If you want to learn to invest and save your money, a great way to start is by picking up investing lingo. It might seem like jibberish at first, but once you understand basic terminology, you can then use it to show off (and save!)
I know so many people who want to invest their money and save, but they’re intimidated by investing lingo. Sometimes it seems like traders and financial advisers are speaking another language. Trust me; I’ve been there. The good news is that it’s easy to learn.
What you have to remember is that it’s just lingo. Anyone can learn the basics of investing, which consist of a few simple terms. Then, you can take your knowledge and use it to seem smarter than everyone else at parties. That’s right. Go ahead on with your bad self.
Here are six investing terms to know:
A stock is a portion of a company. When you buy a stock, you are buying a share of a company. If a company has 1,000 shares and you own 100 of those shares, you own 10% of the company.
Think of a bond like a loan to a company or other entity. When you buy a bond, you are giving a loan to a company or the government, and they have to pay you back by a certain date with interest. My grandmother gave these to me for all of my birthdays and Christmases growing up. I had around $5,000 by the time I graduated from high school.
A mutual fund is a group of stocks or bonds typically overseen by a manager. Many new investors have mutual funds because it’s helpful to have an experienced manager be in charge of growing their finances.
This stands for Standard & Poor’s index. Basically, a group of people select 500 companies in the U.S. and use their financial data to determine how well the market is doing as a whole. The companies are selected for a variety of reasons (size, success, etc.) Many people use this as a benchmark to see how the U.S. is doing financially.
This is a type of mutual fund that is considered more passive investing. It mimics well known indexes, like the S&P 500, and they also tend to have lower management fees. Basically it would be hard to buy stock in all 500 companies in the S&P 500, but you can buy into an index fund that has a similar rate of return.
When certain companies profit, they pass along those profits to their shareholders. These are called dividends. There are many people out there who invest heavily in companies that offer dividends so they can grow their portfolios enough to create passive income in the future when they retire.
Now, I know I threw a lot at you, but these six terms are only the beginning. Trust me; learning about investing is just like learning about anything else. It just takes some time to get the basics! However, the more you read and the more you learn about it, the easier it gets to carry on a conversation about what you’ve learned. Once you get interested and excited about investing, it becomes really fun to talk about with others. Yes, even at a party. Come find us. We’ll be the other cool kids in the room talking about the same thing.