Investing terms can often feel confusing, especially for beginners. This glossary is designed to give you clear, simple definitions of the most important concepts in fundamental investing so you can understand how markets work and make better financial decisions.
Fundamental investing focuses on analyzing businesses based on their financial performance, competitive advantage, and long-term value. To do that effectively, you need to understand the language investors use—from basic terms like assets and cash flow to more advanced concepts like return on invested capital (ROIC) and discounted cash flow (DCF).
In this investing glossary, each term is explained in plain language with a focus on real-world understanding—not technical jargon. Whenever possible, definitions are connected to broader investing concepts so you can see how each idea fits into the bigger picture.
You’ll learn key terms related to:
Financial statements and accounting concepts
Business analysis and valuation methods
Stock market fundamentals and investment strategies
Risk, return, and long-term decision-making
If you’re just getting started, this glossary is the perfect place to build your foundation. If you’re already learning, it will help reinforce and clarify the concepts that matter most.
Start with our complete guide: What Is Fundamental Investing
Then explore deeper topics in Investing Basics and Business Analysis
A mutual fund is a pooled investment fund that collects money from many investors and uses it to buy a portfolio of securities, such as stocks, bonds, or other assets. In fundamental investing, mutual funds matter because they give investors access to diversified portfolios managed according to a specific investment objective, strategy, or asset class.
An ETF, or exchange-traded fund, is an investment fund that holds a basket of assets and trades on a stock exchange like a stock. ETFs can hold stocks, bonds, commodities, sectors, indexes, or other investments. In fundamental investing, ETFs matter because they allow investors to gain diversified exposure to a market, industry, strategy, or asset
ETF (Exchange-Traded Fund) Read More »
EBIT stands for earnings before interest and taxes. In fundamental investing, EBIT is a profitability metric used to measure a company’s operating earnings before the effects of financing costs and income taxes. It helps investors evaluate how much profit a business generates from its operations before capital structure and tax differences. EBIT is often similar
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. In fundamental investing, EBITDA is a profitability metric used to estimate a company’s operating earnings before financing costs, income taxes, and certain non-cash accounting expenses. Investors often use EBITDA to compare companies with different debt levels, tax rates, depreciation policies, or acquisition histories. Why EBITDA
Net profit margin is a profitability metric that shows the percentage of revenue left as net income after all expenses have been deducted. In fundamental investing, net profit margin helps investors understand how much of a company’s revenue becomes final profit for shareholders after operating costs, interest, taxes, depreciation, amortization, and other expenses. Why Net
Operating margin is a profitability metric that shows the percentage of revenue left after subtracting cost of goods sold and operating expenses. In fundamental investing, operating margin helps investors understand how efficiently a company turns revenue into operating profit before interest, taxes, and non-operating items. It is an important measure of business efficiency, cost control,
Gross margin is a profitability metric that shows the percentage of revenue left after subtracting the direct costs of producing goods or delivering services. In fundamental investing, gross margin helps investors understand how efficiently a company turns revenue into gross profit before operating expenses, interest, taxes, and other costs. It is one of the first
PEG Ratio, or price/earnings-to-growth ratio, is a valuation metric that compares a company’s price-to-earnings ratio to its expected earnings growth rate. In fundamental investing, the PEG Ratio helps investors evaluate whether a stock’s price-to-earnings ratio (P/E Ratio) is reasonable relative to the company’s expected earnings growth. It is often used to analyze growing companies where
EV/Sales is a valuation multiple that compares a company’s enterprise value to its revenue. In fundamental investing, EV/Sales helps investors understand how much the market is paying for each dollar of company sales after accounting for debt and cash. It is often used to evaluate companies with limited earnings, negative earnings, temporarily depressed margins, or
EV/EBIT is a valuation multiple that compares a company’s enterprise value to its EBIT. In fundamental investing, EV/EBIT helps investors evaluate how expensive a business is relative to operating profit before interest and taxes. It is often used to compare companies with different capital structures, debt levels, tax rates, and depreciation policies. Why EV/EBIT Matters
