New to investing? It’s great you want to begin your journey to wealth! But we won’t sugarcoat it - the overwhelming nature of financial jargon often leaves many new investors fearful in the early days.
But don’t let this hold you back. Whether you're a beginner investor or a seasoned pro, having a reliable glossary on hand can help you quickly explain a particular phrase or broaden your stock market vocabulary.
Whilst you should note that investing should be carried out at your own risk, and that your investments may go down as well as up. Part of the critical part of becoming an investor is the research and education, so we've compiled a list of the most important investing phrases to help clear up some of the uncertainty and overwhelm surrounding investing. If you do need further guidance, please consult a professional.
A - Active management: an ‘active’ fund manager is very hands-on with stock picking, buying and selling assets, with the overall aim of outperforming a stated benchmark or index.
B - Blue-chip company: companies that are reputable, financially stable and well-established in its sector. The term originates from the game of poker where the blue chip has the highest value.
C - Capital gain: the profit you make when you sell shares or investments for a higher price than the price you paid for.
D - Dividend: a percentage of a company’s earnings that are paid to its shareholders, usually in cash, which provides a source of income for investors
E - Exchange rate: the price of a country's currency that will be exchanged for another currency. For example, how many US dollars or Euros you would receive for every £1 of sterling.
F - Fund: is a pool of money collected from investors that is invested and managed by the fund manager.
G - Gilts: bonds issued by the UK government which are traditionally considered to be low risk.
H - Hedging: a risk management strategy known used to reduce or offset the possibility of a loss that could result from market volatility.
I - Investments: shares, bonds, property or other assets, whether owned directly or indirectly by an investor.
J - Junk bonds: these are debts issued by companies or governments that carry a high risk of default, either by not paying their interest or repaying their capital at maturity
K - Key industry - An industry that plays a critical role in a nation's economy by generating a large portion of revenue.
L - London Stock Exchange (LSE): this is the largest in Europe and the primary stock exchange in the UK, located in the City of London. It comprises 1,300 companies and its movement reflects the performance of the market.
M - Market capitalisation: is the total market value of a company's outstanding shares. It is often used as the basis for a fund’s investment objectives and is calculated by multiplying the number of shares by the current market price of a single share.
N - Nominal value: the face value of money without taking into account the effect of inflation. This is different from real value, which is inflation-adjusted.
O - Offer price: also known as ask price, this is the minimum price that a seller is willing to take for their shares. Consequently, it is the price that investors will pay in order to buy shares.
P - Portfolio: a collection of investments by an investor.
Q - Quick ratio: also known as the Acid test ratio, it is an indicator of a company's financial strength (or weakness). To identify the firm's liquidity and capacity to fulfill its obligations, it is calculated by taking current assets less inventories, divided by current liabilities.
R - Return on Investment: ROI is a percentage-based metric for gauging how well an investment has performed. This is computed by multiplying by 100 and dividing the net profit by the investment's cost.
S - Shares: units of ownership of a company or investment, also known as ‘stocks’ or ‘equities’. Usually purchased by investors to be entitled to a percentage of the profits.
T - Technical analysis: is a form of security analysis that uses price data and volume data, typically displayed graphically in charts, to detect and interpret patterns in past security prices.
U - Underwriter: a Stakehoder that buys an issue of securities from a company and resells it to investors.
V - Volatility: a measure of how much the price of an investment moves up and down over the short-term.
W - Wall Street: Generic term for the securities industry firms that buy, sell, and underwrite securities. Based on an eight-block-long street in Lower Manhattan in New York City, where the Stock Exchange and banks are.
X - XD: The term "ex-dividend," represented by the symbol XD, refers to a share that is trading without regard to the amount of its upcoming next dividend payment.
Y - Year-end dividend: A special dividend declared at the end of a fiscal year that usually represents distribution of higher-than-expected company profits.
Z - Zero-coupon bond: A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date.
Fempire Finance
Happy Investing!
Fempire Finance