The terms this site uses, defined once.

Asset class

A broad category of investments that behaves distinctly (equities, bonds, gold, commodities): the building blocks of a diversified, tactically allocated portfolio.

Backtest

Applying a set of rules to historical data to see how it would have behaved. Useful for understanding a strategy, never a forecast of the future.

Benchmark

A reference index against which a portfolio's return and risk are measured, the yardstick that says whether a result is good in context.

Correlation

How closely two assets move together, from +1 (in lockstep) to −1 (opposite). When it is low, it is what makes diversification work.

Diversification

Spreading capital across assets that behave differently, so weakness in one is offset by others. It reduces avoidable risk but does not remove market-wide risk.

Drawdown

The decline from an investment's most recent peak to its subsequent trough, in percent. It is a direct measure of pain endured, and of the gain needed to recover.

ETF (Exchange-Traded Fund)

A fund that trades on an exchange like a single share and usually tracks an index, giving low-cost, diversified exposure to a whole market.

Fund fees (TER)

The ongoing cost of holding a fund, quoted as a total expense ratio (TER). Small-looking annual fees compound into large sums over an investing lifetime.

Hedging

Taking an offsetting position to reduce a specific risk, trading away some potential upside in exchange for protection against a particular loss.

Liquidity

How easily an asset can be bought or sold at a fair price without moving the market. It is high for large ETFs and major indices, low for niche holdings.

Market regime

A persistent market environment (trending, calm, or turbulent) that a rules-based reading identifies from price behaviour, rather than a prediction of what comes next.

Mean reversion

The tendency of a stretched price or ratio to move back toward its historical average. It is the mirror image of momentum, and often at odds with it.

Momentum

The tendency of assets that have performed well (or poorly) recently to keep doing so for a time, a well-documented pattern used by trend and momentum strategies.

Rebalancing

Periodically realigning a portfolio back to its target weights after prices drift them apart: trimming what has grown, topping up what has lagged, on a fixed rule.

Sharpe ratio

A measure of return earned per unit of risk (volatility), a way to compare strategies on reward relative to the bumpiness of the ride.

Systematic investing

Investing by explicit, pre-defined rules rather than discretion or gut feel, so decisions are repeatable, testable, and free of in-the-moment emotion.

Tactical Asset Allocation (TAA)

Adjusting a portfolio's mix of broad asset classes over time in response to the market environment, instead of holding fixed weights regardless of conditions.

Total return

The full return of an investment including both price change and income (dividends or interest) reinvested. It is the honest measure of what an investor actually earned.

Trend following

A rules-based approach that raises exposure to assets in sustained uptrends and reduces it in downtrends, following the move rather than predicting the turn.

Volatility

How much an asset's price fluctuates over time. High volatility means larger swings. It measures turbulence, not direction, and it is not the same thing as risk.