Vocabulary

• Exchange Traded Funds (ETFs) – These are investment funds and exchange-traded products, with shares that are tradable on a stock exchange.
• Stock Exchange – A marketplace where securities, commodities, derivatives and other financial instruments are traded.
• Mutual Fund – An investment programme funded by shareholders that trades in diversified holdings and is professionally managed.
• Dividend – A sum of money paid regularly by a company to its shareholders out of its profits.
• Bonds – Debt securities, similar to IOUs. When you purchase a bond, you are lending money to the issuer in exchange for periodic interest payments and the return of principal at maturity.
• Commodities – Basic goods used in commerce that are interchangeable with other commodities of the same type.
• Derivatives – Financial security with a value reliant upon or derived from an underlying asset or group of assets.
• Securities – Represent an ownership or debt that has been securitized into a form that can be traded.
• Capital – Wealth in the form of money or assets, used by businesses to produce more wealth.
• Portfolio – A range of investments held by a person or organization.
• Asset Allocation – An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.
• Index Fund – A type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index.
• Liquidity – The degree to which an asset or security can be quickly bought or sold in the market at a price reflecting its intrinsic value.
• Market Capitalization – The total dollar market value of a company's outstanding shares of stock.
• Bull Market – A condition of a financial market where the prices of securities are rising or are expected to rise.
• Bear Market – A condition of a financial market where the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.
• Volatility – A statistical measure of the dispersion of returns for a given security or market index.
• Risk Tolerance – The degree of variability in investment returns that an investor is willing to withstand.
• Diversification – The practice of spreading investments among different securities to reduce risk.
• Inflation – The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
• Deflation – The reduction of the general level of prices in an economy.
• Interest Rate – The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.
• Credit Rating – An assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.
• Leverage – The use of various financial instruments or borrowed capital to increase the potential return of an investment.
• Margin – Borrowed money that is used to purchase securities.
• Options – Contracts that give the bearer the right, but not the obligation, to either buy or sell an amount of some underlying asset at a pre-determined price at or before the contract expires.
• Futures – Financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.
• Hedge – Making an investment to reduce the risk of adverse price movements in an asset.
• Arbitrage – The simultaneous purchase and sale of the same assets in different markets in order to profit from tiny differences in the asset's listed price.
• Short Selling – The sale of a security that is not owned by the seller, or that the seller has borrowed, in the hope that the price will go down.
• Day Trading – The practice of buying and selling within the same trading day, before the close of the markets on that day.
• Swing Trading – A style of trading that attempts to capture gains in a stock within one to four days.
• Initial Public Offering (IPO) – The process by which a private company can go public by sale of its stocks to general public.
• Dividend Yield – A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
• Capital Gain – An increase in the value of a capital asset that gives it a higher worth than the purchase price.
• Capital Loss – The decrease in the value of an investment or capital asset.
• Blue-Chip Stocks – Shares in large, well-known companies with a history of sound financial performance.
• Penny Stocks – Shares of small public companies that trade at significantly low prices.
• Broker – An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
• Underwriter – A person or company that guarantees the sale of investment securities.
• Venture Capital – Financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.
• Private Equity – Capital that is not listed on a public exchange.
• Shareholder Equity – The net value of a company, or the amount that would be returned to shareholders if all the company's assets were liquidated and all its debts repaid.
• Return on Investment (ROI) – A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.
• Financial Leverage – The use of borrowed money to increase the potential return of an investment.
• Yield – The income return on an investment, such as the interest or dividends received.
• Active Investing – An investment strategy involving ongoing buying and selling by investors.
• Passive Investing – An investment strategy to maximize returns by minimizing buying and selling.
• Market Order – A request by an investor to buy or sell a security at the best available price in the current market.
• Limit Order – An order to a broker to buy a specified quantity of a security at or below a specified price, or to sell it at or above a specified price.