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Common Investment Terms

The vast majority of retail investor accounts lose money when trading CFDs . You should consider whether you can afford to take the high risk of losing your money.

It can be intimidating for anyone to start investing their hard-earned money in the global markets. After all, investing is all about taking risks to gain a respectable amount of profit. However, when new investors try to read the latest reports about the market, they are immediately confused by the buzzwords used by financial advisors and journalists.

Here are some of the most commonly used investment terms that you should know:

Bond- a bond is a type of loan offered by borrowers to investors. Bonds are usually offered by governments or major corporates. When investors purchase bonds, they get details about the future payments and loan. Governments and corporates use bonds to finance operations and projects. Because bonds are backed by governments and corporate, they are considered as a more secure form of investments and due to the relatively low risk, the profit is typically low as well.

Stocks- stocks represent the ownership of a business. After buying a stock, you own a very tiny part of the company. When the company is doing well and its valuation goes up, the value of your stock also goes up. After a period of time, you can sell the stock for a decent profit.

Mutual Fund- mutual fund is a pile of cash gathered from multiple investors. Money managers decide the best way to invest the mutual funds to buy assets like bonds and stocks. The main purposes of mutual fund are to spread risk and ease management.

Price-To-Earnings (P/E) Ratio- P/E ratio is calculated by dividing the stock price and your earning at any given time. It is a good indicator to measure whether your investment is overvalued or not. You are not doing well if P/E ratio value is between 0 and 8. If the P/E ratio is above 20, the company has good growth. Be aware that if the P/E ratio is extremely high, it could be a sign that the industry is at its peak and the bubble may burst anytime soon. You are doing fine if the P/E ratio is between 10 and 18.

Asset Allocation- asset allocation simply means investment strategy. There are places where you can decide to allocate your money, like cash, stocks, bonds, commodities, and foreign currencies.

Contact CFI Financial

To learn more about investing in today’s global markets, contact CFI Financial today and speak with an expert who can answer any questions that you might have.

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