Investing is an area that’s filled with strange and obscure terms. Whether it’s acronyms, approaches, math, fundamentals or something else, there are hundreds of words, meanings, and definitions when you’re dealing to do with your money. Here’s a list of some of the more common terms that you’ll come across when you’re investing.
Bulls and Bears
When the market is going up, and investors are optimistic, s said to be a “bull market.” When the markets are going down and investors are pessimistic, it’s said to be a “bear market.” Bull and bear markets often run in cycles, and although bull markets generally outlast bear ones, the impact of bear markets an be very significant In the short to medium-term.
Capital gain (or loss)
The amount of profit (or loss)that you realize when you sell an investment. For example, if you buy too shares in Amazing Blue Widget Co. In 2010 for $5o per share and sell them In 2m4 for $8o a share, you’d make a capital gain of $30 per share, or $3000 overall. You will normally have to pay taxes on your capital gains.
A payment made duringthe time that you hold a stock, share or fund, normally a percentage of the value of the holding. A dividend Is known as an “Interim payment” and they are normally paid out several times a year. For example, if you hold $10,000 of stock in Amazing Blue Widget Co. and they have a dividend rate, you could expect to receive $250 as a dividend in a year. The “dividend yield” is the percentage of the overall value that you will have returned to you, while the dividend itself is normally the amount. You will normally have to pay taxes on your dividends.
The various places that Investments can be bought and sold. Typically the stock market, the commodities market, the bond market etc. Interim Income income that you receive for an Investment, without having to sell the original investment. This could come from dividends, Interest payments or some other means
The placement of money into a particular financial product in the hope that it will generate wealth over time.
A set of rules and guidelines that assist investors in choosing what, how, why, where and when to buy, sell and hold various investments
Someone that puts money into various financial products in the hope and expectation that they will make a profit on that money over time, especially the medium to long-term. Contrast with “trader” And out how micro-Investing can help you meet your investment and financial goals. This article explores how investors can use micro-investing to build wealth and make the most of their money. It includes information on the benefits, drawbacks, returns and other aspects of micro-investing.
Micro-Investing allows you to invest your spare change and snail amounts in various funds. It is a low-Impact, easy way to get Into the habit of investing. Who should use micro-investing? Micro-investing is a helpful tool to use alongside your regular investing. It’s designed to let you make small contributions (e.g. rounding up the value of purchases in your bank account and investing them) over time. It’s a simple, automatic way to invest, and although it doesn’t replace other types of investment of larger sums, It’s worth considering as an alternative to traditional investing. How does micro-investing help you meet your financial goals? If you don’t have much to invest, then micro-investing is a great place to start. If you already have investments that work for you, you can use micro-investing alongside those to give you more diversification. It’s also helpful if you want to Invest automatically over time.
What are your expected returns?
Micro-Investing provides both capital growth (i.e. an overall increase in the fund values In your portfolio) together with paying a dividend. As micro-Investing is still in its infancy, we don’t know yet how it will perform overtime. However, other diversified funds typically return around 7- 8%a year.
Taxes and Inflation
Learn about two key direct and indirect costs, taxes and inflation. These yeas can have a significant impact on investors and can eat into their profits. Here’s few notes about tax and Inflation, and what it means to your investments. If you’re investing, there are two types of cost that you’ll need to be aware of. Tax, which Is a direct cost, and inflation, is an indirect cost. This article explores both of these areas, and the Impact they can have on your investments.
Tax rules vary enormously depending on where you are, what you’re Investing In, and a multitude of other factors, so ft’s always worth talking to an accountant or tax specialist. If you are investing, here are some general guidelines to be aware of.
You’ll probably have to pay tax on some or all of the investment profits you make (capital gains ). You’ll normally pay tax for the tax year in which you sell an investment (i.e. when you’ve realized the profit) You’ll probably have to pay tax on any dividends or returns.
You can reduce the tax you pay on your profits in several ways Offset your profits in one investment with your loss from another. Hold your investmentsfor more than a year (investments bought and sold within a year are typically taxed at a higher rate) Use spedal shelters and tediniques to reduce your tax burden (for example, sometypes of retirement accounts are taxed differently) In every case, you should speak to your accountant or tax adviser for details of how to reduce your tax burden.
Learning About fees
One thing you’ll learn pretty quickly when you’re investing Is lhat there are always fees of some kind. Whether you’re buying or selling an Investment, or sometimes Just holding It, you’ll have to pay a fee. These tend to come In one of three not so delicious flavors.
A one-lime, fixed transaction fee that you’ll pay when you buy or sell an Investment.
A percentage of the overall value of your Investment or a price per share, charged as a premium.
An ongoing fee for holding an investment; this is a percentage of the overall value of the investment (I.e. it’s charged on the full amount, not on the profit). The type of fee you’ll pay is normally based on the type of investment you’re making. Checking and savings accounts sometimes charge fixed fees, normally on a monthly basis or for things like ATM withdrawals and transfers. Retirement accounts, index-trackers, ETFs, and mutual funds normally charge management fees these typically vary between o.1% and 1% it a year.
Stockbroker accounts normally charge either fixed fees (typically between $1 and $10 a trade) or a commission. These fees are not important to understand the impact they’ll have on your investments as they eat directly into any profit you make.