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 convertible bond is a corporate bond that can be converted into a specified number of shares of the issuing company’s common stock under terms established when the bond is issued. Convertible bonds combine characteristics of debt and equity. Like traditional bonds, they generally pay interest and have a maturity date. But they also give
A callable bond is a bond that gives the issuer the right to redeem, or “call,” the bond before its scheduled maturity date according to terms specified when the bond is issued. Companies often include call provisions so they can refinance debt if interest rates fall. For investors, this creates call risk because a bond
Convexity is a bond risk measure that describes the curvature in the relationship between a bond’s price and its yield. Duration provides a first-order estimate of how much a bond’s price may change when yields move. Convexity improves that estimate by accounting for the fact that bond prices do not move in a perfectly straight
Modified duration is a bond risk measure that estimates how much a bond’s price will change, in percentage terms, for a small change in its yield. It is one of the most practical measures of interest-rate risk in fixed-income investing. For example, a bond with a modified duration of 6 would be expected to fall
Bond duration is a measure of how sensitive a bond’s price is to changes in interest rates. It also reflects the weighted average timing of the bond’s expected cash flows. In practical investing, duration is commonly used to estimate how much a bond’s price may rise or fall when market yields change. A bond with
Current yield is a bond’s annual coupon income divided by its current market price. It measures the income an investor receives from a bond relative to the price paid today. Unlike the coupon rate, which is based on face value, current yield changes when the bond’s market price changes. In fixed-income investing, current yield provides
Yield to maturity (YTM) is the estimated annualized return an investor can earn by buying a bond at its current market price and holding it until maturity, assuming the issuer makes all scheduled coupon and principal payments and the bond is not called or otherwise redeemed early. In bond investing, yield to maturity is one
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Face value is the stated amount assigned to a security by its issuer. For bonds, face value is the principal amount the issuer generally agrees to repay at maturity and the amount used to calculate coupon payments. In bond investing, face value and par value usually mean the same thing. A bond may have a
Par value is the stated or face value assigned to a security by its issuer. For bonds, par value is the principal amount the issuer generally promises to repay at maturity and the amount used to calculate coupon payments. In bond investing, par value is commonly called face value. A bond may have a par
The coupon rate is the annual interest rate a bond pays based on its face value, also called par value. For most traditional fixed-rate bonds, the coupon rate is established when the bond is issued and remains unchanged until maturity. The bond’s market price and yield can change, but the contractual coupon rate usually stays
