InvestingFIRE glossary
Defined termExpense Ratio
The annual fee a fund charges, expressed as a percentage. A 0.03% ratio means $3/year on $10,000. Tiny differences compound massively over 20+ years — always minimize this.
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Index Fund
A fund that passively tracks a market index (like the S&P 500). Low fees, broad diversification, and the core holding for most FIRE investors.
Asset Allocation
How your portfolio is split across asset classes (stocks, bonds, cash, real estate). The single biggest driver of long-term returns and volatility — pick one you can actually stomach in a crash.
ETF
A fund that trades on an exchange like a stock. ETFs often track an index, have low expense ratios, and can be bought and sold throughout the trading day.
Rebalancing
Periodically selling overweight assets and buying underweight ones to return to your target allocation. Forces "buy low, sell high" mechanically, without prediction.
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