Financial terms can be difficult and in order to get started with the investing process, you first must understand the terminology. Online financial resources should be used in daily life to increase your knowledge.
“With the proper tools on your fingertips, you can become confident in your financial decisions. From PFs to international markets, managing your portfolio can be easier when you have an understanding of the language that is being used. A finance dictionary can be a quick reference that you can keep handy for easy access.”
This personal finance dictionary is for those new to investing or for savvy investors that are looking for a quick reference. You will find an alphabetical index of terms derived from Stack Finance informative articles. It is for informational and educational purposes only and It is not meant to be comprehensive.
alpha: Alpha is a measurement of the performance of an investment as compared to an index such as the Nifty 50.
asset allocation: Asset allocation refers to the apportionment of the capital assets in your investment portfolio in a way that balances the risks and rewards.
asset class: Asset classes refer to securities that have similar characteristics and market behaviors to be grouped together for investment, trading and economic analysis.
automatic investing: Automatic investing is a method of investing in which money is utilized at specific intervals automatically.
bear market: A bear market is a downward trend that extends over a longer time period than a stock market correction.
beta: The investment beta or β means a measurement of the volatility of a portfolio, stock, or security compared to a benchmark or entire market.
bond: Bonds are securities considered to be relatively low-risky than other investments. They allow others to borrow money from you. Bonds give you a certain interest rate, and the debt that is retuned to you by the government or corporate entity is repaid when your security matures.
broker: A broker is a stockbroker or firm that executes your buy and sell orders at a certain commission.
brokerage account: A brokerage account is a type of taxable investment account that you can open at a licensed brokerage firm. It is an arrangement through which you deposit funds and then can place buy and sell orders for different securities.
brokerage firm: The full-service brokerage firm is a firm that offers a variety of services in addition to executing buy and sell orders for their users.
Bombay Stock Exchange: The Bombay Stock Exchange is an Indian stock exchange located at Dalal Street, Mumbai. Established in 1875, the BSE is Asia’s first stock exchange
bull market: In a bull market, the market performance continues to grow.
capital gain: An increase in the value of an investment, capital asset, or real estate is a capital gain.
capital loss: Capital losses occur when there has been a capital asset that you own has declined as compared to the price that you bought it at.
Certificates of Deposit (CD): These certificates of deposit are savings accounts where your money is held for a time period from a few months up to a number of years.
common stock: Common stocks are shares of companies that provide you with voting rights in shareholders’ meetings.
debt: Debt is when something that is owed by one party, usually in the form of money, to a second party.
demand pull inflation: Demand pull inflation occurs when the demand of an asset is much higher than the supply. As consumer demand increases, companies try to increase the supply to meet the demand. When additional supply unvailable, the stock price increases. This leads to inflation.
diversification: Diversification is the act of including different kinds of asset classes in a portfolio. Diversification could act as a hedge against risk.
dividend: A dividend is a percentage of a company’s profits that the company pays to shareholders on a timely basis, typically quarterly.
dividend yield: The dividend yield formula is company’s annual dividend divided by its share price.
earnings per share: The earnings per share of a dividend stock is the difference between company’s net income and dividends that are paid for preferred stocks divided by the average number of shares that are outstanding.
equity: Equity refers to the value of assets minus liabilities.
Exchange Traded Funds (ETFs): Exchange-traded funds are specific kinds of index funds that try to match the performance of a predetermined indicator and are traded over the exchange
financial bubble: A financial bubble is when the price of a commodity, security, or other financial instrument increases to a point where it cannot be reasonably supported by its underlying fundamentals.
financial goals: Your financial goals are where you would like to be financially in the short-term, mid-term and long-term.
financial plan: personal financial plan is a written evaluation of the finances, including your income, asset evaluation, your liabilities and your investments to determine both your current financial status and your future financial status.
financial success: Financial success can be proportional to monetary success.
fund: A fund consists of money from a large number of investors pooled in for a specific purpose.
investment books: Investment books are books that are meant to educate people about the stock market, the importance of savings and how to make smart investment choices.
investment portfolio: An investment portfolio refers to a collection of your assets. A portfolio may include securities including stocks, bonds, mutual funds, money market funds and exchange-traded funds.
investment strategies: The methods that people use to get strong returns and greater capital appreciation from their investments are called investment strategies.
long term capital gains: Long term capital gains are an increase in the worth of an asset that you have held for more than a year.
long-term debt: Long-term debt consists of financial obligations that last for 12 months or more.
margin call: If the assets in your margin account fall below its initial margin requirement for a stock that you bought, you can get a margin call. This is a demand from your broker that you deposit additional money/securities into your margin account so that potential losses and your margin debt can be covered up.
market downturn: The stock market downturn definition refers to a period of time during which the stock market continues to decline.
National Stock Exchange of India (NSE): The National Stock Exchange of India Limited is the leading stock exchange of India.
net income: Net income is the dollar amount after subtracting taxes and deductions.
options: Options are contracts that allow you to exercise the option to purchase or sell stocks at a set price on a specific day.
passive investing: Passive investing involves lesser of buying and selling. When you engage in passive investing, you might buy and hold investments for long term, which is called set it and forget it investing or a lazy portfolio.
provident funds: Its purpose is to provide employees with lump sum payments at the time of exit from their place of employment.
personal finance blogs: The top personal finance blogs may offer money advice from people who have successfully saved, made profits, gotten out of debt and increased their wealth.
portfolio: A portfolio is a term that refers to a collection of your assets and securities. A portfolio may include securities including stocks, bonds, mutual funds, money market funds and exchange-traded funds.
preferred stock: Preferred stock are shares of a company that pay dividends in predetermined amounts. If you are a preferred stockholder, you may not have voting rights.
price-earning ratio: The price-earning ratio is stock’s current price divided by its earnings per share. This ratio is determined by taking the product of the share price and the number of diluted shares outstanding and then dividing that by the sum of the earnings over the past four quarters.
Real Estate Investment Trusts (REIT): An REIT is a public or private company that owns real property that creates income.
retirement: Retirement can mean completely leaving the workforce.
retirement strategies: Retirement strategies are the plans that you make and implement so that you do not run out of money when you retire.
risk: Risk is defined as an investor’s ability and willingness to withstand volatility in the stock market.
roboadvisor: Robo-advisors are computer programs that are programmed to advise users according to their financial needs and goals.
Securities and Exchange Board of India (SEBI): The Securities and Exchange Board of India is the Regulator for the Securities market in India owned by Government of India.
short-term capital gains: Short term capital gains is an increase in the price of an asset that you hold for 12 months or less.
stock: A stock is a security that represents ownership in a company sold by the board to an investor or a shareholder. The company then uses this money to fund operations, and the investor receives dividends, or fiscal rewards, based on the company’s performance and earnings.
tax exempt: Tax exemption is a monetary reduction in taxable income.
treasury bills: Treasury bills are short-term, no interest, government securities that are sold at some discount.
treasury bonds: Treasury bonds are debt securities with long-term maturities of more than 10 years.
trend investing: A strategy employed by investors in which they place their money in industries, stocks, or markets that are expected to boom in the future is known as trend investing.
value investing theory: Value investing theory is the finding of stocks that are undervalued and buying was introduced by John C. Bogle.
volatility: Volatility is measurement of the distribution of returns for a particular index or security.
yield curve: A yield curve is a graph that plots in a line the yields of equal credit bonds and their maturity dates.
This almost comprehends all the major financial terms. Hope it helps you in your journey of financial life!