Investing is a responsible adult’s activity. It comes with risk and trade-offs. You must give up a resource to gain another. Fortunately, you can develop and hone your knowledge on the type of investment channels and instruments available in your country.
Growing your money and saving for the future is science. It has several jargons you wouldn’t know if you aren’t familiar with them. There’s no other time than now to check these fifteen investing terms and know them by heart.
It is the lowest price the seller is willing to accept the security – stock deposits, stocks or bonds.
It is the highest price the buyer is willing to accept when purchasing securities.
It is the difference between the Ask and the Bid.
It is the opposite of the bull. Investors expect a decline in the market or a particulate stock.
Investors expect the market or particular stock will rise.
6. Asset Allocation
It is an approach to managing capital by setting parameters for different asset classes. Since the characteristics and behavior of each asset class differ from one another, it’s crucial to get the right mix of investment vehicles for each investor situation. Considering the investor’s goals and risk tolerance through asset allocation increases the probability of successful outcomes.
7. Book Value
It is the value of the asset once you subtract the liabilities. To find the book value of the company, you must subtract the liabilities from total assets.
8. Market Capitalization
It is also known as “market cap.” You can calculate a company’s market cap by multiplying its current price per share with its number of outstanding shares.
It is the chunk of a company’s profit paid to shareholders. Shareholders receive their dividends on a quarterly or annually.
They are certificates of indebtedness. When the government or a company issues bonds, they are actually borrowing money from you. The bond issuer promises to repay on a future date which is the maturity date. They also must pay the interest income.
11. Mutual Funds
A mutual fund is a portfolio of investment. Investors buy the shares or units in the trust. The trust is a combination of individual stocks, equity funds, and bonds. You won’t have to worry about extensive research on each investment vehicle. A professional portfolio manager invests the pooled money from investors.
12. Exchange Traded Funds (ETFs)
They are similar to mutual funds, but they trade throughout the day on stock exchanges almost like stocks. Hence, you pay more or less than the value of the holdings in the fund. Exchange traded funds also have certain tax advantages, but traditionally structured mutual funds work just as well.
13. Hedge Funds
They under a limited partnership or limited liability company. Thus, it is a type of investment partnership. Partners pool money from investors to engage in a range of investing activities. However, these investment activities are riskier than a typical investor undertakes. Hedge funds rely on leverages to increase their return, so it’s a challenge for beginner investors to manage them.
14. Real Estate
It is tangible property. It can either be land or a building. Owning a house or a plot of land is an example of having a real estate property. When an owner allows other individuals or entities to use it, it generates rental income. The aggregate of such tangible properties is called the real estate market. Affordable low cost housing in Philippines is part of the local real estate market.
15. Selling Short
Selling short or short selling is an asset selling tactic. These investors or speculators borrow shares of stock or asset they don’t own to sell it and takes the money with a promise to replace the property someday. The asset in question must have a lower price to be repurchased at a lower value for it to work.
Whether you’re investing in your country’s security market or the Philippines, it worth knowing these terms. They will help you be familiar with different financial markets and the several transactions happening in the day. The stocks, bonds, or real estate market are all viable options to start investing for your future.