We thought we’d do something a little different with this post and talk about five commons terms in the investment world, and ask the average layperson off the cuff if they can figure out what these terms mean. This is a handy look into the psyche of the beginner investor and see if these terms are easily understood or fly right over the average person’s head.
InvestorJunkie has a brilliant post with common investing terms and definitions; we’ve taken the top 5! Here goes:
An Off The Cuff Definition: It’s…when you ask for advice from a financial adviser…?
What It Really Means: This refers to the lowest price an owner will accept for an asset.
2. Blue Chip
An Off The Cuff Definition: Technology company shares.
What It Really Means: These refer to company stocks. This is the term given to companies that have a reliable history of positive earnings and good overall balance sheets, and whose dividends go up regularly.
3. Asset Allocation
An Off The Cuff Definition: Is that how someone makes up their individual portfolio in terms of stock, shares, bonds…country as well?
What It Really Means: This refers to the division of your investment portfolio by asset class. The logic behind this is that you have negatively correlated assets in the overall market, so you can control the risk exposure of your portfolio by spreading your bets.
4. Bear Market
An Off The Cuff Definition: An aggressive and volatile market.
What It Really Means: This refers to a falling market, which has a downward trend. You may also call an investor a bear if they believe a stock or the market is about to fall.
5. Bull Market
An Off The Cuff Definition: Sounds similar to a bear market! A market which has a period of stability followed by a sudden surge either positive or negative.
What It Really Means: This is the same as bear market, but in reverse. The market is going up in value, or if you are bullish, you believe that the value of a certain stock is going to go up.
So there you have it! To be honest, this was quite the learning experience. Do you have any unique interpretations for investment terms, or don’t know what something means? Let us know in the comments.