Investment Terms All Beginner Traders Need to Know – 2024 Guide

Everyone who wants to become a part of something, no matter if it’s some profession, group, company, or investment activity, should always know what are they all about. Probably you’ve seen that people from different niches have a specific way of talking and communicating, which includes advanced terms we don’t always understand. For example, the doctors – these people always have some unique way to talk between themselves and understand each other. It’s the same with the engineers. Surely, it requires a lot of years of training and practicing, until they learn every aspect of their job and become professionals.

If you are interested in investing, you have to learn to speak their language too. You need to start with some educational process before you move to invest what you have, expecting profits. First, you will need guidance from online tutorials you can read more this, and then you have to start learning what’s important about it, and of course, adapt to the terms and language they are using. There are plenty of types of investments, including cryptocurrencies, real estate, stocks, and even trading with food and other common goods, but today we will talk about the raw terms and their meaning:

1. Common stock

This one describes the ownership of the company. One company can have one owner or group of owners that own shares. If some of the owners want to sell their shares or buy more from someone else, they are using cash dividends.

2. Dividend

It’s the amount of money that is paid to the owners of some company, according to the profit. When the company makes some big profit, it’s shared between the shareholders, depending on the size of their part. What’s not shared between the owners, it’s reinvested in the business.

3. Day trading

It’s the action when you are active on the market, you are buying stocks or shares in some company, but you still manage to sell them the very same day.

4. Asset

It’s similar to the saved amount of something. It doesn’t necessarily need to be money. It can be some real estate, cryptocurrencies, and many other goods that you already own, you don’t spend them, but they have the potential to bring some profit at the moment you decide to trade them. Or in general, assets are something you have, but you expect they can produce a profit at the right moment.

5. Asset allocation

It’s a smaller part of your complete assets, that you decide to take and trade with it. So, you are setting limits when you join the market, knowing how much you can afford, and how much you want to save for the next time.

6. Bonds

These are the money someone owes you. If you lend money to someone, no matter if it’s a person or a company, and they claim they will use them to make a profit and give them back together with a proportional portion of the profits, that’s what investors call the bond. You see, you are bonding with them until they fulfill their part of the contract.

7. Broker

It’s a person or company that is buying or selling the investments on your behalf. Usually, they charge additional fees for this service. If you are doing that through a website or platform, it’s automatically charged from your balance.

8. Exchange

That’s the place where all the money, stocks, and other assets are bought and sold. It’s a simple explanation of the connection between the buyer and seller. Additionally, exchange-traded funds are funds that are traded like a stock.

9. Index

It’s a statistic unit that measures the progress of some asset or group of stocks. It shows us when their value is going up or down, or how the price was changed over time.

10. Margin

These are the borrowed money you took to invest, and now you have to earn more than that, so you can give them back to the person or company who gave them to you, pay the fees, and still make some profit with them.

11. Mutual fund

It’s a fund by pooled money from individual investors. Usually, a company trades that fund, and then shares the gains with the individuals, depending on the amount of money they invested in that fund.

12. Swing trading

This is very similar to day trading, and it may take only a few hours. The trick is to wait one night, so you can re-invest the money you got. It’s also a short-term investment and it can start at 10 pm, being completed at 2 am. It’s a different day already.

13. Hedge funds

A type of investment fund based on partnership. It’s usually a limited partnership, when the partners invest their money in a “pool” and trade them together, sharing the gains proportionally. It’s different than mutual funds, because in that case, someone is doing that on behalf of the people, and in hedge funds, they are doing the trading together.

14. Trust funds

It’s easier to explain them with an example. It’s a situation when someone else is holding the assets that should be passed to another person. For example, when parents are saving funds for their kids in a bank, but the kids can use them after they reach some specific age or accomplish some goal in their life. That can be money, jewelry, or even real estate property.

15. Asset allocation

An action when you take some piece of your assets and relocate them for another purpose. For example, you may need money urgently, but you can’t earn the exact amount by working. You can always decide to take some portion of your assets and trade it as you think you should do it, and then use the money on what you need.

There are many more terms that are crucial for beginners. It may seem like a lot, but once you take part in this market, it will all come naturally and you will get used to this specific language. It’s only important to plan your actions smartly, and enjoy the profits you make.