Asset

An asset is any form of investment that can generate future income. For example, if you buy a car and rent it out in exchange for money; then your car becomes an asset.

Asset Allocation

 Asset allocation is the practice of diversifying your investments to reduce risk.

Ask/Bid

Asset prices can be referred to as a Bid or an Ask, where the Bid represents the highest price a buyer is willing to spend on an asset and the Ask is the lowest price at which a seller is willing sell an asset.

 Bull/ Bear market

An asset is referred to as being in a Bull Market when the prices of said assets goes up for about 20% during a consistent period of time. In contrast, an asset is said to be in a Bear Market when the prices fall for about 20% for a consistent period of time.

 Share

A share refers to a unit of ownership in a company. It is one of the equal portions into which a company’s fund is divided. 

Bond

A Bond is a loan provided by a buyer (you) to the issuer of the bond (usually the government or a corporation). When you buy a bond, you provide the issuer a loan which they will pay back on an agreed specific date. In the meantime, the issuer pays you periodic interest payments until the day of loan reimbursement.

Capital gain or loss

 A capital investment is the total amount of money spent on an investment. A capital gain the profit made on a capital investment. For example, if you invested Rs 100 on a wallet (capital investment) and then sells the wallet for Rs150, you have made a capital gain of Rs50. Similarly, if you sold the wallet for Rs50, then you made a capital loss of Rs50 since you lost Rs50 on your capital investment of Rs100.

Dividend

When someone buys shares of a company, that person becomes a shareholder. A company can then decide to reward their shareholders for their investment by sharing part of their profit with them. This shared profit is called a dividend. Dividend can be given in cash (in proportion to one’s share) or in the form of additional shares in the company.

Interest

An interest is the money charged to borrow money or the profit made on an investment.

Compound interest

 Compound interest is described as the earning, or owing of interest on your initial interest.

Index

An index tracks the performance of a group of assets to measure the overall performance of a specific investment type or category. For example, S&P 500 is an index of the 500 largest publicly traded companies in the USA.

 Index fund

An index fund is a fund that consists of a group of companies that tracks and mirrors the performance of a certain index like the S&P 500, by mimicking their makeup.

Mutual fund

 A mutual fund is a fund gathered from many investors which will be managed by professionals to invest in stocks, bonds and other assets on the investors’ behalf.

Portfolio

A portfolio consists of all the financial assets (cash, stocks, bonds, etc) that an individual investor or fund owns.

Return

The return is either the profit or loss of an investment over a specific period of time. 

Risk tolerance

 Risk tolerance refers to the degree of risk an investor is willing to take when making an investment.

Security

Any type of financial instrument (cash, stocks, checks, bank loan, etc.) that can be traded is known as a security. 

IRA

An IRA stands for Individual Retirement Account. It refers to a retirement account that offers long-term, tax-advantaged savings used by individuals with earned income to save for the future.

Margin

 Margin refers to money borrowed from a broker to make an investment.

Market capitalisation

A company’s market capitalisation refers to the cumulative value of all of the company’s shares held by all its shareholders.