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A Few Terms Investors Should Know

UPDATED: March 2022

A Few Terms Investors Should Know – If you keep investing and diversify your earnings investments, you will get a better return on your investments.

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A Few Terms Investors Should Know

History has consistently shown that stock prices start to go up after a crash, and remain bullish for years thereafter, which is why it is best to invest right now. Whether you choose trade or invest alone, or opt to use a financial advisor, broker, or a robo advisor, you should know about a few investment terms before you start investing. These terms include:

Terms Investors Need to Know – * Stocks

Stocks are an ownership share of a company and represent a claim on the assets and earnings of that company. In general, the value of a stock grows when the company performs well on the market, and when the performance of the company is terrible, the value of the stock will go down.

Terms Investors Need to Know – * Bonds

When you buy a bond, you lend money to a company or government (municipal, federal, or state). There are maturity dates for bonds, at which time you can collect interest money by cashing in the bonds.

Terms Investors Need to Know – * Mutual Fund

The mutual fund collects money from several investors and then invests it in assets like bonds and stocks. You can make a lot of money quickly by choosing to invest in mutual funds.

Terms Investors Need to Know – * Cash

Everybody knows that cash is the green notes you keep in your wallet and use to exchange goods. However, in portfolio terms, cash generally refers to Treasury bills, certificates of deposits (CDs), or money market accounts.

Terms Investors Need to Know – * Expense Ratio

When you invest in mutual funds, you will come across this term. The “expense ratio” refers to the costs of owning a fund, which includes annual administration and maintenance fees, along with the advertising costs that the mutual fund incurs.

Terms Investors Need to Know – * Price-to-Earnings Ratio

When looking at the fundamentals of stocks, the price-to-earnings ratio, also known as the P/E ratio, is crucial. It will examine the stock price of a company in relation to its earnings. When the company isn’t doing well in the market, it will have a low P/E ratio. However, a higher P/E ratio doesn’t necessarily mean that the company is doing well. A P/E ratio above 25 may indicate that there will be a bubble burst in the industry.

Conclusion of A Few Terms Investors Should Know

These were some of the terms you should know about as an investor when you are thinking about investments. The more knowledge you are about the terminology used in investments, the better your chances of making profitable investments.


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