Investing Glossary
Every key term used on InvestWealth.com, explained in one or two sentences. Tip: anywhere on the site, hover over (or tap) a dotted word to see its meaning.
Backtest
Testing a rule-based strategy on historical data to see how it would have performed, including estimated trading costs.
Read more →Bitcoin (BTC)
The first and largest crypto asset. Fixed supply of 21 million coins; very volatile.
Market page →Buy & Hold
Buying an asset and simply holding it through all ups and downs, never selling. The benchmark every strategy must beat.
Read more →CAGR
Compound Annual Growth Rate — the average yearly return, including compounding. 10% CAGR doubles money in ~7 years.
Read more →Calmar ratio
CAGR divided by the worst drawdown. Higher is better.
Correlation
How much two markets move together, from −1 to +1. +1 = always the same direction, 0 = no relationship, −1 = opposite.
Read more →Crude Oil (DBO)
The US benchmark oil price (WTI), driven by global growth, OPEC supply decisions and geopolitics.
Market page →Crypto block
A fixed share reserved for BTC, ETH and SOL (equal split). Each coin is held only while its trend is up.
Diversification
Spreading money across different assets so one loss does not sink the whole portfolio.
Read more →Drawdown
How far an investment is below its previous high. Drawdowns are what make most investors panic-sell.
Read more →ETF
Exchange-Traded Fund — a basket of assets you can buy like a single share, e.g. one ETF holding all 500 S&P companies.
Read more →Gold (GLD)
A precious metal held as a store of value. Often rises when trust in currencies or central banks falls. GLD is the largest gold ETF.
Market page →Inflation
The rate at which money loses purchasing power. Cash under the mattress loses value every year.
Read more →Invested now
Share of the portfolio currently in markets; the rest is in T-bills.
Liquidity
How easily something can be bought or sold without moving the price. Also: how much money is flowing through the financial system.
Read more →Macro
The big-picture economy: interest rates, inflation, growth, money supply and central-bank policy — the tide that lifts or sinks all boats.
Read more →Max drawdown
The worst peak-to-bottom loss over the period. −50% means at some point half of the money was gone.
Read more →Momentum
The tendency of assets that have risen to keep rising for a while (and fallers to keep falling). One of the best-documented effects in finance.
Read more →Nasdaq-100 (QQQ)
The 100 largest non-financial companies on the Nasdaq exchange — heavy in technology (Apple, Microsoft, Nvidia…).
Market page →Out-of-sample
The most recent years, reported separately: does the construction still work after it was designed?
Rebalancing
Periodically bringing a portfolio back to its target weights — selling some winners, adding to laggards.
Read more →Risk-on / Risk-off
Risk-on: investors buy growth assets (equities, crypto). Risk-off: they flee to safety (cash, bonds, gold).
Read more →S&P 500 (SPY)
The 500 largest US companies in one index. SPY is the most traded fund that tracks it — the default benchmark for "the stock market".
Market page →Sharpe ratio
Return per unit of risk (volatility). Higher is better. Above 1.0 is considered very good over long periods.
Read more →Slot rule
What happens to a market's share when its trend turns down: fixed = parked in T-bills; rotation = moves to markets still trending; mixed = crypto parked, the rest rotates.
Stock/Bond mix at the same risk
A constant SPY / TLT / T-bill mix scaled to the portfolio's volatility — the fair benchmark at the same risk.
Strategy portfolio
Several single-market strategies combined into one allocation, rebalanced monthly.
Trading cost
Estimated yearly cost of the rebalancing trades. Already deducted from all returns. Taxes not included.
Trend
The persistent direction of a price over months. Uptrend = higher highs and higher lows. Trends tend to persist longer than most people expect.
Read more →Turnover
Share of the portfolio traded per year (average of buys and sells). 100% = replaced once a year.
Underwater period
Longest time spent below a previous high.
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