Investing glossary
The terms you'll run into when you start investing, explained in a sentence or two.
- Stock exchange
- The market where stocks and other securities are bought and sold (BMV, NYSE, Nasdaq).
- BMV
- The Mexican Stock Exchange.
- Bond
- A loan to a company or government that pays interest and returns your money on a date.
- Market capitalization
- What a company is worth on the exchange: share price times number of shares.
- Broker
- The institution where you open your account to buy stocks, ETFs and CETES.
- CETES
- Short-term loans to the Mexican government, with a return known from the start.
- Annual fee (expense ratio)
- The percentage a fund or ETF charges every year on your money.
- Diversification
- Spreading your money across many investments so a single one doesn't hurt you too much.
- Dividend
- The part of profits a company pays out to its shareholders.
- ETF
- A fund that trades like a stock and bundles many investments into a single purchase.
- Emergency fund
- Money set aside (3 to 6 months of expenses) in something safe you can withdraw quickly.
- Mutual fund
- Many people's money that a fund manager invests in stocks, bonds or both.
- Horizon
- How long you'll leave your money invested before you need it.
- Index
- A list of companies that measures a market, like the S&P 500 or Mexico's IPC.
- Inflation
- How much prices rise overall; it makes money buy less over time.
- Compound interest
- When your gains generate gains too and growth speeds up.
- Liquidity
- How fast you can turn an investment into cash without losing value.
- P/E (price/earnings)
- How many times its annual earnings you pay for a share; helps tell if it's expensive or cheap.
- Risk profile
- How big a drop you can handle given your horizon, experience and reactions.
- Rebalancing
- Bringing your portfolio back to the percentages you chose after the market moves them.
- Return
- What an investment gains (or loses), usually in % per year.
- SIC
- International Quotation System: lets you buy foreign stocks and ETFs from Mexico in pesos.
- Volatility
- How much an investment's price goes up and down.