Investor Glossary

Short, precise definitions of terms found in portfolio analytics. Terms with formulas link to detailed explanations.

XIRR Extended Internal Rate of Return

Internal rate of return for irregular cash flows — the money-weighted portfolio return. It accounts for the amounts and dates of deposits and withdrawals. Details and formula →

TWR Time-Weighted Return

The time-weighted return. It measures the effectiveness of a strategy without the influence of capital inflows and outflows; used for comparison with a benchmark. Details →

YTM Yield to Maturity

A bond's yield to maturity — the rate at which the present value of all future payments equals the purchase price (including accrued coupon income). Firewire calculates YTM from the trade price. Details →

Duration Duration

The weighted-average term of a bond's payments and a measure of its price sensitivity to interest-rate changes. The higher the duration, the higher the interest-rate risk. Details →

ACI Accrued Coupon Income

The portion of the coupon accrued since the last payment date. A bond buyer pays the accrued coupon income to the seller and then receives it back with the next coupon. It affects the "dirty" trade price.

MCFTR Moscow Exchange Total Return Index

The MOEX gross total return index: in addition to share price growth, it accounts for dividend reinvestment. The correct benchmark for comparison with a stock portfolio's TWR.

IMOEX Moscow Exchange Index

The main price index of the Moscow Exchange for the shares of the largest Russian companies. Unlike MCFTR, it does not account for dividends, so it understates the market's total return.

CPI Consumer Price Index

The key measure of inflation — the rise in the cost of a fixed basket of goods and services. Used to calculate real return.

Real Return Real Return

Return adjusted for inflation using the Fisher formula. It shows the real growth of capital's purchasing power. Details →

NPV Net Present Value

Net present value — the sum of cash flows discounted to the present moment at a given rate. Setting NPV to zero underlies the calculation of XIRR and YTM.

Coupon Coupon

A periodic interest payment to a bondholder. It can be fixed, floating, or linked to a rate/inflation.

Bond Amortization Amortization

Repayment of a bond's face value in parts over its term rather than as a lump sum on the maturity date. It affects the payment schedule, YTM, and duration.

Benchmark Benchmark

A reference point (usually an index) against which a portfolio's return is compared to assess the quality of a strategy.

Maximum Drawdown Max Drawdown

The largest decline in portfolio value from a local maximum to a subsequent minimum. A measure of how painful risk is: it shows how much could have been lost "at the bottom".

Rebalancing Rebalancing

Bringing asset weights back to target values through purchases and sales. It helps control risk when some assets grow faster than others.

FIRE Financial Independence, Retire Early

A strategy for achieving financial independence through a high savings rate and passive income from capital, allowing one to stop depending on active earnings.

Terminal Value Terminal Value

The portfolio's value on the valuation date: the market value of all positions plus the balance of uninvested cash. It is part of the XIRR calculation.