The original amount of money borrowed or invested, before interest.
Principal is the original amount of money borrowed in a loan or invested in an account, not including interest or gains. When you take a $200,000 mortgage, the principal is $200,000; interest is charged on top. When investing $10,000, the principal is $10,000; any gains beyond that are returns. As you make loan payments, portion goes toward principal (reducing what you owe) and portion toward interest (the lender's cost). Early loan payments are heavily weighted toward interest; later payments are weighted toward principal. Understanding principal is crucial for understanding how loans work: paying principal down faster reduces total interest paid. In investing, protecting your principal (not losing it) is often a conservative goal, though this limits growth potential.