With the rapid development of global economy and finance, investment has become an important way for people to increase wealth. However, for investment beginners, the complex professional terminologies often make them at a loss. Mastering some key investment terminologies can help beginners better understand investment products, markets and strategies. This article summarizes some important investment terminologies for beginners from aspects of investment products, markets, participants and strategies. By learning these key terms, beginners can have a more comprehensive understanding of the investment field, and lay a solid foundation for future investment practices.
Key terms about investment products
There are various types of investment products, including stocks, bonds, funds, derivatives, etc. Stocks represent ownership and entitle shareholders to claim part of profits. Bonds are debt investments with promised interest payments. Funds pool money from investors to purchase assets. Derivatives derive values from underlying assets. Other key product terms cover dividend, yield, liquidity, risk/return profile, etc.
Essential market terminologies
The investment marketplace consists of primary and secondary markets. Primary market is for new securities issuance while secondary market handles trading of existing securities. Key market terms also include exchanges like NYSE, Nasdaq and over-the-counter platforms. Moreover, market indexes such as S&P 500 track overall market conditions. Bull market means rising prices and bear market means falling prices. Market volatility describes fluctuations in prices.
Major participants in investment activities
There are different participants in investment process. Individual investors participate in investment on personal level. Institutional investors include banks, funds, insurance companies, etc. Investment banks assist corporations in issuing securities while commercial banks accept deposits and provide loans. Brokerages execute trading orders on behalf of clients. Lastly, investment advisors provide guidance to investors in managing portfolios.
Common investment strategies
Different investment strategies suit different investor types and goals. Growth investing aims for capital appreciation through buying fast-growing companies. Value investing targets undervalued stocks. Income investing focuses on generating current income via bonds and dividends. Index investing seeks to match market performance. Technical analysis and fundamental analysis are two main analytical approaches. Asset allocation optimizes mix of assets based on risk tolerance.
In conclusion, mastering these key investment terminologies of products, markets, participants and strategies can empower beginners with substantial knowledge to better navigate the complex investment world.