Glossary

Personal finance glossary

99 terms explained simply. From net worth to crypto taxation.

Basics

Allocation: How your money is split across the big families of investments: shares, property, cash, and so on. Saying "my allocation" is saying which share goes where.
Asset class: A family of investments that broadly moves together: shares, bonds, property, cash, gold, crypto. Grouping them shows at a glance what your money is actually resting on.
Assets: Anything with monetary value: bank accounts, investments, real estate, vehicles, gold, crypto, business shares.
Cash: Money available right now without selling anything: current account, savings account, notes. An investment is called liquid when it can be turned into money quickly and without loss.
Compound interest: This year's gains themselves earn gains next year. It is why starting early and starting late end up so far apart over twenty years, with nothing else changed.
Contribution: Money you add to an account. It is not a gain: your wealth went up because you paid money in, not because the investment rose. IgniFI separates the two, or every performance figure would be wrong.
Current account: The everyday bank account: your income arrives in it and your payments leave from it. It usually pays nothing, so money left there loses each year what inflation takes from it.
Emergency fund: Liquid reserve covering 3 to 6 months of expenses, kept in a savings account to handle unexpected events (job loss, health, repairs).
Gross and net: Gross is what you are exposed to: a 300,000 flat moves by 300,000 with the market whatever the bank is owed. Net is what you actually own: what would be left after selling and repaying. Both are true, and they answer different questions.
Gross wealth: Everything you own, before taking off what you owe. A €300,000 property financed with a €250,000 mortgage counts €300,000 gross and €50,000 net: gross measures what you hold, net what is yours.
Inflation: The general rise in prices. At 2% a year, what costs 100 today costs about 122 in ten years: money sitting still loses buying power even though the number has not moved.
INSEE: Institut national de la statistique et des études économiques, the French national statistics office. Its latest household wealth survey is what places your wealth among French households: the rank you read is a rank among its respondents, at the survey's date.
Liabilities: Your debts: mortgage, car loan, consumer credit, overdraft, credit-card balances, tax debts.
Net worth: Total of what you own (assets) minus what you owe (liabilities). The #1 indicator of your real wealth.
Pocket: A group of accounts you set aside for one purpose: retirement, the house, the safety cushion. The spending plan draws pocket by pocket, in the order you choose, rather than from one pot.
Portfolio: Everything you hold, seen as one whole. A portfolio can span several accounts at several institutions.
Position: One line of your portfolio: a specific investment and how much of it you hold. "A position of 12 units" means you own 12 of them.
Savings rate: Share of net income you set aside each month. Formula: (Income − Expenses) / Income. Classic target: 20%+.
Time horizon: How long before you need this money. A short horizon calls for caution; a long one lets you sit through falls without having to sell at the worst moment.
Unrealised gain: The gain on what you still hold: today's value less what you paid. Unrealised because it exists only on paper until you sell - and so there is nothing to declare.
Wealth percentile: Where you sit in the distribution of French household wealth, among households of comparable age and make-up. At the 70th percentile, 70% of comparable households own less than you. A landmark, not a mark.
Withdrawal: Money you take out of an account. Like a contribution it is a movement and not a loss: telling it apart from a fall in value is what keeps performance honest.

FIRE

4% rule: You can withdraw 4% of your invested wealth each year without depleting it over 30 years (Trinity study). Adapt to your situation.
Coast FIRE: You've invested enough early that compound growth alone will reach your FIRE number by retirement - without new contributions.
FIRE: Financial Independence, Retire Early. Reaching enough wealth to live off passive income without having to work.
FIRE number: Target wealth to be independent. Classic calculation: annual expenses × 25 (based on the 4% rule).
Lean FIRE / Fat FIRE: Lean FIRE = independence on a tight budget (~$25k/year). Fat FIRE = independence with a comfortable lifestyle (>$70k/year).

Investments

2nd-pillar buy-in (rachat): A voluntary payment into your Swiss pension fund (LPP) to fill missing years. Fully deductible from taxable income in the year of the buy-in: saving ≈ amount × marginal rate. Very effective in a high-income year. ⚠ Bought-in capital is locked for 3 years before any lump-sum withdrawal; spreading buy-ins over several years maximises the tax effect.
Accumulating and distributing: Two ways a fund handles the income it receives. Accumulating: it reinvests it for you, nothing lands in your account and the value rises. Distributing: it pays it to you, you see it arrive and decide what to do with it.
Bond: A loan you make to a government or a company, which pays you interest and then repays you. Calmer than a share, and less rewarding over a long period.
CFD: Contract For Difference. A derivative that replicates the return of an underlying asset without owning it. Leverage available.
DCA (Dollar Cost Averaging): Investing a fixed amount at regular intervals (e.g. monthly), regardless of price. Smooths out market highs and lows.
Dividend: The share of profits a company pays out to the people who hold its shares. Some funds pay it into your account, others reinvest it for you.
ETF: Exchange-Traded Fund. A listed fund that tracks an index (MSCI World, S&P 500…). Low fees, instant diversification.
Euro fund: The guaranteed part of a French life-insurance contract: the capital paid in cannot fall. In exchange the return is low, often close to inflation.
Flat tax (PFU): French 31.4% flat tax on financial gains (12.8% income tax + 18.6% social charges). Applies to brokerage accounts.
IRR (internal rate of return): The return on your own money: it weighs each period by what was invested in it, so it diverges from the performance figure (TWR) when you bought a lot just before a rise or a fall. This is the number to compare with a savings account; the performance figure is the one to compare with an index.
Life insurance (FR): Flexible French wrapper: guaranteed euro fund + unit-linked funds. Tapered taxation after 8 years, easy estate transfer.
Livret A: The French regulated savings account: capped, available at any time, free of income tax and social charges, at a rate the State sets twice a year. It is the benchmark for money that sits idle, and the rate the app assumes for an account with no declared return.
Management fee: What the provider takes each year to look after your money, as a percentage of the amount invested. It is deducted automatically and therefore invisible, which is what makes it easy to underestimate.
Monte Carlo: A method that simulates thousands of random market scenarios (instead of one smooth average return) to estimate the probability your capital lasts. It exposes 'sequence-of-returns risk': a run of bad years right after you retire hurts far more than the same years later on.
MSCI World: An index tracking about 1,500 large caps across 23 developed countries. The benchmark for global equities.
Net asset value: The price of one unit of a fund, recalculated regularly from what the fund holds. It is the price at which you buy and sell.
PEA: Plan d'Épargne en Actions - French tax-advantaged wrapper for European equities (income-tax exempt after 5 years).
PER: Plan d'Épargne Retraite (French retirement savings plan). Contributions are deductible from taxable income: the immediate tax saving = contribution × your marginal bracket. Capital is locked until the legal retirement age (64), except to buy your primary residence. On exit, the capital is taxed as income. Most worthwhile at a high bracket (30%+) and over a long horizon, ideally if your bracket drops in retirement.
PERCO: Plan d'Épargne Retraite Collectif: the older French company retirement savings plan, fed by profit-sharing and employer top-ups. Replaced by the collective company PER since 2020, but many people still hold one. Same logic as the PER: capital locked until retirement, paid out as a lump sum or an annuity.
Pillar 3a: Swiss tied individual pension. Contributions (cap ≈ CHF 7,056/yr for an employee with a pension fund) are deductible from taxable income: saving ≈ contribution × marginal rate. Capital locked until ~5 years before retirement age, except for a primary residence, leaving Switzerland, or becoming self-employed.
Regulated savings accounts (Livret A, LDDS, LEP): Livret A, LDDS (livret de développement durable et solidaire) and LEP (livret d'épargne populaire): French state-regulated savings accounts. Rate set by the government, capital guaranteed, withdrawable at any time and entirely tax-free. Where an emergency fund lives, not a long-term investment.
Savings account (livret): An account that pays interest: the capital does not fall and stays available at any time. In France it is called a livret. The regulated ones (Livret A, LDDS, LEP) have a rate set by the State and are tax-free; an ordinary bank livret has a free rate, and its interest is taxed.
Share: A slice of a company. Holding one entitles you to a fraction of its profits and exposes your money to its success and its trouble alike.
Taxable brokerage account (CTO): Standard investment account with no cap or geographic restriction. In France, subject to the 31.4% flat tax (PFU).
TER (ongoing charge): The percentage a fund or ETF takes every year from what you hold, deducted automatically from the unit price. 0.20% on 50,000 is 100 a year, whether the fund rises or falls.
Ticker: The short code that identifies a security on an exchange (e.g. AAPL for Apple, CW8.PA for the Amundi MSCI World ETF in Paris). It's what you search for to add a holding: every stock, ETF or crypto has one.
TWR (money-weighted-free return): How your investments performed once deposits and withdrawals are taken out of the calculation. It is the only figure comparable with an index: without it, paying 1,000 into an account looks like a 1,000 gain.
Unit-linked: The non-guaranteed part of a French life-insurance contract, invested in funds or property. It can return more than the euro fund and it can also fall.
Withdrawal rate (SWR): Safe Withdrawal Rate: the percentage of your starting capital you withdraw each year in retirement (then adjusted for inflation). The well-known '4% rule' is its most famous example.
Yield: What an investment pays over a year, as a percentage of what it is worth. Rent of 6,000 a year on a 200,000 property is a gross yield of 3%.

Risk

Beta: An asset's sensitivity to market moves. Beta 1 = moves with the market. Beta 0.5 = moves half as much.
CAGR: Compound Annual Growth Rate. Smooths a total return over a period into an annual equivalent.
Correlation: Measure (-1 to +1) of the link between two assets. Diversifying = combining lowly or negatively correlated assets.
Drawdown: Maximum drop from a portfolio's all-time high. A -40% drawdown = a 40% loss before recovery.
Leverage: Investing with borrowed money. A property bought with a mortgage is the everyday case: a 10% rise in the property is far more than 10% on your deposit, and so is a 10% fall. Leverage amplifies both ways.
Sharpe Ratio: Return per unit of risk. (Return − risk-free rate) / volatility. > 1 = good. > 2 = excellent.
Volatility: Measures the magnitude of an asset's price swings. 15%/year volatility means the price typically swings by ±15%.

Strategies

Asset allocation: How your wealth is split across asset classes: equities, bonds, real estate, cash, gold, crypto.
Barbell: A strategy combining very safe assets (cash, short bonds) with very risky ones (equities, crypto), avoiding the middle risk.
Buy and Hold: Passive strategy: buy and hold for the long term, ignoring short-term swings. Minimizes fees and taxes.
Copy trading: Automatic replication of an experienced trader's transactions on your account. You control capital, they control decisions.
Diversification: Spreading risk across multiple assets, sectors, and geographies. Don't put all your eggs in one basket.
Rebalancing: Periodic readjustment to the target allocation when markets have shifted it. Forces selling high and buying low.

Crypto

Cold wallet: Offline crypto wallet (Ledger, Trezor) that stores your private keys with no internet exposure. Maximum security.
Stablecoin: A crypto pegged to a currency (USDC, USDT for the dollar). Acts as cash in crypto without volatility.
Staking: Locking up crypto to secure a network and earn interest (typically 5-15%/year). Taxable in most jurisdictions.

Taxation

Capital gain: Gain realized when selling a security (stock, ETF) above its average acquisition cost. Taxed at the 31.4% flat tax (PFU) in France.
CRDS: Contribution au Remboursement de la Dette Sociale. A small levy that travels alongside CSG on the same income.
CSG: Contribution Sociale Généralisée, the largest of the French social levies. It applies to investment income on top of income tax, which is why one gain is taken from twice.
Form 2042: Main French income tax declaration. All other forms (2047, 2074, 2086) are carried over to it.
Form 2086: Crypto disposals. A disposal = converting crypto → euros. Carried over to box 3AN (gain) or 3BN (loss) of Form 2042.
Form 3916: Declaration of foreign accounts. Mandatory for eToro, IBKR, Binance. €1,500 penalty per missed account.
IR (French income tax): The tax you pay on what you earn: salary, rent, and depending on the case your investment gains. Its rate climbs in bands as income rises.
IS (French corporation tax): The tax a company pays on its profits, instead of its owners. It is the alternative to IR when setting up an SCI: the company pays, and you are taxed only on what it distributes to you.
Social charges (PS): Social levies (CSG, CRDS…) on investment income, on top of income tax. Since 2026 the CSG rose 1.4 points on movable capital: 18.6% on dividends, interest and securities/crypto gains, but still 17.2% on rents, real-estate gains and life insurance.
Tax wrapper: The kind of account that holds your investments - PEA, CTO, life policy, pension plan, savings account. Not what you buy but what it sits in, and it is the wrapper that decides the tax, the caps and the waiting periods.
TMI (marginal tax rate): Tranche Marginale d'Imposition: the income-tax rate applied to your top slice of income (0, 11, 30, 41 or 45%). It drives the tax cost of bare rental income and the saving from a PER contribution.
Weighted average cost: Average acquisition cost of a security bought in several batches. The basis for capital gains calculation.

Real estate

Amortisation: The part of your monthly payment that genuinely repays the debt. Early in a loan it is small and interest dominates; the order reverses over the years.
Bare ownership (nue-propriété): You buy the property at a discount (~60-70% of value) without the usufruct: no rent and no property tax for 10-20 years, then you automatically recover full ownership. A wealth-building strategy, not an immediate-income one.
Borrower insurance: The cover a lender requires, which repays the loan in your place on death or incapacity. Its cost sits on top of the interest and is negotiated separately from the loan.
Borrower share: Your part of a loan signed with somebody else. On a 50/50 mortgage, half the outstanding principal is yours, and it is that half which belongs in your net worth.
Cash flow: Monthly difference between rents collected and all expenses (loan, taxes, vacancy, repairs). Positive = self-financing.
Debt-to-income ratio: The share of your monthly income that goes on loan repayments. French banks generally stop around 35%.
Deposit: The money you put in from your own pocket on a purchase, the rest being borrowed. It does not vanish: it becomes part of what you own in the property.
Gross rental yield: Annual rents / purchase price. First indicator of a rental investment. Aim for 5-8% depending on city and risk.
LMNP: Non-professional furnished rental (Loueur Meublé Non Professionnel). Renting furnished homes: under the real regime, accounting depreciation wipes out most of the tax on rents for 20-30 years. The simplest rental structure and often the most tax-efficient.
Monthly payment: What you repay each month on a loan. It mixes two things: interest, which is the cost of borrowing, and capital, which actually reduces your debt.
Outstanding balance: What you still owe today, excluding future interest. It is this figure, not the amount originally borrowed, that comes off your wealth.
Pinel: A former French income-tax-reduction scheme for buying a new-build home and renting it out (capped rents and capped tenant income) for 6, 9 or 12 years. ⚠ The scheme ended on 31 December 2024: no new Pinel investments since 2025. Existing commitments run to term. Worth knowing: the capped rents are often below market and new-builds are frequently overpriced, and the tax reduction offsets a sometimes-mediocre asset. In IgniFI, model a Pinel flat as a regular rental (direct real estate or LMNP); the time-limited tax reduction has usually expired well before retirement.
SCI (IS / IR): A French property-holding company (Société Civile Immobilière). Under IR: transparent, rents are taxed at your marginal rate (TMI) + social charges. Under IS: the company pays corporate tax (15-25%), great for accumulating, but dividends paid out are taxed again (31.4% flat tax).
SCPI: A French real-estate investment trust (Société Civile de Placement Immobilier): 'paper property'. You buy shares of a managed property portfolio and receive a share of the rents. EU-based SCPIs often enjoy lighter taxation for a French resident.

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