InvestingFIRE glossary
Defined termRebalancing
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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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.
Dollar-Cost Averaging (DCA)
Investing a fixed amount on a regular schedule regardless of price. Smooths out volatility and removes emotion from timing decisions.
Tax-Loss Harvesting (TLH)
Selling losing positions in a taxable account to bank the capital loss for tax purposes, then buying a similar (not identical) asset. Can offset up to $3,000/year of ordinary income.
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