Being knowledgeable about different investment terms is a necessity if you want to enter the financial markets. This glossary covers some of the more basic, but important, terms investors should be aware of beginning with the letters between J and Z.
Being knowledgeable about different investment terms is a necessity if you want to enter the financial markets. This glossary covers some of the more basic, but important, terms investors should be aware of beginning with the letters between J and Z.
Junior ISA – A version of the ISA, where parents can invest up to £3,600 a year on behalf of their child, who then has access to the invested total plus interest accrued from their eighteenth birthday.
Liquidity - The ease at which buying and selling can take place on the financial markets.
Loan – Money that is paid to an individual or company which must then be paid back over time. This will usually be paid gradually on a monthly basis over a set time period, with interest included in the monthly payments.
Market Capitalisation – The total market value of an entire company. All assets, including cash and assets, are taken into consideration.
Market Value – The price at which a security is trading and could be bought for.
Maturity – The length of time until the last interest payment of a bond will be redeemed.
Property Investment – When land or buildings are invested in with the intention to buy and sell for a higher price at a later date. Some make money through charging rent while the investment increases in value.
Retail Prices Index (RPI) – A measure of inflation which looks at the increase or decrease in retail prices.
Return – The percentage of income from an investment. So, if £100 was put towards an investment and it is now worth £120, that is a return of 20%.
Security – A security is a negotiable certificate that shows a debt or equity obligation.
Settlement – A payment or collection of proceeds that results in the end of a financial agreement. For example, a loan settlement mean the loan has been paid off and is now complete.
Share – A stake in a company. Shares are divided into portions, which are sold to investors.
Share Capital – The amount of a company’s funding that comes from the issuing of shares.
Short-Selling – Selling a security while prices are high with a plan to buy it again at a later date when it is at a lower price.
Spread – The difference in yield between two different bonds.
Stamp Duty – A form of taxation which is paid by a purchaser of certain assets, including property.
Total Return – The overall return on a stock or portfolio taking into account changes in capital values and income earned.
Valuation – A summary of an investment portfolio showing the value and value of everything they own.
Venture Capital (VC) – Where a company is invested in at its early stages. These companies can be invested in for relatively little, meaning potential for high returns. They are risky though, as there is no previous performance to base potential on, only expectation.
Yield – The percentage of return paid on a stock in the form of a dividend or the effective rate of interest paid.
Yield Gap – The difference in yield between different assets.
Andrew Marshall ©
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