Some plain talking – investment terms uncovered

Navigating investment conversations can be daunting. Let’s simplify! Here’s a breakdown of key investment terms:

1. Active/Passive Investment: Active managers pick assets, aiming to outperform, while passive mimics index performance.
2. Annual Dividend/Yield: Dividend is paid to shareholders yearly, and yield is the dividend divided by share price.
3. Asset Class: Equities, bonds, property, cash, and commodities are investment categories.
4. Bear Market: A 20%+ market drop from its peak over a period.
5. Bonds: Investor loans to entities for interest and capital return at bond maturity.
6. Correlation: Measures how two assets move together; diversification aims for non-correlation.
7. Correction: A milder market drop (10%).
8. Equities: Also known as shares or stocks, they represent ownership in a company.
9. Hedge: Strategy to offset investment risks.
10. Leverage: Using borrowings to amplify gains or losses.
11. Market Capitalisation: Total value of a company’s shares.
12. Premium/Discount: ETF trading above (premium) or below (discount) its value.
13. Real Return: Return accounting for inflation.
14. Sectors: Different economic areas, like tech, finance, healthcare.
15. Stock Exchange: Where shares are traded.
16. Volatility: How much a fund’s performance fluctuates; higher volatility can mean higher risk.

These are just a few investment terms. Whether you’re discussing portfolios or investment strategies, these terms can serve as a helpful guide.