A-Z Investment And Financial Terms To Know

When dealing with anything financial, from banking to investing there is a lot of financial jargon used. Use the A-Z index below to find explanations of some important investment and financial terms to know. There are many more financial terms and this index will constantly be updated.

Investment And Financial Terms To Know

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A-Z Of Investment And Financial Terms To Know

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There are currently 57 names in this directory

APR or annual percentage rate is the yearly interest that is either paid by a borrower or earned by an investor.

In financial terms, an asset is anything that is owned by a company or individual that provides current or future economic value. Both businesses and individuals can have assets.


Balance Sheet
A balance sheet is a financial statement showing a company's finances. It reports a company's assets, liabilities and shareholder equity. It is one of the types of financial statements that can be used to analyse a company.

Bear Market
A bear market is the term used when a financial market is in a prolonged decline, most commonly associated with declines in a market index. Markets are usually considered to be bear markets after a fall of 20% or more over a given period of time, usually accompanied by negative investor sentiment.

If you are aware of cryptocurrency then you've probably heard of blockchain. Blockchain is a public ledger system which adds to a large chain of confirmed transactions which is where the name blockchain originated from.

With blockchain technology after verifying a financial transaction you cannot change it. It creates immutable records. This is excellent for security but not so good if you make a mistake with a transaction. There is no turning back after verification and confirmation.

Learn more about blockchain and cryptocurrency here; Bitcoin Cryptocurrency – What It Is.

Bonds are a type of loan that are classed as a fixed income instrument as they pay out a fixed interest rate, although they can also be variable. They are usually issued by companies and governments as a way to raise funds. They are issued with a maturity date by which time the original amount borrowed must be paid back to the bondholder.

Bull Market
A bull market is the opposite of a bear market. This refers to when market prices continue to rise over an extended period of time.

A buyback is when a company repurchases it's own shares. This reduces the number of shares in issue on the open market which can then increase earnings per share, this in turn may result in a higher share price.


Financial capital refers to the money a business or individual has available to fund current operations and future growth.

Cash Flow
Cash flow refers to the money that is both coming in and going out of a company.

Closed End Funds
These are closed-ended due to there being a fixed amount of non-redeemable shares in issue. These are funds that are traded in the same way as shares on a stock exchange. This can mean their price doesn't always match the fund's NAV (Net Asset Value).

Collateral is an asset that is used to secure a loan. This can include a number of different types of asset but can include a property or vehicle. If the borrower defaults then the lender can seize the asset that was secured as collateral against the loan. Collateral offers a level of protection to the lender as they can recoup potential losses from the collateral.

Compounding is the reinvestment of earnings over time to generate additional earnings. It is effectively the earning of interest on interest.

In financial terms, credit is an agreement between a borrower and a lender.

Credit Score
A credit score defines the creditworthiness of an individual and is represented by a number. This is calculated from a multitude of factors such as current borrowing, credit applications, payment history etc. It is used by a lender to assess how likely a borrower is to repay any credit. FICO scores are one of the most commonly used credit scoring metrics.

Cryptocurrency is a form of digital currency. This digital currency uses cryptography to keep it secure, hence the name 'cryptocurrency'. Learn more about cryptocurrency and how it works in this post; Bitcoin Cryptocurrency – What It Is.


A debt is money borrowed from one individual or company from another. This debt can be used to fund large purchases that the borrower otherwise wouldn't be able to afford. For example an individual may take out a mortgage to enable the purchase of their own home. A business may use debt to fund it's future growth plans. Money is borrowed under an agreement whereby the borrower must pay it back by a certain date. Interest payments are also made to the lender at an agreed schedule.

Default is when a borrower fails to repay their debts. This can include failure to repay an interest payment or principal.

Deflation is the opposite to inflation. It is the decline in prices of goods and services, giving greater spending power of money.

Diversification is the strategy of holding a mix of different types of investments within an investment portfolio to reduce risk. This can include holding a mix of different asset types within a portfolio such as stocks, bonds or gold. Diversification can also be within an asset class such as stocks. For instance stocks can be diversified by holding a variation of stocks in different industries or regions etc. By diversifying you can limit the impact if a particular industry, geographic region or asset class is under-performing. Although this can also work the other way and may limit performance.

A dividend is a reward payment made to shareholders from a company's earnings. There are several different types of dividends a company can pay including cash, stock, property and liquidating dividends. Learn more about how dividends work and the different types of dividends in this post; What Are The Different Types Of Dividends?

Dividend Yield
Dividend yield is the percentage amount of dividends paid in relation to the share price. It is a simple calculation to make. Take the annual dividends per share and divide it by the current share price.

For example, Company X pays an annual dividend of $1. Let's assume Company X's current share price is $10. To find the yield we would make a simple calculation. Take the annual dividend per share ($1) and divide by the current share price ($10).

So 1/10 = 0.1 which can be expressed as a percentage by multiplying by 100.

0.1 x 100 = 10, therefore this gives us a 10% dividend yield.

Learn more about dividends in this post; What Are The Different Types Of Dividends?


Emergency Fund
An emergency fund is a pool of money that has been set aside to cover any unexpected future expenses. Emergency funds are sometimes called a contingency fund. It is important to build up this cash buffer in the event of any financial shock. This could include job losses, medical expenses or property maintenance costs. Learn the importance of creating an emergency fund and how to get started in this post; Emergency Fund – How Much Should I Save?

Environmental, social, and governance is often abbreviated as ESG. These are a set of standards that can be used to screen a company on their ethics and environmental credentials. It is becoming an important factor for investors to consider alongside financial analysis when making investment decisions. Many banks and investment firms are taking a more proactive approach to ESG credentials, such as Aspiration Bank.

An ETF is an exchange traded fund which is a fund that is traded on a stock exchange. It aims to track the price of anything from an index to a commodity or other asset type.


Financial Adviser
A financial adviser is a professional that provides financial advice to clients. Customers may seek financial advice on all aspects of wealth including investments, tax planning, and retirement planning.

Fractional Share
A fractional share is simply a part of a share that is less than one full share. Fractional shares can be difficult to trade as they aren't traded on stock exchanges. They are usually as a result of stock splits or dividend re-investment plans. Fractional shares can be traded through some brokerages such as eToro.

Foreign exchange is also abbreviated as FX. It is an exchange of one currency for another on an exchange called the Forex market.


Gross domestic product or GDP is a measure of a country's economy and rate of growth. GDP is the combined monetary value of all products and services produced within a country over a period of time.


Illiquidity occurs when an asset cannot be quickly or easily exchanged for cash.

Income is money made through the exchange of work, goods or services. Individuals can receive an income from working a job for example. Businesses can receive an income from selling a product to customers.

Indexing is a way of tracking and measuring a group of assets that represent a particular area of the market. Indexes can be used to track any type of asset including stocks, bonds, property, commodities and more. Examples of indexes include the S&P 500 and FTSE 100.

Index Fund
An index fund is a type of fund that aims to track an index such as the S&P 500. These types of funds are passive which results in lower charges when compared to actively managed funds.

Inflation is the price increase in goods and services and the corresponding decline in purchasing power of money over time.

Institutional Investor
An institutional investor is a professional entity that trades and invests on behalf of others. This includes large organisations that can make large or sophisticated trades such as pension funds, mutual funds, investment banks and hedge funds.

Interest is the charge applied to money that is borrowed. There are two main types of interest, these are simple interest and compound interest. Simple interest is the interest rate charged on the original amount borrowed. Compound interest is interest that is applied to both the original sum and the interest compounding on the loan.

Inventory is a type of company asset that includes all it's raw materials and finished goods.


Liquidity refers to any assets that can be quickly and easily exchanged for cash.

Liquidation is when a company ceases business activities and formally closes, it can be either compulsory or voluntary. The company's assets are sold to pay any creditors. If anything is remaining then shareholders may receive a liquidating dividend.


Micro Investing
Micro investing is when an individual invests very small sums of money through a micro investing platform. This allows those with limited incomes or small lump sums to invest cost effectively. Please see this post for a more detailed explanation of micro-investing platforms; Micro Investing For a Wealthier Future.

A mortgage is a type of loan that is used to fund the purchase of a property or land. The property itself is secured as the collateral against the loan which could be repossessed if the borrower defaults. There are several different types of mortgages available including fixed rate, adjustable rate and interest only. It is important to to check your credit score is in good order before applying for a mortgage.

Mutual Fund
A mutual fund is a type of investment vehicle that combines investors money to hold a diversified set of assets. This can include assets such as stocks and bonds.


Net asset value or NAV is the value of a company or fund's assets minus it's liabilities.


P/E Ratio
Price to earnings ratio or P/E is a simple company valuation method. It takes the company's share price and divides it by earnings per share. This can then be compared to other companies or the company's own historical price.

Price Sensitivity
Price sensitivity refers to how customers' purchasing behaviour is influenced by different pricing factors. Learn more about business pricing strategy and the 9 laws of price sensitivity here; Pricing Models And Strategies.

Profit is any gain made from generated revenue after the deduction of all costs and taxes.


Quick Ratio
A quick ratio is a simple metric used to measure how well positioned a company is to meet it's short term obligations from it's liquid assets. It is calculate by adding together all cash, cash equivalents and marketable securities and then dividing this by current liabilities. The higher the number the better financial health of the company. For instance, a ratio of 1 indicates the company can meet all it's current liabilities. A ratio of 2 indicates it has double the liquid assets compared to it's current liabilities. Whereas a score below 1 indicates a company may not have enough liquid assets to cover it's current liabilities.


Recurring Revenue
Recurring revenue is revenue that a company generates at regular intervals that is usually predictable and stable. These types of revenues can be generated across different types of businesses but are particularly applicable to subscription based businesses. An example of a business that generates recurring revenue is a subscription box business.

A REIT is a real estate investment trust. It is a company that owns or operates income producing real estate. REITS can contain investments in many different estate types including residential buildings, offices, factories, warehouses and hotels. Many REITs are publicly traded and so are accessible to retail investors, giving easier access to property investment. For a company to qualify as a REIT there are some important conditions that must be met including a requirement to distribute at least 90% of income as shareholder dividends.

Retail Investor
A retail investor refers to an ordinary individual investor that isn't a professional investor.

Revenue is all the money a business generates from it's normal operations.


Shares are a unit of ownership in a business. They can be traded publicly on a stock exchange or privately. There are different classes of shares with the two most common being common shares and preferred shares. Common shares usually carry voting rights and dividend entitlements, this is the type most people invest in. Preferred shares are a form of fixed income security that pays out either a fixed or variable dividend.

Stock Market
A stock market is an exchange where people can buy and sell shares in public companies.

A stockbroker is a professional that executes buy and sell orders of stocks for clients in return of a commission fee. As well as an individual stockbroker, the term is also applied to brokerage businesses. Most trades these days use an automated process and are commonly executed through online brokers.


Volatility is a measure of the price swings of an asset or market. An asset that experiences large swings in price is considered more volatile and therefore a riskier investment.


The symbol XD indicates that a share is trading ex-dividend. This means that anybody purchasing the shares will not be entitled to receive the most recent dividend.


The final of our financial terms to know is yield. A yield is a measurement of the return on an investment over a specified time period. Calculating yields varies depending on the type of asset such as shares or bonds. It takes into account the gains made on an investment including price rises, interest payments and dividend payments.

We hope you have found these investment and financial terms to know useful. In addition to this you might also like to view Marketing Terminology You Need To Know. Find more guides on our website and please join our newsletter to receive our latest content.

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