- Portfolio
- All the investments you own, added up together. Your "team" of holdings.
- Time horizon
- How long until you need the money. A 4-year college goal has a short horizon; a 40-year retirement goal has a long one. Your horizon is the single biggest thing that should shape how you invest.
- Risk tolerance
- How much your investments can drop before you lose sleep and do something you'll regret. Conservative means you want small swings; aggressive means you can hold through big drops.
- Risk
- The chance that an investment loses value or doesn't do what you hoped. Higher potential reward almost always comes with higher risk.
- Diversification
- Spreading your money across many different investments so that if one sinks, it can't sink your whole plan. "Don't put all your eggs in one basket.".
- Asset allocation
- How you split your money between different types of investments — like stock funds, bonds, and cash. Your allocation should match your goal and horizon.
- Stock
- A share of ownership in one company. If the company does well, your share can gain value; if it struggles, your share can lose value.
- Bond
- A loan you make to a government or company that pays you interest. Bonds usually grow less than stocks but bounce around less too — they steady the ride.
- Index fund / ETF
- A single investment that owns a slice of hundreds of companies at once. Buying one gives you instant diversification, usually with low fees.
- Cash / money market
- Money kept safe and steady (it barely moves in value). Great for money you'll need soon; grows very little.
- Compound interest
- When your money earns money, and then that money earns money too. Over long horizons it snowballs — which is why starting early matters so much.
- Volatility
- How much an investment's price bounces up and down. High volatility means big swings; low volatility means a smoother ride.
- Risk-adjusted return
- Your return measured against how much risk you took to get it. A 10% gain from a safe, diversified plan is worth more, as a decision, than a 10% gain from a wild all-in bet. This is how smart investors judge results — not by raw return.
- Rebalancing
- Adjusting your portfolio back toward your target mix when one part grows too big. For example, if one stock balloons to 20% of your portfolio, you trim it back under your 10% cap.
- Glide path
- A plan to gradually shift your portfolio safer as your goal date gets closer (more bonds and cash, fewer stocks). Common for education and retirement goals.
- Churn (over-trading)
- Buying and selling too often, usually chasing short-term price moves. Churn racks up costs and is a sign of speculation, not investing. In this project, churn is penalized.
- Signal vs. noise
- A signal is a price move caused by real news about a company or the economy — worth paying attention to. Noise is random day-to-day wiggling that means nothing. Investors react to signal and ignore noise.
- Speculation
- Betting on short-term price moves based on a hunch or a hot tip, usually concentrated in one bet. Not the same as investing.
- Gambling
- Risking money on pure chance, where the odds are stacked against you over time. The opposite of a defensible, evidence-based plan.
- Investing
- Putting money into diversified assets for the long term, based on evidence about value, so the odds tilt in your favor over time. This is what this project trains.
- Thesis
- Your plan in a nutshell: your goal, your horizon, your risk level, and why your strategy fits them. The backbone of your Portfolio Defense Essay.
