When I started this blog, I was going to focus on women and investing. I have worked as a financial advisor and thought that it was important for many women to gain knowledge about how to handle their money. The financial articles didn’t gain the interest that my parenting tips did–and I enjoyed writing about parenting more–so that’s where my blog headed. However, here’s an article for early on about investing terms. The New Year is a good time to make some resolutions about our finances.
I know you’ve heard them talked about and mentioned a million times. But, do you know what they mean? How many of these ten financial terms can you can define:
If we women are going to own the world, then we better know what we’re talking about. How many times have you listened to a financial advisor and your eyes glaze over? Is it because financial professionals take for granted that you have knowledge that you don’t have? Is it their jargon? Or, are they are just plain boring!
Take a moment to quiz yourself. FYI, the answers are right here:
Ten Investment Terms
Equity — stock, ownership in a company.
Bond — Unlike a stock, where you are an owner in a company, with a bond, you lend money to a corporation, municipality or government agency. In return, you will be paid back your money plus interest.
Yield — This term is often found to be confusing. There are several types of yield, but the basic definition is the income return you’ll receive on an investment.
Risk — The more risk you take, the higher your chance of reward and vice versa. There are many different types of risk including company, market, inflationary, reinvestment risk, etc.
Mutual Fund – A pool of money that is collected from many investors and invested in stocks, bonds, options, commodities or money market securities.
ETF — Exchange Traded Fund (ETF) is an investment traded much like stock on the exchanges. An ETF closely mimics an index, such as a stock or bond index. (SPDR is an example that follows the S&P 500.)
Dividend — Corporate profits paid to shareholders of common and preferred stock.
Asset Allocation — Diversifying your investments across different assets (cash, stocks, and bonds) to protect against volatility.
Blue Chip — Large, well known companies that have performed well over a long period of time.
DOW — The Dow Jones Industrial Average known as the “DOW” is a compilation of 30 blue chip companies, that gives a snapshot of how the overall market is doing at a particular time.
How did you score?
0 to 3 financial flounder
4 to 7 fiscally efficient
8 – 10 financial wizard