Investing definitions and terms
New to investing or want to test your knowledge? Below are some helpful investing definitions on common words related to investing. It would be great if there were no risks associated with investing, but there are, and because of market movements and other risk the value of investments can go up and down. To learn more about risks you should read this blog – ‘Risks of Investing’
ETF
Short for ‘exchange traded fund’, is a security that trades like a stock on a stock exchange. It usually tracks an index of stocks, bonds or more alternative assets like commodities of infrastructure.
Dollar Cost Averaging
An investment principle of buying a fixed dollar amount into a particular investment on a disciplined regular basis. The investor purchases more shares (units) when prices are low and fewer shares when prices are high.
S&P 500
The Standard & Poor’s index that tracks 500 of the biggest companies listed in the USA and is a favourite tool for analysts trying to understand how the US market as a whole is performing.
Net Worth
The value of your assets minus any debt you owe.
Compounding
Generating earnings from previous earnings, when these returns are reinvested. Such as when the dividend you previously earned on your investment starts earning market returns as well.
Diversification
Spreading your money among different investments to reduce the market risk.
Asset
Anything of value is an asset: cash, stock, a car, a house, even the money owed to you by someone else.
Dividend
Money paid by a company back to their shareholder, out of its profits.
Volatility
The rate at which the price of an asset changes – increases or decreases – over a given period of time. It is used as a measure of market risk.
Liquidity
A market’s ability to absorb a purchase or sell order for an asset without causing significant change in the asset’s price.
20-30-50 Rule
Allocate 20% of your monthly income towards goals, 50% for fixed expenses and 30% for flexible spending.
Basis Point
1 basis point is equal to 0.01% so 100 basis points is 1%.
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Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
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The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
