AI and Investing Glossary: 20 Key Terms Explained

AI terms

• AI Agent: An AI agent is an AI system that works toward a goal by planning steps, using tools such as search or files, checking the result and deciding what to.
• AI Automation: AI automation is a chain where a trigger starts a task, an AI step reads or writes something, and an action saves or sends the result, without you.
• AI Hallucination: An AI hallucination is a confident answer from an AI that is not true, such as a made-up fact, number, quote or source.
• Artificial Intelligence (AI): Artificial intelligence is software that performs tasks that normally need human intelligence, such as understanding language, recognising images.
• Context Window: A context window is the amount of text an AI model can consider at once, including your prompt, any documents you add and its own reply.
• Generative AI: Generative AI is a type of artificial intelligence that creates new content, such as text, images, audio, video or code, from a prompt you give it.
• Large Language Model (LLM): A large language model, or LLM, is an AI system trained on huge amounts of text to understand and generate human language by predicting the most.
• Multimodal AI: Multimodal AI can work with more than one type of information at once, such as text, images, audio and video.
• Prompt: A prompt is the instruction or question you give an AI tool. A clear prompt states the role, the context, the task and the format you want back.
• Prompt Engineering: Prompt engineering is the practice of writing and refining prompts so that an AI gives reliable, useful results.
• Retrieval-Augmented Generation (RAG): Retrieval-augmented generation, or RAG, is a method where an AI first retrieves relevant documents and then uses them to write its answer, so the.
• Token (AI): A token is a small piece of text, often part of a word, that an AI model reads and writes. In English, one token is roughly three quarters of a word.

Investing terms

• Asset Allocation: Asset allocation is how you divide your investments between asset types such as shares, bonds, cash and property.
• Compound Interest: Compound interest is interest earned on both your original money and on the interest it has already earned, so growth builds on itself over time.
• Dollar-Cost Averaging (DCA): Dollar-cost averaging is investing a fixed amount at regular intervals, such as every month, regardless of the price. In some countries the same idea.
• ETF (Exchange-Traded Fund): An ETF, or exchange-traded fund, is a fund that holds a basket of investments, such as shares, and trades on a stock exchange like a single share.
• Expense Ratio: An expense ratio is the yearly fee a fund charges, shown as a percentage of the money invested. A 0.10% ratio costs about 1 per 1,000 invested each.
• Financial Freedom: Financial freedom means having enough savings and income from assets to cover your living costs without needing to work for money.
• Index Fund: An index fund is a fund designed to match the performance of a market index, such as the S&P 500, by holding the same investments in the same.
• Portfolio Diversification: Portfolio diversification means spreading your money across different assets, sectors and regions so that one poor investment does less damage to the.