12 Basic Investing Terms and Phrases
There’s no need to be embarrassed if you’ve heard these investing terms or phrases before but don’t understand what they really mean -we’ve all been there. I didn’t even know what a mutual fund was until like three years ago!
Now, I love learning new financial words and I hope that after reading this, you will too. I’ll teach you how to speak the lingo like one of the pros. Use this investing glossary I’ve complied with some of the basics, and you’ll be a Wall Street native in no time.
1.) Bear Market- A major sale on stocks and bonds! Take advantage and buy more during bear markets, and you’ll be ahead of most investors.
2.) Bond- Lending money with the promise to get it back- possibly with interest- at a later time. Very low risk.
3.) Bull Market- A big increase in prices on stocks. Good for the economy, good for your investments!
4.) Common stock- Your piece of the pie (share) of a corporation in exchange for investing your money.
5.) Compounding- Making money on money you’ve already made (earnings on your earnings from money you’ve invested). And the more time you have the better, because the real benefit is seen later on.
6.) Diversify your portfolio- Spreading the risk around. Mixing it up with stocks (both big and small companies) and bonds from around the world and at home (U.S.).
7.) Dividend- Your “winnings” when the companies you invest in make money.
8.) Dow Jones Industrial Average- The oldest market index of 30 highly traded companies. It’s the most popular measure of the U.S. Stock Market’s health.
9.) Inflation- The rise in retail prices overtime; meaning your dollar buys less than today than it did years ago. For example, the avg. price of a gallon of gas in 1960 was $.31 and in 2018 it’s $2.50. One of the main causes of this is the government’s ability to print money-must be nice.
10.) Mutual Fund- It’s like a team made up of stocks and bonds that usually has a manager. The manager makes trades (buys and sells) on its players (stocks and bonds) to get the best performance (return).
11.) Portfolio- Just another way of saying the collection or variety of your investments.
12.) Return- What you make or lose on money you’ve invested. You want the real deal (real returns), meaning it accounts for inflation; as opposed to nominal returns which don’t.
Now, you can be confident discussing your finances. Keep this list handy and refer to it anytime you need a refresher. Are there are other investing terms or phrases you’ve heard that you need translated? Comment or write to me and I’ll put together another version.