Glossary

Investing and crypto are full of jargon. Every term here is explained in plain language. Explanation only, never advice.

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Bear market

A longer period in which prices have fallen 20 percent or more from the top. The opposite of a bull market.

Blockchain

A shared ledger of transactions kept by many computers at once. Changing it afterwards is practically impossible.

Bond

A loan to a company or government. You receive interest and your money back at maturity, unless the issuer cannot pay.

Box 3

In the Netherlands, the tax on wealth from savings and investments. The rules are being changed. Check the tax authority for the current system.

Bull market

A period in which prices rise over a longer time and confidence is high.

Compound growth

Return on return. What you earn also earns something itself. Over long periods this makes a big difference.

Correction

A fall of about 10 percent or more from a peak. Happens regularly and is normal for markets.

Diversification

Spreading your money over many companies, countries and asset types. If one part disappoints it does not hit your whole wealth. It does not remove risk.

Dividend

A part of the profit a company pays to shareholders. A company is not obliged to pay it and can lower or cancel it.

Dollar cost averaging (DCA)

Investing a fixed amount every month regardless of price. You do not need to pick the right moment, but it does not guarantee a profit.

Earnings per share (EPS)

A company's profit divided by its number of shares. At quarterly results it is compared with what analysts expected.

Emergency fund

Savings for unexpected costs, often three to six months of fixed expenses. It is separate from what you invest, so you never have to sell at a bad moment.

ETF

An investment fund traded on the stock exchange that often tracks an index. One purchase puts you in many companies at once.

Free cash flow

The money left after a company has paid its costs and investments. Profit is an accounting figure, cash flow is real money.

Guidance

What a company itself says it expects for the coming period. Markets often react more to this than to last quarter's results.

Halving

About every four years the reward for new bitcoin is cut in half. As a result new supply arrives more slowly.

Index

A figure that summarises a group of stocks, for example the AEX with the 25 largest Dutch companies. It shows how that group does as a whole.

Inflation

The average rise of prices. At 2 percent inflation the same money buys about 2 percent less after a year.

Interest rate

The price of borrowing money. Central banks such as the ECB and the Fed set the base rate and so influence the mood of the market.

KYC

Know your customer. The identity check exchanges and banks must do before you can trade.

Leverage

Investing with borrowed money. Gains and losses get bigger, and you can lose more than you put in.

Limit order

An order to buy or sell only at a price you name yourself. It avoids ending up with a much worse price.

Liquidity

How quickly you can sell something without the price moving. A big listed stock is liquid, a house is not.

Market capitalisation

The share price times the number of shares. It is what the market currently thinks the whole company is worth.

MiCA

The European law for crypto providers. It sets requirements for companies offering crypto but does not make crypto itself safe or risk free.

Ongoing charges (TER)

The yearly percentage a fund charges for management. It seems small but over decades it eats a large part of the return.

Price earnings ratio (P/E)

The share price divided by earnings per share. A high P/E means the market pays a lot for each euro of profit, often because growth is expected.

Rebalancing

Bringing your allocation back to plan, for example after stocks rose far more than bonds.

Return

What an investment earns, as a percentage of what you put in. Price gains, dividends and costs all count.

Seed phrase

A series of twelve or twenty four words that can restore a wallet. Whoever has it has your money. Never share it and store it offline.

Share

A small piece of ownership in a company. If the company does well the value can rise and dividends may follow. If it does badly the value can fall.

Spread

The difference between the price at which you can buy and the price at which you can sell. A hidden cost, especially for small or thinly traded assets.

Stablecoin

A cryptocurrency pegged to for example the dollar. Its stability depends on the issuer and what it holds as backing.

Staking

Locking coins to help secure a network in return for a reward. There are risks, such as being locked in or a provider error.

Volatility

How strongly a price moves up and down. Crypto and small companies often move far more than broad index funds.

Wallet

A program or device with which you manage your crypto. In fact you keep the key, not the coins themselves.