Finance glossary
The terms you meet on GFX.GE, in plain words, each with a link to the page where it is used. These are explanations, not financial advice.
Currencies and exchange rates
- Official rate
- The lari exchange rate published by the National Bank of Georgia. It is published every business day and applies from the next day. It is used in accounting, taxes and contracts; banks do not exchange cash at this rate. Open the page
- Buy rate
- The rate at which a bank or exchange office buys foreign currency from you. It is the one that matters when you hand in dollars or euros and receive lari. Open the page
- Sell rate
- The rate at which a bank or exchange office sells foreign currency to you. It is the one that matters when you buy dollars or euros with lari. It is always higher than the buy rate. Open the page
- Spread
- The difference between the sell rate and the buy rate. It is the price of exchanging: the wider the spread, the more you lose if you buy a currency and sell it straight back. Open the page
- Cross rate
- An exchange rate between two currencies worked out through a third one. For example EUR/GEL = EUR/USD × USD/GEL, which is why the euro can move against the lari while the dollar stands still. Open the page
- Dynamic currency conversion (DCC)
- When a card terminal or ATM abroad offers to charge you in your home currency. The rate is then set by the foreign side and is often worse than your own bank's card rate.
- Interbank market
- The market where banks trade currencies with each other in large amounts. The lari's official rate is based on this trading.
- Depreciation (devaluation)
- A fall in a currency's value against other currencies. When the lari depreciates, one dollar costs more lari and imported goods get more expensive. Open the page
Savings, deposits and inflation
- Deposit
- Money placed in a bank that earns interest. A term deposit is locked for a fixed period and usually pays more than a demand (savings) deposit. Open the page
- Effective interest rate
- The annual rate that includes compounding and mandatory fees. It is a fairer way to compare deposits or loans than the nominal rate. Open the page
- Compound interest
- Interest that is added to the balance and then earns interest itself. Over long periods it makes savings grow faster and faster rather than in a straight line. Open the page
- Inflation
- A rise in the general level of prices. With 5% inflation you need 5% more money a year later to buy the same things. In Georgia it is measured by Geostat. Open the page
- Consumer price index (CPI)
- The change over time in the price of a basket of goods and services. Inflation is calculated from the change in this index. Open the page
- Real return
- Return after inflation. If a deposit earned 10% and prices rose 4%, your purchasing power grew by roughly 6%. Open the page
- Monetary policy rate
- The National Bank's key interest rate, its main tool for controlling inflation. When it goes up, loans usually get more expensive and deposit rates rise.
Stocks and funds
- Stock (share)
- A piece of ownership in a company. Shareholders gain when the price rises and, if the company pays one, from dividends; they can also lose money when the company does badly. Open the page
- Dividend
- Part of a company's profit paid out to shareholders, usually quarterly or yearly. Dividends are not guaranteed and can change. Open the page
- Dividend yield
- The yearly dividend divided by the share price. A $100 stock paying $3 a year yields 3%. Open the page
- ETF (exchange-traded fund)
- A fund that holds many stocks or other assets and trades on an exchange like a single share. One ETF can give you hundreds of companies at once. Open the page
- Stock index
- A measure of the combined price of a group of stocks, such as the S&P 500 for 500 large US companies. You cannot buy an index directly, but you can buy an ETF that tracks it. Open the page
- Expense ratio (TER)
- The yearly fee a fund takes from its assets automatically. 0.03% means $3 a year on $10,000. Open the page
- Market capitalization
- The total value of all a company's shares: share price times the number of shares. It shows what the market thinks the company is worth. Open the page
- P/E ratio
- The share price divided by yearly earnings per share. A high P/E means investors expect growth, or that the stock is expensive. Open the page
- Dividend reinvestment (DRIP)
- Using dividends to buy more of the same stock or fund, so the payouts compound as well. Open the page
- Bond
- A loan in the form of a security: you buy a government's or company's debt, it pays you interest (the coupon) and returns the principal at maturity. The risk depends on how reliable the issuer is.
Returns and risk
- Dollar-cost averaging (DCA)
- Investing the same amount at regular intervals, for example monthly, whatever the price. You buy more units when prices are low and fewer when they are high, without having to time the market. Open the page
- Compound annual growth rate (CAGR)
- The steady yearly growth rate that would take the starting amount to the final amount over the same period. If 1,000 became 2,000 in 5 years, the CAGR is about 14.9%. Open the page
- XIRR (money-weighted annual return)
- The annual return that accounts for when and how much you put in. With monthly contributions it is fairer than the total profit percentage. Open the page
- Drawdown
- How far an investment's value fell from its previous peak. -40% means 10,000 dropped to 6,000 at some point. It shows the loss you would have had to sit through. Open the page
- Volatility
- How strongly and how often a price moves. Crypto is highly volatile, broad index funds less so, a lari deposit hardly at all.
- Diversification
- Spreading money across different assets so that one falling does not hurt all your savings. A broad index fund is diversified by itself.
- Liquidity
- How quickly and cheaply an asset can be turned into cash. Cash is the most liquid; real estate and term deposits are less so.
Crypto
- Cryptocurrency
- A digital asset recorded on a blockchain and not issued by a central bank. Prices are highly volatile. Open the page
- Blockchain
- A shared ledger of transactions kept and checked by many computers at once, which makes past records practically impossible to change. Open the page
- Stablecoin
- A cryptocurrency pegged to an ordinary currency, usually 1 US dollar (for example USDT and USDC). The peg relies on the issuer's reserves and is not a government guarantee. Open the page
- Crypto exchange
- A platform where you buy, sell or swap crypto. Prices and fees differ between exchanges, and money left on an exchange is only as safe as the exchange. Open the page
- Crypto wallet
- An app or device that holds the keys to your crypto. Whoever has the keys (the seed phrase) controls the funds, so never share it.
- Network (TRC20, ERC20)
- The blockchain a token is sent on. The same USDT exists on several networks; the sender's and receiver's network must match or the funds can be lost. Open the page
Metals and commodities
- Troy ounce
- The unit of weight for precious metals: 31.1035 grams. World gold and silver prices are quoted per troy ounce. Open the page
- Spot price
- The world market price for immediate delivery. Dealers add their own premium to it when selling bars or coins. Open the page
- Fineness (purity)
- The share of pure metal in an alloy, per thousand. 999 is almost pure gold; 585 means 58.5% gold. Open the page
- Brent and WTI
- The two main oil benchmarks: Brent is North Sea crude, WTI is US crude. Prices are per barrel (159 litres) in dollars. Open the page