- September 18, 2019
- |Legal Moneylender
- 0
For people who are new to the world of investment, it is quite easy to get confused with technical concepts and terms. The inability to understand these concepts can often lead to wrong decisions and losses. Therefore, if you are planning to start off with any type of investment in Singapore, you must be well acquainted with these terms.
Stocks
Stocks are a type of security that gives stockholders a share of ownership in a company. Stocks are often known as shares or equity. Owners are usually entitled to receive dividends and vote on important company matters.
Bonds
In simple terms, a bond is like a loan. When you buy a bond, you agree to borrow money from the government or a company. Typically, the bond issuer promises to repay the entire principal loan amount on a future day, known as the maturity date, and pay interest income in the meantime.
Mutual Funds
A mutual fund is a pooled portfolio. Investors buy shares or units in a trust and a professional portfolio manager invests the money. The fund itself holds the individual stocks, in the case of equity funds, or bonds, in the case of bond funds.
Exchange-traded Funds
A special type of financial trust that allows an investor to buy an entire basket of stocks through a single security, which tracks and matches the returns of a stock market index.
Dividends
This is the payment made by a company to its shareholders from past and current earnings. The amount an investor receives is based on the number of shares owned.
Estate Planning
It is the process of determining and mentioning how an individual’s assets, properties, wealth, and belongings will be distributed and inherited after his demise or mental incapacitation. Creating a will is just one part of the estate planning process.
Portfolio
A portfolio is a collection of securities, such as stocks, bonds, or mutual fund shares, owned by an individual or an organization.
Diversification
Diversification is the act of including different types of assets in your portfolio. It also includes the decision to buy investments from different industries or geographic locations.
Ask or Offer
This is the lowest price at which someone is willing to sell the security. When combined with the bid price information, it forms the basis of a stock quote.
Ask Size
The ask size is the amount of security that a market maker is offering to sell at the asking price. The higher the ask size, the more supply there is that people want to sell.
Bid
A bid is the highest price a buyer is willing to pay for a stock. When combined with the ask price information, it forms the basis of a stock quote.
Blue Chip Stocks
Stocks of leading and nationally known companies that offer a record of continuous dividend payments and other strong investment qualities are called blue chip stocks.
Capital Gain or Loss
Capital
gains or losses include the profit or loss resulting from the sale of certain
assets classified under the federal income
tax legislation as capital assets, such as stocks.
Broker
A broker is a person who acts as an intermediary between the buyer and seller of a security, insurance product, or mutual fund, often paid by commission. The terms broker and dealer are sometimes used interchangeably.
Exchange
This is a place where investments, including stocks, bonds, commodities, and other assets are bought and sold. It is a place where brokers, buyers, and sellers can connect.
Index
An index is a tool used to statistically measure the progress of a group of stocks that share characteristics. This can include a group of stocks, a group of bonds, or a group of other assets.
Margin
This is essentially borrowed money used to make an investment. You can get credit from a broker to buy more than you actually have money for. The hope is that you will make enough money that you will be able to repay the borrowed amount from your earnings.
Liquidity
Liquidity is the ability to turn an asset into cash readily.
Market Capitalization
The market cap of a company is figured by multiplying its current share price by the number of outstanding shares. The largest companies have market caps in the billions.
Asset Allocation
It is an approach to managing capital that involves setting parameters for different asset classes such as equities (ownership, or stocks), fixed-income (bonds), real estate, cash, or commodities.
Stock Broker
A stockbroker is an institution or individual who or which executes buy or sell orders on behalf of a customer. Stockbrokers settle trades – making sure cash gets to the right party.
Market Volatility
Market volatility is the relative rate at which investment market prices move up and down.
Arbitrage
It refers to buying and selling the same security on different markets and at different price points.
Bear Market
A bear market is a period of several months or years during which share prices consistently fall. During bear market periods, investing can be risky even for the most seasoned of investors.
Bull Market
A bull market is a period of several months or years during which share prices consistently rise. It is exactly opposite to bear market situation, and thus, investments are highly encouraged during this period.
Haircut
It is an extremely thin spread between the bid and ask prices of a stock. Haircut can also refer to a situation in which a stock price gets reduced by a specific percentage for margin trades or other purposes.
Knowing the meaning of these investment-related terms won’t make you an investment guru immediately. But being in the know will put you on the right track to taking your investments in the correct direction.
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