Investing Terms Cheat Sheet

Overview

Understanding investing terminology is crucial for making informed financial decisions. This cheat sheet covers essential terms to help navigate the world of investing.

Common Investing Terms

*General Terms*

• Asset Allocation: Strategy of distributing investments across asset types (stocks, bonds, cash).
• Diversification: Spreading investments to reduce risk.
• Risk Tolerance: Level of financial risk an investor is willing to take.
• Liquidity: Ease of converting assets into cash.

*Stock Market Terms*

• Stock: Ownership share in a company.
• Dividend: Payment from a company to its shareholders.
• Market Capitalization: Total value of a company’s outstanding shares.
• Bull Market: A period of rising stock prices.
• Bear Market: A period of declining stock prices.

*Investment Strategies*

• Growth Investing: Investing in companies expected to grow revenue rapidly.
• Value Investing: Buying stocks that appear undervalued compared to their fundamentals.
• Index Fund: A fund that tracks a stock market index.
• Exchange-Traded Fund (ETF): A collection of stocks or bonds traded like a stock.

*Bond & Fixed Income Terms*

• Bond: A loan to a company or government that pays interest.
• Yield: Earnings generated from an investment over time.
• Coupon Rate: Interest rate paid on a bond’s face value.
• Duration: Sensitivity of a bond’s price to interest rate changes.

*Advanced Investing Concepts*

• Price-to-Earnings (P/E) Ratio: Stock price relative to company earnings.
• Return on Investment (ROI): Profit or loss from an investment.
• Capital Gains: Profit from selling an investment at a higher price.
• Short Selling: Betting that a stock price will decline.

Tools & Resources

• Stock screeners for researching investments.
• Financial news platforms for market updates.
• Investment calculators for assessing returns.