Passive Income Glossary
Clear, concise definitions for the most common terms in investing, online business, and financial independence.
Angel Investor
A high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company.
APR (Annual Percentage Rate)
The annual rate of interest charged to borrowers and paid to investors. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.
APY (Annual Percentage Yield)
The real rate of return earned on an investment, taking into account the effect of compounding interest.
Arbitrage
The simultaneous purchase and sale of the same asset in different markets to profit from tiny differences in the asset's listed price.
Asset Allocation
An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon.
Bear Market
A market condition in which the prices of securities are falling or are expected to fall. It is typically characterized by a 20% drop from recent highs.
Bootstrapping
Starting and growing a business with little to no outside capital, relying instead on personal savings and initial revenue.
Bull Market
A market condition in which prices are rising or are expected to rise. It generally describes a period of optimism and investor confidence.
Capital Gains
The profit earned from the sale of an asset, such as a stock, bond, or real estate, that has increased in value over the purchase price.
Cash Flow
The net amount of cash and cash-equivalents being transferred into and out of a business. Positive cash flow indicates that a company's liquid assets are increasing.
Compound Interest
Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.
CPA (Cost Per Acquisition)
A marketing metric that measures the total cost to acquire one paying customer on a campaign or channel level.
Cryptocurrency
A digital or virtual currency that is secured by cryptography, making it nearly impossible to counterfeit or double-spend.
DCA (Dollar Cost Averaging)
An investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility.
Dividend
A distribution of a portion of a company's earnings, decided by the board of directors, paid to a class of its shareholders.
Dividend Yield
A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
DRIP (Dividend Reinvestment Plan)
A program that allows investors to reinvest their cash dividends into additional shares or fractional shares of the underlying stock on the dividend payment date.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's overall financial performance.
Equity
Ownership of assets that may have debts or other liabilities attached to them. In a business context, it represents the value of the shares issued by a company.
FIRE (Financial Independence, Retire Early)
A lifestyle movement whose goal is financial independence and retiring much earlier than the standard retirement age.
Growth Stock
A share in a company that is anticipated to grow at a rate significantly above the average growth for the market.
HYSA (High-Yield Savings Account)
A type of savings account that typically pays a much higher interest rate than a standard savings account.
Index Fund
A type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the S&P 500.
KPI (Key Performance Indicator)
A quantifiable measure used to evaluate the success of an organization, employee, etc. in meeting objectives for performance.
Leverage
The use of borrowed capital (debt) to increase the potential return of an investment.
Liquidity
The availability of liquid assets to a market or company. It refers to how quickly an asset can be converted into cash without affecting its market price.
LTV (Lifetime Value)
A metric that estimates the total revenue a business can reasonably expect from a single customer account throughout the business relationship.
Passive Income
Earnings derived from a rental property, limited partnership, or other enterprise in which a person is not materially involved.
Portfolio
A grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts.
REIT (Real Estate Investment Trust)
A company that owns, operates, or finances income-generating real estate. Modeled after mutual funds, REITs pool the capital of numerous investors.
ROI (Return on Investment)
A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.
SaaS (Software as a Service)
A software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted.
Side Hustle
Any type of employment undertaken in addition to one's full-time job. It is often a way to pursue a passion or increase income.
Solopreneur
A person who sets up and runs their business alone, without any partners or employees.
Venture Capital
A form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.
Yield Farming
The practice of staking or lending crypto assets in order to generate high returns or rewards in the form of additional cryptocurrency.
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