Investing can be confusing, especially for beginners, as it often involves a lot of specialized language and terminology. Here are some common investing terms with examples:
• Asset: An asset is something that has value and can be owned. Examples of assets include stocks, bonds, real estate, and commodities.
• Capital: Capital refers to the money or other assets that an individual or business has available for investment.
• Diversification: Diversification is the practice of spreading your investments across a variety of different assets in order to reduce risk. For example, an investor who owns a mix of stocks, bonds, and real estate may be said to be diversified.
• Earnings: Earnings refer to the profit that a company generates from its operations. Earnings are typically reported on a per-share basis, and can be an important factor in the price of a company’s stock.
• Equity: Equity refers to the ownership interest in a company. For example, if you own stock in a company, you have equity in that company.
• Fixed income: Fixed income refers to investments that pay a fixed rate of return, such as bonds.
• Inflation: Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation and avoid deflation in order to keep the economy running smoothly.
• Market capitalization: Market capitalization, or “market cap,” refers to the total value of a company’s outstanding shares of stock. It is calculated by multiplying the company’s stock price by the number of outstanding shares.
• Risk: Risk is the potential for loss or the uncertainty of achieving a desired outcome. Different investments carry different levels of risk, and it’s important for investors to consider their risk tolerance when deciding where to allocate their capital.
• Volatility: Volatility refers to the amount of fluctuation in the price of an asset, such as a stock or commodity. Assets with high volatility tend to have more significant price swings, while assets with low volatility tend to have more stable prices.
These are just a few examples of investing terms, and there are many others that you may encounter as you learn more about investing. It’s important to familiarize yourself with these terms and to continue learning about investing in order to make informed decisions with your capital.
*We are not financial advisors and only present our findings. Please do your own due diligence and what you feel you can make work in your own unique situation.