is the financial haircut of the lender, adding up to 100%, covered by the borrower’s equity. The higher the LTV ratio the loan has, the higher the risk for the lender.

Long (or Long Position)

A long (or long position) is buying a security such as a stock, commodity or currency with the expectation of a rise in value.

An investor who expects the price of an asset to fall will go “Long” on a put option. An investor who hopes to benefit from an upward price movement will be “Long” on a call option.


Margin Trading

Margin trading uses borrowed funds from a broker to trade a financial instrument. Since the use of financial leverage can potentially increase gains but also lead to devastating losses, leverage can be a double-edged sword and I would not recommend this.


A mortgage is a debt secured by specified real estate as collateral. The borrower must pay the debt with a predetermined set of payments. The borrower repays the loan, plus interest until it owns the property. If the borrower stops paying the mortgage, the lender may foreclose.

Mutual fund

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities.

Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The main advantages of mutual funds are that they provide economies of scale, a higher level of diversification, provide liquidity and managed by professional investors. On the negative side, investors must pay various fees and expenses.


Net Worth

Net worth is the amount by which assets exceed liabilities. It is a concept that applies as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; in reverse, net worth is reduced by annual operating losses or a decrease in asset values relative to liabilities.

Nominal Value

The nominal value,is the stated value of bonds and stocks and refers to the unadjusted rate or current price, regardless of inflation or other factors. This is opposed to real values, where adjustments are made for general price level changes over time.


Origination fee

An origination fee is a payment associated with setting up an account with a bank, broker or other company providing services handling the processing associated with taking out a loan. An origination fee is usually a set amount for any account.


An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset. This may be a specified price, before or on a specified date, depending on the form of the option.



See Peer to peer

Passive income

Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.

Peer to peer

Also known as P2P, is a transaction directly between two parties without intermediaries. Often used in conjunction with Peer to peer lending / Crowdlending where you want to symbolize that there are two people or companies borrowing money directly from each other.


A group of financial assets, such as shares, properties or bonds, held by one person or entity.

Price-to-earnings ratio (P/E)

The price-to-earnings ratio (P/E ratio or PER) is the ratio of the share price of a company to the earnings per share of the company. The ratio valuate companies and to determine whether they are overvalued or undervalued.

Price-to-book ratio (P/B ratio)

The price-to-book ratio compares the market price of a company to its book value. It’s also known as a market-to-book ratio.

The P/B ratio can be calculated in two ways, but the result should be the same. The market capitalization of the company is divided from its balance sheet by the total book value of the company. Or you divide the current share price of the company by the book value per share.


Principal is a term with several financial meanings. The most commonly used refers to the original sum of money borrowed from a loan or put into an investment. Principal can also refer to a bond’s face value.



Real Estate Investment Trust (REIT)

REITs enable individual investors to purchase shares in commercial real estate portfolios that receive income from a variety of properties. REITs pay at least 90% of their taxable income in the form of shareholder dividends each year.


The potential to lose something of value. The main risk to the investor with equity investment is to lose all the money invested.

Read about the risks involved with P2P Lending here


Robo-advisors are digital platforms that provide, with little to no human supervision, automated, algorithm-driven financial planning services. A robo-advisor typically collects information from clients about their financial situation and goals and uses the data to provide advice and/or invest client assets.


Shareholder agreement

An agreement between a company’s shareholders detailing certain rights and obligations of the shareholders.


An ownership interest in a company that entitles the shareholder to certain rights, such as a share of the company’s profits or dividend payments. Shares are also referred to as “stock”.

Secondary market

A market where investors purchase shares from other each other rather than the company that has issued the shares.


The initial stage of a business, where it seeks to create a minimum viable product, establishing proof of concept.

Short (or Short Position)

A short or a short position is when a trader first sells a security with the intention of repurchasing it or later covering it at a lower price.

Small and medium-sized enterprises (SME)

According to the EU, small and medium-sized enterprises (SMEs) are firms with fewer than 250 employees and an annual turnover not exceeding € 50 million.

Stock split

A stock split increases a company’s number of shares. The price adjusts so that the before and after market capitalization of the company remains the same and dilution does not occur. It includes options and warrants.


Term sheet

A non-binding agreement that addresses the basic terms and conditions under which an investment will be made in a business. A term sheet often serves as a template for developing more detailed legal investment documentation.

The Trinity study (the 4% rule)

The Trinity study (also called “the 4 percent rule”) is an informal name used by three financial professors at Trinity University to refer to an influential paper from 1998. It is one in a category of studies that attempts to determine “safe withdrawal rates” from retirement portfolios that contain stocks and therefore grow (or shrink) unevenly over time.

It states that a person has enough savings in assets if 4% of his or her assets are sufficient to cover a year’s expenses.



An uptrend describes a financial asset’s price movement when the overall direction is upward. In an uptrend, each successive peak and trough is higher than those found earlier in the trend.



The monetary worth of a business determined by considering qualitative and quantitative factors.

Value investing

Value investing involves buying securities appearing underpriced by some form of fundamental analysis.






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@Crowdinvestor. UX and graphics nerd, self-taught coder, certified geek.