Robert Kiyosaki said in his book, Rich Dad Poor Dad, "Do not work for the money but rather, make it work for you."

When done right equipped with the right knowledge and mindset, investing can lead you to financially secure life years down the line. 

New investors get ecstatic with this idea and jump right into investing with little to no knowledge about it. The euphoria, however, does not last long once they are bombarded with investing jargon completely new to them. Consequently, hesitancy starts to kick in and soon enough, they get demotivated. Or worse, they lose money due to their wrong mindset and lack of investment knowledge. 

So, before you decide to take the plunge into investing, understand these investment jargons first!

Investment Portfolio

An investment portfolio is a group or collection of your financial assets. It includes all the different investments that you divulge in ranging from stocks, bonds, real estate, commodities, and so forth. 

A portfolio is used for asset allocation to ensure your risk tolerances together with your financial goals are met. The choice is up to you on how you want to manipulate the allocations in your portfolio periodically according to your financial needs. 

A diversified investment portfolio reduces the risk of losing all your money in one go due to market crashes or any unforeseen circumstances. Ultimately, the portfolio provides a clear overview of what you actually have and how it is performing. A good asset allocation within a portfolio is crucial for the best-desired outcome. 

Risk Factor

In financial terms, the risk is defined as the possibility of an investment’s actual return deviating from the expected value. This generally relates to how inclined your investments are towards incurring a substantial loss. 

Risk is always associated with returns. More specifically, both risk and returns have a direct relationship as one increases with the other and vice versa. 

Reading this might be daunting particularly, for new investors but there are plenty of ways to manage risk when you are investing. This is where the portfolio comes in handy. Since risk varies from one investment to another, choose a couple of different investments to populate your portfolio. 

Shares and Shareholder

A share is a portion of ownership of a company or a financial asset that you could own. Investors that hold this share are shareholders of the company. 

As an investor, you have the option to buy or sell any stock on the market. It is best you know that shares can also be classified as common or preferred.

Common shareholders have voting rights towards the company regarding any major decisions while preferred shareholders have none. 

However, preferred shareholders have higher priority when it comes to dividend pay-out or during times of insolvency. This means a common shareholder will not receive any payment until all the preferred shareholders are fully paid out. 

Bear and Bull Market

This is probably one of the most popular jargon out there that is used to indicate the trends of the market. 

Essentially, a bearish trend is associated with bad market sentiment, and it is the opposite of a bullish trend. An easy way to remember them is by imagining how a bear and bull attack. 

A bear chooses to prance “down” on its prey while a bull prefers to charge and thrust its prey “upwards”. 

These trends are crucial for investors as it is a tell-tale sign of when you should be entering and leaving the market. Bear in mind, you should never time the market and always invest for the long run. Hence, do not make any hasty decisions when market trends look favourable or unfavourable. 

There are countless methods to analyse the market to give you the best prediction. Proper research and invaluable expert’s guidance go a long way in making any decisions when it comes to investing.

Dividend 

Holding a share entitles you to be paid dividends based on the company’s earnings. The dividend is earned when the company shares its profits to all its stakeholders which could be in the form of additional stocks or cash. The frequency of this can be either monthly, quarterly, annually or even biannually solely depending on the company’s discretion. 

Generally, a company having a high dividend declaration is a good indication that it is doing well and has generated some profitable incomes within the proclaimed period. 

Adversely, if the company has a bad record of dividend payments by either reduction or elimination it may be in trouble financially. 

However, that might not always be the scenario since not paying dividends can mean the company is in the works of securing more future projects to further increase its growth and boost profits. 

Having said that, the choice of paying dividends lies ultimately on the company while the choice of investing in the company lies on you.  

Volatility 

Volatility is the uncertainty that is present in investing. More so, market volatility goes hand in hand with risk. 

The market swings up and down, sometimes erratically, resulting in a flurry of panic buys and sales. The higher the risk and return, the more volatile the market. Volatility in cryptocurrencies seems to be the highest followed by equities and bonds.

Not to forget, the impact of political sentiments and the economical state of the country play big roles in investment and its volatility. 

Get Your Investment Jargons Right!

Jargons are just a drop of water in the ocean of investing but to redeem its rewards you got to start from the ground up. Remember, the strongest tool at an investor’s disposal is their knowledge. 

So, educate yourself with sufficient information as you step into and thrive in the sea of investment.