Investment Club Education Series: Investing Terms | Part 1
June 20, 2019
Build Your Vocabulary with These Common Investment Terms - Part 1
When beginning to invest, you will likely encounter new terms, strategies, and ways of thinking that may make your research seem daunting. There is no reason to be intimidated by investing and by learning a few key basics, you’ll quickly be able to ‘speak the lingo’ and participate in investment discussions.
In our first Investment Club Education series, we will be sharing common investment terms to help you build your investing vocabulary.
Test your knowledge with our picks for part 1:
Security: A security is a financial instrument that has monetary value and can be traded. Examples include debt securities, such as banknotes or bonds, equity securities such as stocks, or derivative securities such as forwards, futures, options or swaps.
Exchange: An exchange is an organized market where financial instruments are traded. Well known examples include the New York Stock Exchange (NYSE), NASDAQ and the Toronto Stock Exchange (TSX).
Ask: The ask is the price that a seller will accept for the stock (or other security). Aka: the offer price.
Bid: The bid is the price a buyer is willing to pay for a stock (or other security). The ‘ask’ will always be higher than the ‘bid.’
Spread: The spread is the difference between the ‘ask’ and ‘bid’ price.
Lot: A lot is a standardized unit of a financial instrument, unique to each market, set by the exchange or regulatory body. In stock markets, for example, most stocks trade in lot sizes of 100 shares, with some higher priced stocks trading in lots of 10 shares.
Volume: Volume is the number of shares or contracts traded of a security or market within a defined time period.
Portfolio: A portfolio refers to a collection of investments held by an individual or company.
Diversification: Diversification refers to an investment strategy that encourages investors to build their portfolio from a varied selection of assets. Diversifying investments is believed to lower risk and yield more returns.
Dividend: A dividend is a payment made by a corporation to its shareholders on a regular cycle. It is often a distribution of the companies profits.
Yield: Yield is the amount of cash that returns to the owner of a security, in the form of interest or dividends. Yield is expressed in percentage terms.
Total Return: The total return is the full return of an investment over a given time period. Total return includes interest, capital gains, dividends and other payments over a given period of time.
Capital gain/loss: A capital gain or loss is the difference between the value of a security today versus the initial purchase price. A realized capital gain or loss is this difference at the time the asset is sold. Understanding capital gains/losses is important as there are often tax consequences once realized.
Bull market: A bull market refers to a financial market where prices are rising, or are expected to rise. Bull markets encourage buying.
Bear market: A bear bear market is the opposite of a bull market. In a bear market, prices are falling, which encourages selling.
Blue chip: Blue chip refers to companies that are known to be a reliable investment. They demonstrated sustained growth over long periods and have proven themselves to be able to maintain profitable operations during economic downturns. Fun fact: the name ‘blue chip’ comes from poker, in which the most valuable chip is blue.
Want to learn more investing terms? We've got you covered. View all of our Investment Club Education Series: Investing Terms here.
Ready to try out your new vocabulary? Start your own investment club with Voleo.
Disclaimer: If specific securities are mentioned they are for illustrative purposes only and such mention shall not be seen as a recommendation to buy and/or sell. None of the opinions expressed by Voleo or participating guests should be construed as investment advice. Securities offered through Voleo USA, Inc. Member of the Financial Industry Regulatory Authority (FINRA), Securities Investor Protection Corporation (SIPC). Security products are not FDIC insured, not bank guaranteed, and will fluctuate in value. We do not solicit, recommend, or offer investment advice. Voleo USA, Inc. is a wholly owned subsidiary of Voleo, Inc.