Commonly used Investment Terms
For people who want to start investing or just busy, it can be difficult to know what the technical terms (concepts) of investing. Therefore you will find below a list of concepts in each case, the most common and important concepts. The concepts are explained in a short and understandable language. The following categories will offer:
Classes of shares
You decided at which (internet) broker or bank you are going to invest and subscribe. The broker or bank wants a number of things of you know before you get to their authorized to invest. They need to know (duty of care) that you know what investing is all about (the risks). Further, it is important to know for which you invest (a particular purpose) and how long you want to invest.
Customer profile: everything is logged in a file. The bank or broker should be able to show that they have fulfilled the duty of care. In a customer profile includes: age, addresses, etc. In most cases you should do a test, if you so many questions wills rise in your mind that you may not think of. The rest occurs in the file.
Duty of care: the duty of care is that a broker and bank you should tell what the risks are of the various products.
Risk profile: it looks at your financial background (income, expenses, assets and how that will be in the future). You should always invest with money you need now and not later. To the hand that points looks at what risk someone can walk. This also determines in which someone better can or cannot invest.
Risk Perception: How do you react to a possible light and a big drop? Do you pity or sit back and think that you’ve lost money.
Risk tolerance: the risk that someone may or may not carry through investment.
Objective goal: a goal that must be achieved capabilities for example paying off their mortgage.
Subjective capabilities goal: a goal that anyone would like to have reached, if you can’t that is very less.
The most common is the bond because this is the safest. Save on your savings account or on a deposit, is also a form of investment which a lot of people have forgotten. The order of defensive (safe) to offensive (speculative) is: savings, bonds, stocks, options and last Turbo’s and boosters. They last by the leverage highly speculative and more for sophisticated investors.
Shares: by buying a share are you in fact a little bit became the owner of the company. The money the company receives one can use to invest. The shareholders (someone who has a stake) received a fee.
: you can invest in corporate or Government bonds
. You buy a debt instrument of a company or Government in exchange for this, you will receive a fee.
Options: a law that you have to per option (100 shares) to be allowed to sell or buy for a previously agreed amount. You pay for a premium and an options contract later if any if you exercise the contract the purchase price of the shares. When writing an option you will receive the premium (you sell the contract).
Turbo’s/booster: by the leverage can be made more quickly and more profit or loss, If the share increases (underlying) than the turbo increases more. The share rises 2% then raises the turbo 10% (if the lever 5 had been).
At bonds you have the choice of corporate and Government bonds. In case of shares you have the choice of 4 possibilities. On the stock market are not, however, to obtain this. You get this because you are a long time shareholder of your stock. You may exchange your ordinary shares against ‘ better ‘ shares such as preference shares. Furthermore, employees and other people who are involved with the company this buy shares.
Registered shares: shares that are written down in a register, these shares are also not easy to trade.
Bearer shares: shares those are free to trade and not by name.
Preference shares: shares for common stock. Preferred shares also get priority in the distribution of profits and in the event of bankruptcy.
Priority shares: shares that are also for the common stock going only are these shares meant to drivers to choose.
Like everything else in the world costs also investing money, so also the buying and selling of derivatives. Refer in particular to the buying and selling costs. Siege you with small amounts then these compared to large amount very high and expresses your returns. You pay € 10.00 Per transaction at a time. It is a good idea to see what the rate is in the various banks and brokers. It is said that your return is the cost as low as possible.
Buying and selling costs: costs you have to pay for it to or sell derivatives.
Management fee: also called custodian fees. These are costs you have to pay for the purchased shares. These shares are yours but are fictional in the vault of the broker or bank. The bank or broker saves these for you.
Administration costs: costs are for sending statements and other administrative costs.
Other costs: there may be fees for the use of tools to make investing easy to make.
There are actually 2 different types of income, the gross and the net proceeds. Gross proceeds where most people are talking about are the revenues that created them on the derivatives. To invest are always costs. It is so important to those cost of your gross income. If you have done this you hold the net takes over and you only really know how much return you have met.
Coupon yield: is the percentage that you over the bond receive.
Dividend: revenue on your purchased shares. There are two types of dividends.
Stock dividend: you won’t get any money but new shares.
Cash dividend: you will receive the dividend in the form of money on your investment account.
In the case of sales: If you have bought stock for $10.00 and you sell it for $12.50. Then you have $2.50 sales profit (cost not taken into account). These can also loss.
Par: purchase price is equal to the value of the share.
Agio: purchase price is lower than the value of the share.
Discount: the purchase is higher than the value of the share. You pay more for the shares than that it really is worth.
The above mentioned technical terms about investing are the most common and are very useful for the novice investor. In investing, it’s eventually to return it. This return is made primarily by the cost as low as possible. Siege you with small amounts than express the cost enormously on the return. Further, it is important that you look at the actual return (how much the investment net per annum) of the investment.