Common Terms

  1. Bonds – A debt security, similar to an IOU. Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time.When you buy a bond, you are lending to the issuer, which may be a government, or corporation. In return, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal, also known as face value or par value of the bond, when it “matures,” or comes due after a set period of time.
  2. Diversification – Diversification can be neatly summed up as, “Don’t put all your eggs in one basket.” The idea is that if one investment loses money, the other investments will make up for those losses. Diversification can’t guarantee that your investments won’t suffer if the market drops. But it can improve the chances that you won’t lose money, or that if you do, it won’t be as much as if you weren’t diversified.
  3. Equities – An equity is a stock or any other security representing an ownership interest.
  4. Growth Fund – A growth fund is a diversified portfolio of stocks that has capital appreciation as its primary goal, with little or no dividend payouts. Growth funds are one of the main types of mutual funds.
  5. Investment – An asset or item acquired with the goal of generating income or appreciation. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.
  6. Investment vehicle – Investment vehicle refers to any method by which individuals or businesses can invest and, ideally, grow their money. There is a wide variety of investment vehicles, and many investors choose to hold at least several types in their portfolios.
  7. Mutual funds – A mutual fund is a way for many people to pool their money and buy stocks, bonds or other securities. Mutual funds are divided into shares and each investor in the fund buys a number of shares that corresponds to the amount of money invested. Investors therefore participate proportionally in the gains or losses of the fund. The price of each share is known as the Net Asset Value (NAV). The NAV is simply the total value of the securities the fund owns divided by the number of the fund’s shares outstanding.
  8. Risk – The chance an outcome or investment’s actual return will differ from the expected outcome or return. Risk includes the possibility of losing some or all the original investment.
  9. Return – A return, also known as a financial return, in its simplest terms, is the money made or lost on an investment.
  10. Savings – Savings comprise the amount of money left over after spending.
  11. Stocks – A stock (also known as “shares” and “equity”) is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.