Basis points
A basis point is one hundredth of a percentage point — 0.01% — so 100 basis points equals 1%.
Also known as: bps, basis point
In detail
A basis point (bp, or "bip") is 0.01%: one hundredth of one percentage point. 100 basis points equal 1%, 50 bps equal half a percentage point, 25 bps equal a quarter. The unit exists to remove an ambiguity that costs real money. If a rate moves "from 4% to 5%", saying it rose 1% is unclear — that could mean one percentage point, or one percent of 4% (0.04 points). Saying it rose 100 basis points cannot be misread. That is why interest rates, bond yields, fund fees, and credit spreads are quoted this way. Where it matters most for an ordinary investor is fees. An expense ratio quoted as 75 bps is 0.75% per year, against 3 bps for a cheap index fund. That gap looks negligible written as a percentage and is not: applied annually to a compounding balance over decades, the difference in final value is large.
Where you’ll see this
Synoptiv annotates this term wherever it appears in a stock analysis. Browse analyzed stocks to see it in context.