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Financial Dictionary
If anything is unclear, look here. Terms are listed alphabetically.
A - L
Promotion
Ownership share in the company. When you buy a share, you become a partial owner of the firm.
Allocation (Asset Allocation)
Allocation of your portfolio across various asset classes (stocks, bonds, gold, etc.). For example, 70% stocks, 20% bonds, 10% gold.
Arbitration
Buying the same asset in one location and selling it in another where it is more expensive. Profit from the price difference.
Bear Market (Medvěí Trh)
The period when stock prices fall. The opposite is a Bull Market (a rising market).
Blockchain
The technology powering cryptographic assets. A chain of information blocks that cannot be altered.
Bond (Debt Security)
A loan to the state or a company with a fixed return (coupon) and maturity date.
Broker
A broker that enables you to buy or sell on the stock exchange. For example, Interactive Brokers, ČSOB, Patria.
Bull Market
A period when stock prices are rising and optimism is high. The opposite is a Bear Market.
Broker Fee
A fee charged by your broker for buying or selling. Typically 0.1-1%.
Byrža (Exchange)
A place where shares, bonds and other securities are traded. In the Czech Republic this is the Prague Stock Exchange.
Capitalisation (Market Cap)
The company's total market value. Calculated as: share price × number of shares in circulation.
Kupon (Coupon)
The interest paid by the bond. For example, a bond with a 3% coupon will pay you 3% annually of its nominal value.
Liquidity
How easily you can buy or sell an asset. Shares are liquid (quick sale); real estate is not (slow sale).
Limit Order
Order to buy/sell only at a specified price or better. E.g., "buy share for max 500 Kč".
M - Z
Broker
See "Broker
Margin
Borrowing money from a broker to buy more shares than you can afford. A risky strategy.
Slow Death / Pump & Dump
Manipulating cryptocurrency or stock prices: first someone "pumps" it (raises the price), then sells it ("dumps") and leaves others with losses.
Nominal Value
The original value at which you purchase a bond. For example, a nominal amount of 10 000 Kč with a 2% coupon.
Portfolio
Collection of all your investments. Your portfolio may include: stocks, bonds, gold, crypto, real estate.
P/E Ratio (Price/Earnings)
Price-to-earnings ratio of a share. Lower P/E = cheaper share (relative). Higher P/E = more expensive share.
Contribution (Deposit)
Money that you deposit into your investment account to be able to buy stocks/bonds.
Rebalancing
Restoring your portfolio to its original allocation. For example, if your target is 70/30 (stocks/bonds), but due to stock growth you now have 80/20, you sell stocks and buy bonds.
Risk
The possibility of losing money. Shares carry higher risk; bonds carry lower risk. Higher risk usually means higher potential returns.
Dispersion (Diversification)
Diversifying funds across multiple assets to reduce risk. Instead of going "all-in" on Bitcoin, you buy Bitcoin, Ethereum, stocks and gold.
Purity
The percentage of pure gold in a gold coin/bar. For example, a coin with a fineness of 999,9/1000 = 99,99% pure gold.
Speculation
Purchasing an asset with the aim of quickly buying or selling for a higher profit is speculation. You could lose more. The opposite is investing (long-term holding).
Spot Price (Spotová Cena)
Current market price of the commodity (gold, oil, etc.). The price at which it is currently trading.
Spread (Range)
Difference between purchase and sale price. For example, a broker buys gold for 50 000 Kč and sells it for 52 000 Kč. Spread = 2 000 Kč.
Stop-loss (stop-loss order)
A stop-loss order automatically sells when the price falls below a certain level. It protects you from large losses.
Swapy (Swaps)
Exchange of one financial instrument for another. For example, an interest rate swap, two parties exchange fixed versus variable interest rates.
Technical Analysis
Price analysis based on charts and patterns. It attempts to predict future movements. Many experts say it does not work.
Volatility
How much the asset price changes. Bitcoin = high volatility (can drop by 30% in a day). Bonds = low volatility.
Yield (Return, Rendita)
The percentage profit or loss he earned. For example, "my S&P 500 ETF had a return of 12% last year.
Yield with Compound Interest
When returns generate further returns. For example, 10 000 Kč at a 10% return equals 11 000 Kč. Next year, 11 000 × 10% = 12 100 Kč. The magic of wealth!
No Profit (Break-Even)
When the asset price returns to its original level. You have made no profit, but also suffered no loss.
Acronyms and Abbreviations
ČSOB
Československá obchodní banka: a Czech bank with an investment department
ČNB
The Czech National Bank: the central bank of the Czech Republic
DCA (Dollar Cost Averaging)
Investing the same amount of money at regular intervals (monthly, quarterly). Smooths out volatility.
ETF
Exchange-Traded Fund: a fund traded on an exchange. A basket of stocks/bonds that you buy as a single asset.
IBKR (Interactive Brokers)
American online broker, popular in the Czech Republic for lower fees
IPO (Initial Public Offering)
First public share offerings. When a company first goes on the stock exchange.
KYC (Know Your Customer)
Customer identity verification. Brokers and exchanges do this to comply with legal regulations.
SEPA
A single payment space for euro transactions: easy money transfers between banks in the EU
Sole trader
Self-employed individual: a natural person engaged in business activity
💡 Tip: If any term is missing here, let us knowThe glossary will be expanded!
