When it comes to investing, the average person can often feel intimidated with the amount of jargon investing terms are known for. With investing consisting of so many topics and terms, a novice investor can spend months trying to learn the intricacies of each term.
While it can often seem like investing terms are a foreign language for some people, there are some basic and non-complicating investing terms each investor should know. To help ease you into the world of investing, our key investing terms will provide a solid foundation so you can begin investing with confidence.
One of the benefits of learning key investing terms is that it also enhances your financial literacy. With financial literacy education often lacking in children and adults, taking time to learn investment terminology can help enhance your financial decisions.
With saving and growing wealth among the least educated financial topics for consumers, there are many investing terms everyone should learn to help grow their financial literacy.
Basics of Investment Terminology
Don’t let big works like investment terminology persuade you from enhancing your investment knowledge. Investment terminology we recommend familiarizing yourself with includes:
- Asset Allocation: Also known as an investment strategy, asset allocation encompasses how your investments will be divided up. Whether investing with cash, trading stocks, or bonds, asset allocation is how you place your investment in various markets.
- Bonds: Investing in bonds is essentially like loaning money to a company or government. If the company or government doesn’t have any extreme financial hardships like bankruptcy, you should be able to cash in on the bond when it matures.
- Stocks: Purchasing stocks is essentially owning a piece of the company. As the value of the company changes, so will the return on your investment.
- Mutual Fund: By pooling money from numerous investors, mutual funds can be used to purchase a batch of stocks and securities which helps spread the risk.
- Index Fund: This is a type of mutual fund that allows investors to purchase an index like the S&P 500.
- Exchange-Traded Funds: Also known as ETFs, Exchange-Traded Funds are also similar to a mutual fund but instead of trading through an index, ETFs are traded on the stock exchange like stocks.
- Bull Market: When the stock market experiences continual gains over a period time, this is known as a Bull Market.
- Bear Market: This occurs when the stock market undergoes significant decrease in the value of stocks.
- IRA: An Individual Retirement Account helps store retirement funds in a tax-savings account and there are many varieties of IRAs.
- Diversification: This is the process of allowing your investments across multiple opportunities to help spread the risk to help reduce exposure to extreme swings from one asset.
With the United States often lacking in basic financial literacy compared to other similar countries, there’s no doubt that nearly everyone could use a little help when it comes to managing their finances.
Source: Wall Street Journal
If you’re interested in enhancing your financial knowledge, consulting with a financial advisor, like Matt Logan, can help educate prospective clients on key investing terms and strategies to optimize their finances.
Matt Logan is experienced with informing his clients on the best financial investments and developing strategies for their financial needs. If you need help achieving financial goals or managing your assets through financial markets, Matt Logan has proven strategies suited to fit your finances and lifestyle. Don’t hesitate to reach out to Matt Logan to see how he can help you achieve financial literacy while accomplishing your financial goals. Give a call today at 336-540-9700.