Investment & Stock Market Lingo Simplified

Sometimes it can really seem as though bankers and financial advisors not only majored in money and finance, but in a language completely removed from everyday-English. It can be really frustrating and a real put off for people who are thinking about getting into investing, especially for first timers.

Even though your financial advisor can give you advice and introduce you to new and different investment products to fit your risk comfort levels and investment interests, the decision of where to put your money is ultimately yours.

So what’s what?

Portfolio

A collection of investments which can include stocks, bonds, mutual funds and even investment property and art.

‘Fund’

An investment company.

Shares

Ordinary shares entitle the shareholder to a share in the earnings of the firm and vote at meetings, whereas preference shares entitle shareholders to a fixed, period income but don’t entitle you to voting rights.

Stocks

Money raised through sales of shares.

Bonds

A written and signed contract or agreement that promises to pay a certain sum of money on a certain date.

Liquid asset

Assets which can be converted into cash in a short amount of time with little loss in value.

Hedge fund

An investment company, usually used by wealthy individuals and institutions. They usually use aggressive (and risky) strategies to grow their portfolio. Hedge funds usually set extremely high minimum investment amounts to get started and investors have to pay a management fee plus a percentage of the profits.

Mutual fund

Mutual funds are aimed at raising money from shareholders which is then used to invest in a group of assets. Money is raised through the sale of shares (to the public) in the same way a company can sell stocks of itself. Although, with mutual funds, the money is used to purchase a wide range of investments (versus investment in one single company when purchasing company stocks). By investing in a mutual fund, shareholders receive and equity position in the fund. You’re free to sell at any time, although the price of a share will fluctuate everyday depending on its performance and securities.

Securities

An investment instrument that represents financial value, they are loosely described as stocks, bonds and any other ownership investment that can be traded on the secondary market.

Commodities

Agricultural products, fuels and metals that are traded in bulk on the commodity exchange.

Futures

Commodities or securities that are sold at a stated future date at a specified price.

Greenback

US currency

Forex (foreign exchange)

Trading one currency for another. For example, if you buy US dollars using Australian currency when the US dollar is low, and the Australian dollar is high – and sell you US dollars after they’ve gone up in value, you’ll get back more Australian dollars.

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