Honestly, there are hundreds of important terms in finance that everyone should know about whether or not they are planning to invest their money somewhere. However, there are few of these terms that every woman must know about to not only be informed but to also make sane financial decision.
Here is a list of vocabularies in finance and investment that you should know about:
i. Equities/ Shares- These are shares of a company that represent ownership of the holder in that particular company. There are various online platforms where you can buy or sell shares of listed companies.
ii. Mutual Fund- These are funds raised and managed by professional companies from small shareholders to invest in stocks, bonds and other assets. Mutual funds are of three types – Equity Fund, Fixed income/ Debt Fund, hybrid Funds.
Incase of equity funds where investment is predominantly in equity share and related securities of companies with the objective of growth, wealth creation or capital appreciation. The risk involved is higher in equity fund.
On the contrary fixed income funds are relatively safer like investment in Government Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc.
Hybrid Funds invest both in equity and fixed income plan.
iii. Liquid Fund – Liquid Funds are used when money investment period is not known and unlike Fixed deposit, you can draw the money without loss of interest. Money remains safe though the returns aren’t as good as equity.
iv. Bond- An instrument issued by a company to the investors promising to pay back their money (loan) on the mentioned date, with the specified rate of return.
v. Fixed Deposit- It’s an instrument issued usually by banks that provides holders a higher rate of interest on their savings than normal.
vi. Inflation- A sustainable rise in the price of products and services that reduces buyers’ purchasing power.
vii. Recession- Recession is when in an economy real GDP, employment, income, manufacturing, and retail sales fall for two consecutive quarters.
viii. Overdraft- When you withdraw more amount than what’s available in your bank account, that’s called overdraft.
ix. Cryptocurrency- These are digital currencies that are generated through encryption techniques (blockchain). They are decentralized. Example includes Bitcoin, Ethereum and Dash.
x. Compound Interest- It’s an interest that is calculated on the accumulated interest on the initial principal from previous periods.
xi. Diversification- A technique of holding more than one financial asset of various companies in different industries. This is done to minimize the risks.
xii. Appreciation- A rate or amount with which the value of the asset has increased. Its opposite is called depreciation.
xiii. Dividend- A rate or amount of company’s profit paid to its shareholders.
xiv. Liquidity- It’s am ability to sell the holding asset to get back the invested money quickly.
xv. Portfolio- It’s a collection investment assets help by an individual or organization.
xvi. Volatility- It’s a frequency with which the market price of an asset moves up and down.
Remember these financial terms and their meanings. Also, improve yourself by learning more such important terms.