Glossary
The words you hear on the news and in your banking app, in one or two plain sentences each.
- Asset
- Anything you own that has value and can be bought or sold: shares, bonds, property, cash, gold.
- Basis point
- One hundredth of a percentage point. A rate rise from 2.00% to 2.25% is 25 basis points.
- Bear market
- A long, broad fall in prices, often defined as a drop of 20% or more from a recent high. Read more →
- Bond
- A loan to a government or company that pays interest and is repaid on a set date. Bonds can be bought and sold before then. Read more →
- Broker
- A firm that buys and sells investments on your behalf on an exchange. In the EU, brokers must be authorised by a regulator. Read more →
- Bull market
- A long, broad rise in prices. Read more →
- Capital gain
- The profit when you sell something for more than you paid for it. A capital loss is the opposite.
- Central bank
- The institution that sets interest rates and looks after a currency. For the euro, the European Central Bank (ECB). Read more →
- CFD
- Contract for difference: a bet on a price moving, usually with borrowed money. Most retail CFD accounts lose money. Read more →
- Compound interest
- Growth on top of earlier growth: returns that stay invested start earning returns of their own. Read more →
- Coupon
- The interest a bond pays, usually once or twice a year.
- Deflation
- Prices falling across the economy, the opposite of inflation.
- Deposit facility rate
- The rate the ECB pays banks on money they leave with it overnight. Since 2024 it is the main rate the ECB steers with. Read more →
- Diversification
- Spreading money across many investments so that one going wrong hurts less. It does not remove the risk of the whole market falling. Read more →
- Dividend
- Part of a company's profit paid out to its shareholders. Read more →
- ETF
- Exchange-traded fund: a fund holding a basket of investments, often a whole index, that trades on an exchange like a single share. Read more →
- Euribor
- The rate at which euro-area banks lend to each other. Most variable-rate mortgages in Portugal follow it.
- Exchange rate
- The price of one currency in another. EUR/USD at 1.12 means one euro buys 1.12 US dollars. Read more →
- GDP
- Gross domestic product: the value of everything an economy produces in a period. 'Real' GDP takes inflation out. Read more →
- HICP
- Harmonised Index of Consumer Prices: the EU's common measure of inflation, calculated the same way in every member state. Read more →
- Index
- A single number that sums up how a group of shares or bonds is doing, such as the S&P 500 or the PSI. Read more →
- Inflation
- The yearly rise in the price of a typical basket of household spending. Read more →
- KID
- Key Information Document: the short leaflet every EU investment fund must publish, with its costs and a risk score from 1 to 7.
- Leverage
- Investing with borrowed money. It makes gains and losses bigger. Read more →
- Liquidity
- How quickly something can be sold without moving its price much. Cash is very liquid; a house is not.
- Market capitalisation
- A company's share price multiplied by its number of shares: what the stock market values the whole company at.
- Nominal vs real
- Nominal is the number as stated; real is what it's worth after inflation. A 2% pay rise with 3% inflation is a real pay cut.
- Portfolio
- Everything a person or fund has invested, taken together.
- Recession
- A broad, lasting fall in economic activity. A common rule of thumb is two quarters in a row of shrinking GDP. Read more →
- Return
- What an investment gains or loses over a period, including any income it pays, usually shown as a percentage.
- Risk
- In investing, mainly the chance that the value falls or swings a lot, and that you need the money at a bad moment. Read more →
- Spread
- The gap between the price buyers offer and sellers ask. Also the gap between two interest rates, such as Portugal's and Germany's bond yields.
- Stablecoin
- A cryptoasset designed to keep a steady value against a currency such as the euro or the dollar. Read more →
- TER
- Total expense ratio: a fund's yearly running cost as a percentage of what you hold in it. Read more →
- UCITS
- The EU rulebook for investment funds sold to the public, covering how they invest, spread risk and report.
- Volatility
- How much and how fast a price swings up and down. Read more →
- Yield
- The yearly income from an investment as a percentage of its price. For bonds, the return if bought today and held to the end. Read more →