Understanding the financial landscape starts with dissecting its lingo. Established investors and financial advisors use a ton of buzzwords, such as asset allocation and expense ratio, which can be difficult to keep track of for industry newbies. It is no wonder the language has held back many from pursuing their investment dreams. Do not let that happen to you.
Take down the language barrier by adding this essential terminology to your vocabulary:
This refers to an investment strategy that aims to strike a balance between risk and reward. It involves apportioning a portfolio’s assets strategically based on an individual’s risk tolerance, investment horizon, and financial objectives.
This refers to a declining market. Bear markets are known to last from several weeks to years.
This refers to a debt instrument that was created to raise capital. Also known as a fixed-income security. You can cash in bonds on their maturity date and receive interest, if due.
This refers to money. If you come across the material that talks about moving some of an individual’s portfolio into cash, the article is likely referring to Treasury bills, money market accounts, and savings accounts. This would be the funds that are immediately available, should you require them.
This determines how much of a fund’s assets are used for operational and administrative expenses. Sometimes known as management expense ratio (MER), it is calculated by dividing the operating expenses of a fund by the average dollar value of its asset under management (AUM).
A type of mutual fund or exchange-traded fund that tracks a specific set of underlying investments, usually tied to an index, such as the S&P 500 index.
This refers to a financial vehicle that is composed of a pool of money from various investors. It is used to invest in securities, such as bonds, money market instruments, stocks, and other assets.
This refers to a company’s total profit. It is calculated by taking away all the expenses from the revenue. It goes without saying that a net income increase is perceived as a great development, often reflecting positively on a stock’s performance.
This refers to a disclosure document that defines financial security for prospective buyers. You can rely on it for comprehensive information about investments.
This refers to an equity investment that embodies part ownership in a company or corporation. It entitles the owners to a part of the company’s assets and income.
This refers to a fund offered by an investment company that aims to raise assets over a specified period. Most investors set their target date on the onset of their retirement.
Having a hard time remembering these words? Don’t worry— bookmark this article and use it as a cheat sheet. For better retention, search these terms online and read up on the topics that frequently mention them. Create sentences using them relating to your local investing landscape. Finally, the best way to learn these terms by heart is to start your investment journey ASAP.
Tycoono, LLC and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. Please refer to our disclaimer for more information.