It can seem daunting at times to try and break into investing after all, you may be simply wanting to make some basic investments, but find yourself confronted with a variety of different terms that you aren't completely sure what they mean. To help you with this, several common investment terms are defined below. This should be enough to get you started with some of your investments, at the very least; it should be noted, however, that this is nowhere near a complete list of investment terminology that is used today. Stock A stock is a type of investment that signifies a partial ownership of a publicly- traded company. Each share of stock purchased is an equal portion of ownership that grants the same rights and privileges as every other share of the same type of stock. Some shares of stock may be designated as common or preferred these are very similar, though preferred stock usually gives up the voting rights of the shareholder in exchange for advanced dividends and more security in case of a bankruptcy. Bond A bond is an investment into a loan fund issued by a government or institution. The bond pays interest for the term that it's active, meaning that the longer you have your bond investment the more interest you're going to collect. Once bonds reach their maturity date, the bond expires and the total amount earned is paid to the investor. Index An index is a grouping of different investments that cover the same items. Common indexes are precious metals, diamonds, and industrials. Indexes can often be invested in as a broad fund in much the same way that you invest in stocks. Mutual Fund A mutual fund is an investment that allows individuals to invest their money into a previously-created diverse portfolio that usually contains a variety of stocks, bonds, indexes, and other investment opportunities. Investors in a mutual fund are usually considered to own shares in all stocks included in the fund. Dividends Dividends are a portion of a company's earnings that are distributed among shareholders at the discretion of the company's board of directors. Dividends may be paid in cash, shares of stock, or other means. Money Market A money market account is a type of mutual fund that invests in different loans and financial services while attempting to keep the initial investment low. Interest is paid on the investments as it is collected. Bull Market A bull market occurs when investment prices are either on the rise or appear likely to rise in the near future. It is also referred to as an optimistic market, and tends to have larger amounts of long-term investment. Bear Market A bear market occurs when investment prices are either falling or appear likely to fall in the near future. It is also referred to as a pessimistic market, and tends to have larger amounts of short-term investment in order to get the most out of temporary gains and avoid long-term losses. Futures Futures are investments where an individual pledges to purchase or sell certain commodities at a future date for a certain price. This is often used to get a lower price on commodities that will be resold later for a higher price. Margin Trading Margin trading is where a stock broker allows individuals to purchase shares of stock for a portion of the price, with the broker lending the remaining amount. The borrowed amount must be paid back when the stock is sold, and service fees must be paid to keep the margin account open before that time. You may freely reprint this article provided the following author's biography (including the live URL link) remains intact: About The Author |
