Investing Terms

Asset Allocation

• Dividing investments among asset categories like stocks, bonds, and cash.

Bear Market

• A market condition where prices are falling, usually by 20% or more from recent highs.

Bull Market

• A market condition where prices are rising or are expected to rise.

Bond

• A fixed income instrument representing a loan from an investor to a borrower.

Broker

• A person or firm arranging transactions between a buyer and a seller for a commission.

Capital Gain

• The profit from selling an asset at a higher price than its purchase price.

Capital Market

• A market for buying and selling equity and debt instruments.

Compound Interest

• Interest calculated on the initial principal and accumulated interest from prior periods.

Credit Rating

• An evaluation of a borrower's creditworthiness.

Debt

• Money borrowed from one party by another that must be paid back.

Diversification

• A risk management strategy involving a mix of investments within a portfolio.

Dividend

• A portion of a company's earnings that is distributed to shareholders.

Equity

• Ownership interest in a company, typically in the form of stocks.

ETF (Exchange-Traded Fund)

• An investment fund traded on stock exchanges, similar to stocks.

Fiscal Policy

• Government policy related to setting tax rates and spending levels.

Fixed Income

• Investments with regular, set returns, like bonds or fixed deposits.

Forex (Foreign Exchange)

• The global marketplace for trading national currencies.

Hedge Fund

• An investment fund employing various strategies to earn active returns for investors.

Inflation

• The rate at which the general price level for goods and services rises.

Initial Public Offering (IPO)

• When a company sells its stock to the public for the first time.

Interest Rate

• The cost of borrowing money, or the return for lending money.

Investment

• Allocating resources with the expectation of generating profit.

Leverage

• Using borrowed money to increase the potential return of an investment.

Liquidity

• The ease of converting an asset into cash.

Market Capitalization

• The total value of a company's outstanding shares of stock.

Mutual Fund

• An investment vehicle comprised of a pool of funds collected from numerous investors.

Net Asset Value (NAV)

• The value of a mutual fund's assets, minus its liabilities.

Portfolio

• A collection of financial investments such as stocks, bonds, and cash.

Price-to-Earnings Ratio (P/E)

• A ratio valuing a company by relating its current share price to its earnings per share.

Return on Investment (ROI)

• A measure evaluating the efficiency or profitability of an investment.

Risk

• The possibility of losing some or all of an investment.

Securities

• Tradable financial assets like stocks and bonds.

Stock

• A security representing ownership in a corporation.

Volatility

• The degree of variation in a financial instrument's price over time.

Yield

• The earnings generated and realized on an investment over a period.

Blue Chip Stocks

• Shares of large, reputable, financially sound companies with reliable performance history.

Derivatives

• Financial contracts where the value depends on the value of an underlying asset.

Call Option

• A financial contract granting the buyer the right to buy an asset at a set price within a specific time.

Put Option

• A contract granting the holder the right to sell an asset at a specified price within a certain period.

Arbitrage

• Taking advantage of a price difference between two or more markets.

Beta

• A measure of a stock's volatility relative to the overall market.

Alpha

• The excess return on an investment relative to the return of a benchmark index.