Price-to-earnings (P/E)
What you pay for each unit of a company's profit. A high P/E isn't automatically 'expensive' — it means the market expects growth. The question is always whether that expectation is reasonable, not whether the number is big.
A finance wiki inside every answer.
Financial language is often needlessly opaque, and that opacity is sometimes the point. Here is every term you'll meet in a TRUE brief, explained the way a patient colleague would explain it.
For research and education. Not financial advice.
Valuation
What a company is worth — and why people argue
Free cash flow
The cash a business actually generates after paying to keep itself running and investing in its future. Harder to massage than earnings, which is precisely why serious analysts pay attention to it.
Market capitalisation
Share price multiplied by shares outstanding — what the market says the whole company is worth. Note that it says nothing about debt, which is why enterprise value exists.
Multiple expansion
When a share price rises because people are willing to pay more for the same earnings, rather than because earnings grew. It can reverse just as easily as it arrived.
Risk
The words that actually matter
Volatility
How much a price moves around, not which direction it moves. High volatility means a wider range of outcomes — including the good ones. It is a measure of uncertainty, not of danger, though the two often travel together.
Correlation
The degree to which two things move together. This is the term that quietly destroys portfolios: you can own twelve positions and, if they're all highly correlated, be holding roughly one bet.
Concentration
How much of your outcome depends on a small number of holdings. Almost everyone is more concentrated than they think, especially once fund overlap is counted.
Drawdown
The fall from a peak to a trough. Worth internalising: a 50% drawdown requires a 100% gain to recover. The maths of losses is unforgiving and deeply unintuitive.
Liquidity
How easily you can buy or sell without moving the price. Thin liquidity is why small assets can rise dramatically on modest buying — and fall the same way on modest selling.
Stop loss
A pre-set order to sell if a price falls to a chosen level, used to cap a loss. Worth understanding because you will see the term constantly. Note that a stop is not a guarantee — in a fast-moving or gapping market, the fill can be worse than the level set. The research tools on this site place no orders of any kind.
Macro
The weather every market moves in
CPI (inflation)
The change in the price of a basket of goods. Markets care less about the number itself than about whether it came in above or below what was already expected.
Real yields
Interest rates after subtracting inflation. This is the quiet driver behind a great deal of asset pricing — including, frequently, the gold price.
The dollar (DXY)
The dollar's strength against a basket of currencies. A stronger dollar tends to weigh on commodities and on the earnings of exporters.
Consensus / expectations
The single most misunderstood idea in markets. Prices already reflect what is widely expected. Assets move on the gap between expectation and reality — which is why good news can be followed by a falling price.
These definitions are educational. They describe what terms mean; they are not advice about what to do, and understanding a term is not the same as knowing how to use it. For decisions about your own money, speak to a qualified financial adviser.
See these terms in a real answer.
Every TRUE brief explains its own jargon as it goes.
For research and education. Not financial advice.