This dictionary aims to provide clear and simple definitions of the most relevant terms in the field of personal finance, both traditional and related to cryptocurrencies. Knowing these concepts will allow you to make more informed decisions and manage your money effectively.
A
Actions
These are shares of a publicly traded company's capital. By buying shares, you become a shareholder and participate in its profits (dividends) and also assume the risk of its losses.
Assets
An asset is anything you own that has economic value, whether tangible (a house, a car) or intangible (stocks, cryptocurrencies). Assets can generate income or appreciate over time.
Saving
Savings is the part of your income that you don't spend and decide to set aside for the future. It is essential to achieve financial goals such as buying a house or preparing for retirement. To achieve this, it is advisable to establish a budget that helps you identify how much you can save monthly.
Altcoin
An altcoin, or “alternative coin,” is any cryptocurrency that is not Bitcoin. There are thousands of altcoins, each with different characteristics and purposes, and they can be an interesting option to diversify your cryptocurrency investments.
Bullish
A bull market is a prolonged period of growth in asset prices, associated with high optimism and market confidence. Recognizing a bull market can offer opportunities to invest and benefit from the positive trend.
Leverage
It involves using debt (loans) to invest and increase the potential for profit. However, it also multiplies the risk of loss.
B
bag holder
The term “bagholder” refers to an investor who holds assets that have lost a lot of value and are therefore below the price they paid for them. These investors usually hold on to their assets in the hope that their value will increase again.
Bass guitarist
A bear market is a period in which asset prices fall steadily. During such a market, investor confidence is often low, which can lead to increased asset sales.
C
Market capitalization
Market capitalization is the total value of all circulating coins or tokens of a cryptocurrency. This term is important for assessing a cryptocurrency's position in the market compared to others.
Commissions
Fees charged by financial institutions for their services, such as transfers, stock trading or investment fund management.
Correction
A correction is a pullback in the price of an asset, generally defined as a drop of 10% or more from its recent high. These corrections are common and can present opportunities to buy assets at lower prices.
Crowdfunding
Crowdfunding through online platforms. It allows entrepreneurs or projects to obtain funds from multiple people.
Crypto Crash
A crypto crash is a sudden, sharp drop in asset prices, typically by 10% or more in a single day. Crypto crashes are often associated with high market uncertainty and fear.
Certificate
D
Deficit
A deficit occurs when your expenses exceed your income, which can lead to debt accumulation. To avoid a deficit, it is crucial to keep track of your expenses and adjust your budget.
Uncorrelation between Investment Assets
Decorrelation is the absence of correlation between two or more assets, given the same financial situation. As investors, we must make use of the decorrelation between our investment assets in order to reduce risk exposure.
Diversification
Diversification is an investment strategy that involves spreading your investments across different types of assets to reduce risk. By diversifying, if one asset does not perform well, others can compensate for that loss.
E
Exchange Traded Fund (ETF)
ETFs are investment funds that are traded on the stock exchange like stocks. These funds usually replicate an index and allow investors to diversify their portfolio without having to manage each asset individually.
F
FOMO (Fear of Missing Out)
FOMO is the anxiety investors feel about not participating in an opportunity that seems promising. This can lead to impulsive decisions, such as buying assets at high prices without proper research.
FUD (Fear, Uncertainty, and Doubt)
FUD is formed from the English words “fear, uncertainty and doubt”. FUD is often used to describe a negative sentiment in the market.
Investment fund
It is a vehicle that pools the money of several investors to invest in a variety of assets. This option is ideal for those who want to diversify their investments without having to manage each asset individually.
G
Active Management
Active management is an investment approach in which fund managers try to outperform the market. This is the case with actively managed funds, where the manager decides where and when to invest. Here the issue is the manager's choice.
Passive Management
Passive management is an investment approach in which funds are managed to replicate the performance of a benchmark index. This is the objective of index mutual funds.
Risk management
Risk management is the process of identifying and minimizing the risks associated with your investments. This includes diversifying your assets and setting loss limits.
H
Mortgage
A mortgage is a loan used to purchase a home, with the property serving as collateral. This type of loan is repaid over a set period of time, usually between 20 and 30 years.
I
Investment
Investing is the act of placing money into an asset with the goal of earning a return or profit in the future. Every type of investment carries risk, so it's important to do your research and understand what you're investing in.
Compound interest
Compound interest is the interest calculated not only on the initial capital of an investment, but also on the interest accumulated in previous periods. This phenomenon allows your money to grow exponentially over time.
L
Settlement
Liquidation occurs when a company decides to cease operations and sells its assets to pay lenders and creditors. Investors may also liquidate their holdings to raise cash, exit a weak position, or for other reasons.
management
Liquidity is the ease with which a cryptocurrency can be exchanged for another digital asset or fiat currency. Assets with good liquidity have a high volume of sellers and buyers.
Margin Call
It occurs when the value of the account owner's portfolio falls below the limit required by the broker. This would force the account owner to add more money to the account, either by depositing or selling assets.
M
Bull Market
A bull market is a prolonged period of growth in asset prices. During this time, investor confidence is usually high, which can lead to more buying and further price increases.
Bear Market
A bear market is a period when asset prices fall. This type of market can be discouraging, but it can also offer opportunities to buy assets at lower prices.
P
Budget
A budget is a plan that helps you manage your income and expenses. Setting a budget allows you to identify how much money comes in and goes out each month, which is essential to keeping your finances under control.
plusvalía
Capital gains are the profits obtained when an asset is sold for a higher price than what you paid for it. This difference is considered a profit and is a key concept in investing.
R
Rental income
Return on investment is the ratio of the profit obtained from an investment to the capital invested. It is usually expressed as a percentage and helps you evaluate the effectiveness of your investments.
Risk
Risk is the possibility of losing money on an investment. Understanding the risks associated with your investments is essential to making informed decisions.
S
Sell-off
A sell-off is a massive sale of assets that causes a rapid fall in prices. This can occur due to bad economic news or changes in policy.
Volatility
Volatility is a measure of how much the price of an asset fluctuates over a given period. A highly volatile asset experiences significant and sudden price changes.
Z
Financial Comfort Zone
The financial comfort zone is the state in which you feel secure and comfortable with your finances. However, staying in this zone can limit your financial growth and investment opportunities.
Author
