Arithmetic mean

‘Arithmetic mean’ is a fancy way of saying ‘mean’ or ‘average.’

To find the arithmetic mean, you add together a set of numbers and then divide your answer by the amount of numbers you had in that original set.

This may sound wordy - especially for math-o-phobes - but it’s really simple.

Take 1,2,3,4,5 as a set of numbers.

1+2+3+4+5 =15

In our original set, there were 5 numbers. So to get the average we just do….

15 ÷ 5 = 3

Simples.

‍
#
a
b
c
d
e
f
g
h
i
j
k
l
m
n
o
p
q
r
s
t
u
v
w
x
y
z

#

52-week high/low

The highest, or lowest, price a share has traded at in a passing year.

See complete list of # terms

A

Account Balance

The amount of money a user has stored in a financial repository.

Accounting Standards

The rules a company follows when preparing financial statements.

After-Hours Trading

Trading outside of a stock exchange's opening hours.

Alpha

The percentage by which an investor outperforms a relevant benchmark.

American Depository Receipt (ADRs)

Tradeable assets that let Americans invest in overseas stocks using US laws and dollars.

Annualised Rate of Return

The average annual return an investor sees over a set period of time.

Arithmetic Mean

The sum of a set of numbers added together and then divided by the total amount of numbers in that set.

See complete list of A terms

B

Balance sheet

A summary of a company's finances, including its assets, liabilities and shareholder equity.

Bed & ISA

Two simultaneous buy and sell transactions used to move a portfolio into an ISA.

Beta

A number showing how volatile a stock or portfolio has been in comparison to the wider market.

Bond

A debt instrument that can be issued by companies or governments.

Bull Market

A period of optimism and belief that the stock market will increase in value. Usually characterised by a 20 per cent increase in the stock market's value.

See complete list of B terms

C

Capital

The money and assets that make up a person or organisation's wealth.

Collective Investment Schemes

Any fund where people pool their money together in order to invest in assets.

Compound Interest

A method of lending, in which interest payments are based on adding the amount owed to prior interest payments.

Costs and Charges

The money you pay when investing.

Custodian

A financial institution responsible for safeguarding assets, including stocks, bonds and cash.

See complete list of C terms

D

Depository

A financial institution used to store cash or other assets.

Diversification

An investment strategy in which money is put into a variety assets.

Dividend

A payment given by a company to shareholders.

See complete list of D terms

E

Earnings Per Share (EPS)

How much money a company makes relative to how many shares it has.

Equity

The amount of money a company would be left with by subtracting its liabilities from the value of its assets.

Equity ETF

An exchange-traded fund that is comprised of a set of stocks.

ESG Investing

An investment strategy that takes environmental, governance and social factors into consideration.

Exchange-Traded Fund (ETF)

A collection of investments, pooled into a single fund that can be bought and sold on a stock exchange.

See complete list of E terms

F

Fixed Income

An investment that provides a fixed rate of return, often over a specific set of time.

Fundamentals

The data or information that is likely to impact a company's stock price.

Free Trade

The other free trade. International trade in which countries allow goods to flow across their borders without imposing import or export taxes.

See complete list of F terms

G

Geometric Mean Return

A way of calculating compound returns on an investment or savings over a set period of time.

Global Investment Performance Standards (GIPS)

A set of standards which investors use to present their investment results.

Gross Margin

The difference between a company's revenue and the cost to produce its goods/services, divided by revenue.

See complete list of G terms

H

Hedge Fund

Investment funds that are often associated with riskier and shorter-term trading strategies.

Holding Period Return

The amount of money generated by an asset during the time that it was held by an investor..

Hypothesis Testing

A mathematical test used to determine whether a claim is true or false.

See complete list of H terms

I

Income statement

A summary of a company's income and expenses over a set period of time.

Individual Savings Account (ISA)

A tax efficient investment or savings account.

Inflation

The increase in the prices of goods and services over time, and the process by which money loses its value.

Interest Rate

The amount a lender charges for lending your money, or a borrower pays you for borrowing your money.

Internal Rate of Return (IRR)

A means of calculating the potential future return on an investment.

Investment Return

The amount of money made or lost from an investment. Usually expressed as a percentage.

Investment Trust

A company that pools money together from multiple investors and then invests it.

See complete list of I terms

J

Junk Bond

A form of debt investment that carries higher risk because of the likelihood that the issuer will default.

See complete list of J terms

K

Key Information Document (KID)

A document issued by an investment fund to help investors determine if it's the right fund for them.

Know Your Customer (KYC)

A legal requirement for financial firms to understand exactly who their customers are. Used to prevent money laundering and terrorist financing.

See complete list of K terms

L

Leverage

A method of trading using borrowed money that usually involves a very high level of risk.

Limit Order

An order given to a broker to buy or sell an asset at a specific price.

LSE

London Stock Exchange, which was founded in 1571 and now has a market cap of almost $5 trillion.

See complete list of D terms

M

Margin Call

Not the movie. A request from a broker to a client to deposit cash or assets in order to prevent losses.

Money laundering

A method of moving money obtained illicitly through the financial system so it can be used legally.

Money Weighted Rate of Return (MWRR)

A percentage value that tells you the return on your investments, taking into account cash flows in and out of your portfolio.

See complete list of M terms

N

NASDAQ

A US stock exchange specialising in the shares of technology companies.

Net Asset Value (NAV)

The value of a company's assets relative to the number of shares it has.

Net Income (NI)

The money a firm is left with from sales after subtracting taxes and different business costs.

NYSE

The world's largest stock exchange. Wall St HQ.

See complete list of N terms

O

OEIC

Unique to the UK, these funds pool together money to invest from multiple investors.

Oligopoly

A situation in which a market or industry is controlled by a small group of companies.

Over-The-Counter (OTC)

A security that is sold outside of an exchange.

See complete list of O terms

P

Packaged Retail and Insurance-based Investment Product (PRIIP)

An investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations.

Ponzi Scheme

A form of fraud designed to lure new investors, and pays the earlier backers by using the new investors' money.

Professional Client

An investor that is able to meet several regulatory criteria.

Profit and Loss Statement (P&L)

A statement that summarises firm's expenses, costs, and revenues incurred during a time period. AKA income statement.

See complete list of P terms

Q

Quantitative Easing (QE)

A monetary policy aimed at boosting the economy, in which central banks create new money and use it to buy government bonds.

Quick Ratio

A number that tells you how easily a company would be able to pay its short term liabilities using liquid assets. AKA 'acid test ratio'.

See complete list of Q terms

R

Rate of Return

Profit on an investment, expressed as a percentage of the investment.

Real Estate Investment Trust (REIT)

An investment trust specialised in investing in commercial property such as parking garages or GP offices.

See complete list of R terms

S

S&P 500

A stock index that tracks 500 of the largest publicly-listed companies in the US.

Securities

Bonds and stocks.

Special Purpose Acquisition Company (SPAC)

Publicly-traded investment vehicle whose goal is to acquire or merge with a company from the proceeds of its own IPO.

Spot Rate

The currency exchange rate a bank quotes, valid with immediate effect.

Stock Exchange

A physical/digital place where stockbrokers and traders can buy and sell securities.

Stock Market

A place where shares of publicly listed companies are traded.

See complete list of S terms

T

Technical Analysis

Examining price movements of shares and other assets, and trying to predict how they will move in the future.

Time Value of Money

The concept that money you have now is more valuable than the same sum in the future.

Time-Weighted Rate of Return (TWRR)

A return calculated over the time period invested, that excludes extraneous elements, such as deposits to and withdrawals from the investment accounted.

Total Return

The return that includes everything: interest, capital gains, dividends and distributions realised over a time period.

See complete list of T terms

U

Unicorn

A startup valued at over £1 billion. They are rare, hence the name.

United States Dollar (USD)

The famous greenback our friends in the US use as currency.

Unit Trusts

A collective investment scheme the investors pay money into in exchange for units. The money is invested in a diversified portfolio of assets.

See complete list of U terms

V

Value Investing

The art of buying shares which trade below their value, according to the analysis of the value investor.

Venture Capital Trust (VCT)

A listed company run by a fund manager, investing mainly in private companies.e.

Venture Capital

A type of financing that investors provide to startups, who sometimes announce getting said financing in TechCrunch, to big fanfare.

Volatility

A measure of how much the prices of an asset or index vary over time.

See complete list of V terms

W

W-8BEN Form

Non-US individuals and businesses may have to file this form for the Internal Revenue Service (IRS), the US tax authority.

Wall Street

A street in New York that became a figure of speech for the financial markets of the US.

Withholding Tax

A tax deduction made at the source of the payment.

See complete list of W terms

X

Xetra

A trading venue operated by the Frankfurt Stock Exchange.

See complete list of X terms

Y

Year to Date (YTD)

A period of time that starts with the first day of the current calendar year and ends with today.

Yield

Income from an investment as a percentage of its current price.

See complete list of Y terms

Z

Zero-Coupon Bond

A bond that pays no interest at all. Read on to see how that can make sense for an investor.

Zero-Sum Game

A situation in which one person's gain is another's loss.

See complete list of Z terms

Download the app and start your
investing journey now.

Freetrade does not provide investment advice and individual investors should make their own decisions or seek independent advice. The value of investments can go up as well as down and you may receive back less than your original investment. Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

Copyright © 2020 Freetrade, All rights reserved. The Apple logo is a trademark of Apple Inc. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.

Made with 🍩 in London.