Most professions have their own terminology or lingo. Unfamiliar financial terms can be very intimidating or confusing. Knowing the language can give you a great advantage. Here are a few translations you may find useful:
Equities - stocks.
Fixed Income - bonds, CD's.
Volatility - the inevitable, daily ups and downs of the markets. (not good or bad)
Standard deviation -defines risk. It graphically maps historical returns.
ROI - return on investment - how much your money has grown.
Mutual funds and Exchange traded funds (ETF) - pools of stocks or pools of bonds. Vehicles which give you access to multiple stocks (or bonds) at one time
Correlation - Choosing investments that do well at different times by determining the relationship of one investment to another. It is one method to avoid putting all your eggs in one basket.
Cap (as in capitalization) – designates size.
Mid-cap or large-cap stock - are terms that classify the size of a company.
It is a way to measure the size of a company by multiplying the number of outstanding shares by its share price.
Alternative investments – are those other than stocks, bonds or cash.
May include precious metals, art, real estate, commodities (e.g. coffee, corn, soy beans, pork bellies).
Alphabet Soup:
ETF - exchange traded fund (grouping of stock or bonds)
IRA - individual retirement account (tax-deferred savings for retirement)
SEP - simplified employee plan (retirement plan for small business)
REIT - real estate investment trust (groupings of different types of real estate- e.g. shopping malls, office buildings, senior housing).
CD – a certificate of deposit (issued by banks for a set time, a set interest rate and a set amount of money).
EFT - electronic funds transfer - a means of moving money from one account to another.
Protect yourself. Learn the language or ask for a translation. Be $ smart.
