Some Investment Terms To Know

An investment in knowledge always pays the best interest.

— Benjamin Franklin.

If you haven’t tried it before, you should check out Google Trends. What people are searching for and surfing on the internet may surprise you. Living in a world where information can be found in an instant, we are never far from an answer that we seek. Sometimes if you feel a little out of depth when looking at investments, or feel embarrassed about searching for simple investment concepts, don’t worry, millions of other people out there are asking the exact same question. Here are some commonly searched investment terms to help you cover the basics and refresh your memory:

• Stocks
  If you own shares of a company’s stock, then you are an owner of the company. As an owner, you are entitled to a piece of its profits (either through the capital appreciation of its stock and or through its dividend payouts).

• Bonds
  A bond is a loan to a company where you are the lender. If you own a company’s bond, then you are lending money to the company in exchange for repayment plus interest by a specific date.

• Index
  A list of stocks, bonds, or sometimes other assets which are grouped together because they share common characteristics like location, business sector, or overall market value. The price movement of an index gives you an idea of how a particular economy or market is doing. Common indices are the S&P 500 and the STI index.

• Unit Trust or Mutual Fund
  A professional fund management company which runs a unit trust or mutual fund pools money from many investors and deploys it in a group of stocks, bonds, commodities, or other assets based on what the fund manager sees fit. When you invest in a fund, you own a piece of all the assets inside it.

• ETF
  It is similar to a Unit Trust or Mutual Fund, but it is much more diversified and tracks a specific index very closely. As the components of an ETF are traded less often, they typically have lower fee structures than Unit Trusts or Mutual Funds (Note that there are exceptions where this may not the case).

• Cryptocurrency
  Digital money created with computer code and is secured by cryptography, which helps to ensure that it cannot be counterfeited. Unlike normal currencies, cryptocurrency is not issued by any sovereign nation and is not backed by assets. As such, it needs to be stored online and its value is subjected to the demand and supply dynamics of people who want to own it.

• Dollar Cost Averaging (DCA)
  DCA is a simple investment strategy where an investor divides up the amount to be invested into equal smaller pieces and systematically enters the market at pre-determined intervals. This process helps the investor buy-in at an averaged price, without the need for market timing and helps to bypass common behavioural problems.

When you first start out in investing, it can feel overwhelming and intimidating at times. Taking things one step at a time will help you in your journey, and before you know it, you will get the hang of things. We are happy to help you get started or provide a second opinion should you feel you need someone to take that journey with you.