A
Asset allocation
StrategyHow your portfolio is split between the different asset classes (shares, bonds, property and so on) in order to optimise the return-to-risk trade-off.
Example: A balanced allocation might be: 60% shares, 20% bonds, 15% property, 5% gold.
Assurance-vie
TaxationA French tax wrapper that lets you invest in fonds euros (capital-protected funds) and in unit-linked funds (riskier). It offers favourable taxation after 8 years and makes passing on wealth easier.
Example: By paying EUR 50,000 into an assurance-vie and waiting 8 years, you benefit from a EUR 4,600 tax-free allowance on your gains.
Assets under management
FundsThe total amount of assets run by a fund or an ETF. A large amount under management usually points to better liquidity.
Example: An ETF with EUR 5 billion under management will be more liquid than an ETF with EUR 50 million.
B
Bear Market
Stock marketA falling market, defined by a drop of more than 20% from the last peak. A period of widespread pessimism.
Example: In 2022 the S&P 500 entered a bear market after falling by more than 20%.
Bull Market
Stock marketA rising market where prices keep climbing. A period of optimism and investor confidence.
Example: From 2009 to 2020, US markets enjoyed one of the longest bull markets in history.
Blue Chip
Stock marketThe share of a large, established, stable and well-known company, usually a leader in its sector. Considered less risky.
Example: Apple, Microsoft, LVMH and Total are blue chips in their respective markets.
Bond
ProductsA debt security: you lend money to a government or a company, which pays you regular interest and repays you at maturity.
Example: A 10-year French government bond (OAT) can pay 2-3% a year with very low risk.
C
CAC 40
IndicesThe stock index made up of the 40 largest companies listed on the Paris stock exchange, weighted by market capitalisation.
Example: The CAC 40 includes companies such as LVMH, TotalEnergies, Sanofi and L'Oréal.
Compte-Titres Ordinaire (CTO)
TaxationA French general investment account that lets you hold every type of security with no geographic restriction. Gains are taxed at the 30% flat tax rate.
Example: To invest in US shares directly (rather than through an ETF), you need a CTO.
Cryptocurrency
CryptoA decentralised digital currency that uses cryptography to secure transactions. Bitcoin and Ethereum are the best known.
Example: Bitcoin can be used as a store of value or as a decentralised means of payment.
Compound interest
FundamentalsThe interest you earn is added to your capital and then earns interest itself. This is the snowball effect that speeds up wealth building.
Example: EUR 10,000 invested at 7% for 30 years grows to EUR 76,000 thanks to compound interest (versus EUR 31,000 with simple interest).
Crash
Stock marketA sudden and violent collapse in stock market prices, often more than 20% within a few days or weeks.
Example: The March 2020 Covid crash saw markets fall 35% in a single month.
Capital gain
TaxationThe profit made when you sell an asset for more than you paid for it. It is taxed when you sell, not before.
Example: Buying a share at EUR 50 and selling it at EUR 80 produces a capital gain of EUR 30.
D
DCA (Dollar Cost Averaging)
StrategyA strategy of investing the same amount at regular intervals, whatever the market conditions. It smooths out your purchase price.
Example: Investing EUR 200 every month in a World ETF, whether markets are rising or falling.
Dividend
Stock marketThe share of a company's profits paid out to its shareholders, usually one to four times a year.
Example: TotalEnergies pays around EUR 3 of dividend per share each year, a yield of roughly 5%.
Diversification
StrategyThe principle of spreading your investments across different assets, sectors and regions in order to reduce overall risk.
Example: Rather than buying only French shares, diversify with world ETFs, property and bonds.
E
ETF (Exchange Traded Fund)
ProductsAn index fund listed on the stock exchange that tracks the performance of an index (CAC 40, S&P 500, MSCI World). Very low fees and broad diversification.
Example: The Amundi MSCI World ETF tracks the performance of 1,600 companies from developed countries for 0.38% in fees per year.
F
Flat Tax (PFU)
TaxationThe Prélèvement Forfaitaire Unique, a single 30% levy on investment income (12.8% of income tax + 17.2% of social contributions). The default option since 2018.
Example: On EUR 1,000 of capital gains you will pay EUR 300 of flat tax (unless the gain sits in a PEA or an assurance-vie, which carry tax advantages).
Fonds euros
Assurance-vieThe capital-guaranteed investment option inside a French assurance-vie, invested mainly in bonds. Low returns, but secure.
Example: The best fonds euros returned around 2-3% in 2024, against less than 1% for the weakest ones.
I
Investment horizon
StrategyHow long you plan to leave your money invested before you need it. It determines the level of risk you can accept.
Example: With a 20-year horizon for retirement, you can afford to hold 100% shares. Over 5 years, you need to play it safe.
Inflation
EconomyA general and lasting rise in prices that erodes the purchasing power of money. The enemy of savings left idle.
Example: With 3% inflation a year, EUR 1,000 today will be worth only EUR 744 in purchasing power in 10 years.
ISIN
TechnicalA 12-character international code that uniquely identifies a financial security (share, ETF, bond).
Example: The Amundi MSCI World ETF has the ISIN code LU1681043599.
L
Liquidity
Stock marketThe ability to buy or sell an asset quickly without moving its price much. Shares in large companies are highly liquid.
Example: You can sell EUR 100,000 of Apple shares in one second. Selling a property takes months.
Livret A
SavingsA regulated French savings account guaranteed by the State and free of tax, capped at EUR 22,950, paying a rate set by the government.
Example: The Livret A paid 3% net in 2024, which is EUR 687 a year once you have reached the cap.
M
Market capitalisation
Stock marketThe total stock market value of a company = number of shares × share price. It lets you compare the size of companies.
Example: LVMH, with 500 million shares at EUR 800, has a market capitalisation of EUR 400 billion.
MSCI World
IndicesA global stock index covering around 1,600 companies from 23 developed countries. The benchmark for world ETFs.
Example: Investing in an MSCI World ETF exposes you to US shares (70%) as well as European, Japanese and other markets.
Main residence
PropertyThe home you live in for most of the year. In France, the capital gain on its resale is entirely exempt from tax.
Example: Selling your house for EUR 400,000 after buying it for EUR 250,000 triggers no tax if it is your main residence.
O
Order (stock market order)
Stock marketAn instruction given to your broker to buy or sell securities. The main types are market orders and limit orders.
Example: A limit order at EUR 100 will only buy if the price falls to EUR 100 or below.
P
PEA (Plan d'Épargne en Actions)
TaxationA French tax wrapper that lets you invest up to EUR 150,000 in European shares, with gains exempt from income tax after 5 years.
Example: After 5 years, a PEA is taxed at only 17.2% in social contributions instead of the 30% flat tax.
PER (Price Earning Ratio)
AnalysisThe price-to-earnings ratio. It shows how many years of current profits would be needed to "pay back" the share price.
Example: A PER of 20 means the market values the company at 20 times its annual profits.
Portfolio
StrategyAll of your financial investments taken together (shares, ETFs, bonds, crypto and so on). Its composition determines your exposure to risk.
Example: A diversified portfolio might hold 5 ETFs covering different regions and asset classes.
R
Return
PerformanceThe gain produced by an investment, expressed as a percentage of the capital invested. It can be annual or measured over another period.
Example: A 7% return per year on an investment of EUR 10,000 produces EUR 700 of gains a year.
Replication (synthetic vs physical)
ETFThe method an ETF uses to reproduce its index. Physical = it holds the shares. Synthetic = it uses swaps (which is what makes world ETFs eligible for the PEA).
Example: The Amundi MSCI World ETF uses synthetic replication, which makes it eligible for the PEA.
S
S&P 500
IndicesThe US stock index of the 500 largest companies listed in the United States, weighted by market capitalisation. A global benchmark.
Example: The S&P 500 has delivered an average annual return of around 10% over the past 100 years.
SCPI
PropertySociété Civile de Placement Immobilier, the French unlisted property fund: you buy units in a professionally managed property portfolio and receive rental income.
Example: With EUR 10,000 in SCPI units yielding 5%, you receive around EUR 500 of income a year.
Spread
TradingThe gap between the buying price (ask) and the selling price (bid) of an asset. The narrower it is, the more liquid the asset.
Example: A EUR 0.01 spread on a EUR 100 share is a hidden cost of 0.01% on every purchase.
T
TER (Total Expense Ratio)
FeesThe total annual charges of a fund or an ETF, expressed as a percentage of assets under management. They are deducted automatically from performance.
Example: An ETF with a 0.20% TER takes EUR 20 a year on EUR 10,000 invested.
Tracker
ProductsAnother name for an ETF. A fund that "tracks" (replicates) the performance of a benchmark index.
Example: A CAC 40 tracker faithfully reproduces the performance of the CAC 40 index.
V
Volatility
RiskThe size of the price swings of an asset. The higher the volatility, the higher the risk (but also the potential gain).
Example: Bitcoin can move 10% in a single day (very volatile). A bond moves 0.1% (barely volatile).
W
Wallet
CryptoA digital wallet used to store, send and receive cryptocurrencies. It can be software (a hot wallet) or hardware (a cold wallet).
Example: A Ledger is a physical cold wallet that keeps your crypto secure offline.