Investment terms to help you get started
An investment should be seen as an essential decision. You want to be as informed as possible before making any investments. This requires you to fully understand what you’re investing in and how it works.
Investor terminology might seem too complex, but you become more confident once you know the basic terms. Check out these investment terms to get you started.
Stock
This is also referred to as a share or an equity. When you hold a stock, you have part ownership of a company. Even if you have one stock, you are a part-owner.
Bond
A bond is when you loan money to a company that pays you back in full with interest at the maturity date. The company may sell bonds to raise funds for a specific initiative.
Fund
A fund is a pool of money invested by several investors to buy securities such as stocks and bonds. These are managed by a fund manager who makes investment decisions and determines the fund’s objectives.
Asset Allocation
Asset allocation allows you to balance your investment according to your goal, risk tolerance and timeline. This is how an investment plan is personalised and tailored to your preferences.
Capital Gain
This is the increase in the value of your investment that makes it higher than your original purchase price. The gains are realised once the asset is sold.
Diversification
In simple investment terms, this is not putting all your eggs in one basket. Diversification implies putting your money in a mix of investments to balance your risk approach.
Portfolio managers always help you find the best way to diversify your investment plan.
Bull Market vs Bear Market
You’ve probably heard these terms before. A bull market is a rising stock market with economic optimism. On the other hand, a bear market is the opposite, where you have a market falling to massive low points and a minimal level of economic confidence.
Top-down Investing vs. Bottom-up Investing
This primarily delves into how you approach investing.
Top-down investing looks at choosing investments on a larger scale and narrowing things down. For example, you can start looking at global trends and then move on to researching specific industries to outline your ideal investment.
The opposite of that would be bottom-up investing. You start by targeting specific industries based on their performance before considering anything on a global scale.
Yield
Yield is the amount you make in a particular period. This is the amount your investment yields, excluding the principal amount.
Volatility
Some investment opportunities are volatile, and others are somewhat steady. Volatility is how much an investment changes value. Generally, high volatility means that you’re taking on more risk, as the value of the investment is more likely to change than a steady investment.
This is why diversification helps. When you have a mix of investments, you can choose to balance your risk between volatile and steady investments.
Investor terminology might seem too complex, but you become more confident once you know the basic terms. Check out these investment terms to get you started.
Stock
This is also referred to as a share or an equity. When you hold a stock, you have part ownership of a company. Even if you have one stock, you are a part-owner.
Bond
A bond is when you loan money to a company that pays you back in full with interest at the maturity date. The company may sell bonds to raise funds for a specific initiative.
Fund
A fund is a pool of money invested by several investors to buy securities such as stocks and bonds. These are managed by a fund manager who makes investment decisions and determines the fund’s objectives.
Asset Allocation
Asset allocation allows you to balance your investment according to your goal, risk tolerance and timeline. This is how an investment plan is personalised and tailored to your preferences.
Capital Gain
This is the increase in the value of your investment that makes it higher than your original purchase price. The gains are realised once the asset is sold.
Diversification
In simple investment terms, this is not putting all your eggs in one basket. Diversification implies putting your money in a mix of investments to balance your risk approach.
Portfolio managers always help you find the best way to diversify your investment plan.
Bull Market vs Bear Market
You’ve probably heard these terms before. A bull market is a rising stock market with economic optimism. On the other hand, a bear market is the opposite, where you have a market falling to massive low points and a minimal level of economic confidence.
Top-down Investing vs. Bottom-up Investing
This primarily delves into how you approach investing.
Top-down investing looks at choosing investments on a larger scale and narrowing things down. For example, you can start looking at global trends and then move on to researching specific industries to outline your ideal investment.
The opposite of that would be bottom-up investing. You start by targeting specific industries based on their performance before considering anything on a global scale.
Yield
Yield is the amount you make in a particular period. This is the amount your investment yields, excluding the principal amount.
Volatility
Some investment opportunities are volatile, and others are somewhat steady. Volatility is how much an investment changes value. Generally, high volatility means that you’re taking on more risk, as the value of the investment is more likely to change than a steady investment.
This is why diversification helps. When you have a mix of investments, you can choose to balance your risk between volatile and steady investments.