Financial Glossary
Master financial terminology and build your confidence with clear, simple explanations
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Basics
Asset
Anything of value that you own. Includes cash, bank accounts, investments, property, and other possessions that have monetary value.
Expenses
Money you spend or owe. Includes bills, subscriptions, debt payments, and other financial outflows.
Income
Money you receive from work, investments, or other sources. Includes salary, dividends, interest, and other earnings.
Investing
Putting money into assets with the expectation of generating income or profit. Includes stocks, bonds, real estate, and other investments.
Liability
Money you owe to others. Includes loans, credit card debt, mortgages, and other financial obligations.
Net Worth
Your total assets minus your total liabilities. Represents your overall financial position at a specific point in time.
Pension
Retirement savings plan that provides income after you stop working. Can be workplace, personal, or government-sponsored.
Savings Account
Bank account designed for saving money with interest. Usually used for emergency funds or short-term goals.
Planning
Budget
A plan for how you'll spend and save your money. Helps you allocate resources toward your goals and track progress.
Cash Flow
Money moving in and out of your accounts. Positive cash flow means more money coming in than going out.
Monte Carlo Simulation
Mathematical technique using random sampling to model probability of different outcomes. Helps assess investment risk and potential returns.
Inflation
Rate at which prices increase over time. Reduces purchasing power of your money if returns don't keep pace.
Forecast
Prediction of future financial outcomes based on current data and assumptions. Helps with planning and decision-making.
Emergency Fund
Money set aside for unexpected expenses. Typically 3-6 months of living expenses, easily accessible.
Investing
Alternative Investments
Investments outside traditional stocks and bonds. Includes real estate, commodities, private equity, and hedge funds.
Asset Allocation
How you distribute investments across different asset classes (stocks, bonds, property, etc.) based on goals and risk tolerance.
Bonds
Loans made to governments or companies that pay regular interest. Generally considered lower risk than stocks.
Capital Gains
Profit from selling investments for more than you paid. Tax may be due on the difference.
Compound Interest
Interest earned on both your original investment AND accumulated interest. The snowball effect that helps your money grow exponentially over time.
Dividend
Portion of company profits paid to shareholders. Provides regular income from stock investments.
Diversification
Spreading investments across different assets to reduce risk. Don't put all your eggs in one basket.
ETF (Exchange-Traded Fund)
A basket of securities that tracks an index. Offers instant diversification and typically has low management fees.
Global Funds
Investment funds that invest in companies and markets worldwide. Provide international diversification and exposure to global economies.
Equities
Shares of ownership in companies. Also known as stocks or shares, representing partial ownership of a business.
Rebalancing
Adjusting your portfolio back to target allocation. Maintains desired risk level as some investments grow faster than others.
Risk Tolerance
How much risk you're comfortable taking with investments. Influences your investment strategy and asset allocation.
Retirement
Drawdown
Reduction in investment value during retirement. Refers to spending down savings while market conditions are unfavorable.
Withdrawal Rate
Percentage of investment portfolio withdrawn annually. Important for retirement planning and sustainable income strategies.
FIRE (Financial Independence, Retire Early)
Reaching financial independence where investment income covers living expenses, giving you freedom to retire early or choose work you love.
4% Rule
Safe withdrawal rate in retirement. Suggests you can withdraw 4% of your portfolio annually without depleting principal.
UK Specific
ISA (Individual Savings Account)
UK tax-free savings account. Allows you to save or invest up to £20,000 per year without paying tax on returns.
Gilts
UK government bonds issued by HM Treasury. Considered very safe investments backed by the UK government.
SIPP (Self-Invested Personal Pension)
UK pension where you choose investments. Offers tax relief on contributions and more control than traditional pensions.
GIA (General Investment Account)
A standard investment account with no tax wrapper. No limit on how much you can invest, but unlike an ISA you may pay tax on dividends and capital gains.
LISA (Lifetime ISA)
An ISA for your first home or retirement. Save up to £4,000 per year and the government adds a 25% bonus. Withdrawing for anything else incurs a penalty.
IFISA (Innovative Finance ISA)
An ISA for peer-to-peer lending investments. Returns are tax-free, but the underlying loans are higher risk and not covered by FSCS protection.
VCT / SEIS / EIS
Government schemes offering generous income tax relief for investing in early-stage UK companies (Venture Capital Trusts, Seed and Enterprise Investment Schemes). High risk with long lock-in periods, generally for experienced investors.
Put the terminology to work
ISAs, SIPPs, drawdown, safe withdrawal rate: these only matter in the context of your own money. Delphina puts them together in one place so you can see your net worth, your forecast, and where you actually stand.
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