Risk terms
Words for the things that can go wrong and the tools for limiting them. Position sizing, drawdown, liquidity, diversification. Most investors learn these after they need them, which is the expensive order.
Asset allocation
How you split your money between shares, funds, gold, deposits and cash.
Diversification
Spreading money across different investments so one bad result cannot ruin you.
Drawdown
How far an investment has fallen from its highest point.
Emergency fund
Three to six months of expenses kept in cash, not invested.
Hedging
Taking a position that reduces a risk you already carry.
Inflation
The rate at which money loses buying power over time.
Liquidity
How easily you can buy or sell without moving the price yourself.
Position sizing
Deciding how much to put into one investment.
Rebalancing
Returning your portfolio to its intended mix after prices have moved it.
Risk
The chance that an investment loses value, and how much it could lose.
Slippage
The gap between the price you expected and the price you actually got.
Stop loss
An instruction to sell automatically if the price falls to a level you chose.
Tax loss harvesting
Selling a losing investment on purpose to reduce the tax on your gains.
Trailing stop loss
A stop loss that moves up as the price rises, but never moves down.
Volatility
How sharply a price moves up and down.