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Common Investing Terms You Need To Know

Most of the times, you will notice brokers and investors using certain investing terms to communicate with each other. If you are a novice, you will have a hard time understanding these terms.

But once you start the journey of investment, you will get acquainted with various terms and definitions that are frequently used in the investing world.

Common investing terms and definitions
Investment knowledge never goes waste. One needs to know how and in what context these investing terms must be used. Here are the most common investing terms and definitions.

Asset
Anything that earns you or your business money is your asset. Assets can include stocks, bonds, cash, or real estate.

Balance sheet
Balance sheet is a company statement that shows the earnings and expenses incurred by the company in a financial year.

Common stock
A type of security issued by a corporation and representing ownership in the corporation is called a common stock.

Diversification
The process of spreading out investments into different asset classes to increase returns on investment and minimize risk is called diversification.

Equities
Shares issued by a company to its shareholders that represent ownership in the company.

Fixed-income fund
These are mostly bonds, where there is no maturity date or any repayment guarantee.

Growth investing
Growth investing is an investment strategy that invests in stocks and funds of companies that have good growth potential.

IRA
Individual retirement account (IRA) is a tax-deferred account that allows an individual to contribute $3000 annually.

Inflation
A scenario in which prices of goods and services increase, leaving buyers with no purchasing power.

Junk bond
A bond that has very low ratings, say BB or less, but gives good yields is a junk bond.

Large cap
When the market capitalization of a company stock is greater than $10 billion it is called as a large-cap company. Companies such as Apple, Walt Disney, and Wells Fargo are large capitalization companies.

Liquid funds
Liquid funds refer to an asset such as stocks or bonds that can easily be sold off without any restrictions. For example, stocks or mutual funds are liquid because they can be sold off at the current market price. Whereas bonds are not liquid because they have a specified maturity date.

Long-term investment
When an individual invests a certain amount in stocks or funds with the intention to hold for more than a year, it is called as a long-term investment.

Market price
The price at which an asset such as stock or fund or bond is bought or the current prevailing price is the market price of an asset.

Mutual fund
The mutual fund is a company that pools funds from shareholders and invests in different asset classes such as stocks, commodities, bonds, and other money market accounts.

Net asset value
NAV (net asset value) is the actual value of a fund’s assets less its liabilities per unit of shares. NAV is often calculated in the case of mutual funds.

Portfolio
A basket of investments that includes financial assets such as stocks, bonds, and other instruments, which are owned by an individual or by an organization and managed by finance managers or fund managers.

These day-to-day investing terms and definitions come in handy when dealing with investors and fund managers.

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