Wealthy people invest first & spend what’s left.. Broke people spend first & invest what’s left – Unknown
Why there is a need for decoding investment jargon? Because investment jargon can be extremely annoying for many people. If the jargon in the finance is decoded well, the venture will become a healthy market to the investor and advisor. It will be in reach of both. Being an investor, one must remember that there are a bunch of terminologies and no universal definitions for any particular term. It is better you stay on the same page that your financial advisor is discussing with you. An investor must understand both the purpose and choice of a selected form of investment. It is always important to be realistic and know that it is your hard-earned money will be getting invested, and I shall be responsible for whatever happens to it.
There are two types of advisors:
- These sets of people work hard to make investment simple and more comfortable for middle-class investor.
- This type of advisor is born dishonest engaged in taking advantage of naïve investors.
Here is the list of most common investment jargon – terms used in investment.
| Asset | A source that investor hopes getting returns in future |
| Market | A place where sellers and buyers come together with a purpose |
| Diversification | Splitting your investment across a variety of industries and investment products/sectors. |
| Valuation | The analytical process of determining the current worth of an asset. |
| Bid | An offer made by the dealer, investor, or a trader to buy commodities, currency or a security |
| Savings made simple | To actually save money or to keep money aside for later use. |
| Short-term investments | Include savings accounts, money market funds, and certificates of deposit. |
| Bonds | A bond is a loan you make to a company, municipality, or government. |
| 1031 Exchange | Allows an investor to sell and reinvest into the property, deferring all capital gain taxes. |
| Risk Tolerance | How much an investor is tolerant of a market risk |
| Asset Allocation | A place or area where you are putting your money. |
| Cap | A value of a company remaining shares in the market. |
| Solvency | The ability of a company to meet its long-term debts and financial obligations |
| Bear | When an investor attempt to make a profit from a decline in stock prices |
| Bull | When an investor believes that the share market will rise |
| Risk | The chance that an outcome or investment’s actual gains will differ from an expected outcome |
| Hedge | Investment to reduce the risk of adverse price movements in an asset |
| Equity | The amount of the money shareholders get once debt and other liabilities of a company gets cleared. |
| Credit | A term used when asset decreases and liability increases. |
| Dividend | A part of a companies earnings to be paid to its shareholders. |
Conclusion
There are several financial terms effectively used by the companies and sellers in the market of investment. A good and ethical seller never misused his investor. A good investor shall not be misunderstood by the investment market. If you have enough knowledge about investment jargon, then it will be much easier for you to get a deep dive into the financial world.
Note: www.investopedia.com is one of the best options to learn jargon in the investment.
You can also check our previous blog on best books on financial literacy