Financial Literacy Basics
Welcome to the Financial Literacy Basics page for Pennywise. Here we explain the key terms and concepts you’ll encounter in the Investment Portfolio Recommendation app, so you can make informed decisions even if you have little or no prior finance experience.
Portfolio
A portfolio is a collection of financial assets—such as stocks, bonds, or ETFs—that you own. In the Pennywise app, your portfolio shows which tickers (symbols) and how many shares you hold.
Diversification
Diversification means spreading your investments across different types of assets or categories (like bonds, ETFs, and stocks). This helps reduce risk, because the performance of one asset may offset another.
Asset Category
An asset category groups similar investments (for example, bonds, ETFs, or stocks). ThePennywise app uses these categories to recommend an allocation based on your risk preference and investment horizon.
ETF (Exchange-Traded Fund)
An ETF is a type of fund that trades like a stock on an exchange and holds a collection of assets (such as an index of stocks or bonds). ETFs offer built-in diversification.
Ticker Symbol
A ticker symbol (or ticker) is a short code that uniquely identifies a publicly traded security on an exchange (for example, AAPL for Apple Inc.). You’ll see tickers in the Pennywiseapp when reviewing your portfolio.
Share
A share represents a unit of ownership in a company (for stocks) or fund (for ETFs). In the app, you enter how many shares you hold of each ticker.
Price
The price is the current market value of one share or unit of an asset. Pennywise fetches the latest closing price to calculate the value of your holdings.
Allocation (Weight)
Allocation (or weight) shows the percentage of your total portfolio invested in a particular ticker or category (calculated as shares × price ÷ total portfolio value). The app displays this so you can see how diversified your money is.
Risk Preference
Risk preference (low, mid, or high) expresses how comfortable you are with potential fluctuations in your portfolio’s value. A higher risk preference typically leads to a larger allocation to equities (stocks), while a lower preference favors bonds.
Investment Horizon
Investment horizon (short, mid, or long) refers to the time frame over which you plan to keep your money invested. Longer horizons usually allow for more equity exposure, since there is more time to recover from short-term market swings.
Performance
Performance tracks how the total value of your portfolio changes over time. Pennywiseshows historical performance (1, 3, and 5 years) and projected gains or losses.
Gain / Loss
Gain is the amount your portfolio has increased in value, while loss is the amount it has decreased. The app highlights these to help you see if you’re ahead or behind your starting point.