The ABC of Investing and Finance
Uncle want to share knowledge
This is the first series of the jargon and terminology used in investing. Will link other list at the bottom of the post for future reference.
A
Asset Allocation: Like chicken rice, your portfolio shouldn't just be rice and chicken! You will need a little bit of vegetable, chili and dark soy sauce. Diversify your investments across asset classes (stocks, bonds, cash) to balance risk and potential returns.
Appreciation: Think of your investments like a vintage jacket - their value increases over time, making them worth more when you sell.
Annual Percentage Rate (APR): The true cost of borrowing, expressed as a yearly percentage. It's like reading the ingredients on a candy bar, but for loans.
Ask Price: The minimum amount a seller is willing to accept for an asset. Just like haggling with your durian seller, in the investing world, a good negotiator gets the juiciest deals.
Asset Class: Groups of similar investments. Think of it like sorting your clothes: shirts with shirts, pants with pants, and stocks with stocks (unless you're feeling very rebellious).
Amortization: Spreading the cost of an asset over its useful life. Imagine paying for a new phone in tiny installments instead of one big chunk.
Accumulation Phase: The exciting years when you're actively growing your wealth, like watering a tiny seed until it blossoms into a money tree.
Alpha: The elusive "secret sauce" in investing. It's the extra return you achieve beyond the market average, like scoring a perfect soufflé while everyone else's falls flat.
Average Annual Return: The historical average gain (or loss) of an investment over a specific period. It's like looking at a restaurant's average rating before deciding to dine there.
Ask Bid Spread: The gap between the highest price someone is willing to pay (ask) and the lowest price a seller will accept (bid). Think of it as the haggling space at a pasar malam, the wider the spread, the more room to negotiate.
B is for Building Your Financial Fortress
Bear Market: When the stock market takes a long nap and values hibernate. Don't panic, grab a good book, it'll wake up eventually. Means everything is low, many people will lose money if they sell.
Beta: in short, the difference between the value of your investment against the market movement. This is the chart that you see in those stock markets movie. High beta wiggles like a disco queen, low beta sways like a gentle waltz.
Broker: Starts with the word broke, their job is to help you buy and sell assets. With the the current day and age, they are your online brokerage (think: Moomoo, Tiger Trade and etc).
Bid Price: The maximum someone is willing to pay for an asset. Think of it as offering your highest price for a juicy durian at the market.
Blue-Chip Stocks: The tried-and-true giants of the financial world, like reliable sneakers that never go out of style. (Nike Cortez?)
Bond: An IOU from a government or company, promising to pay you back with interest.
Bull Market: When the stock market throws a wild party and prices are on the rise. Enjoy the champagne, but remember, every party eventually ends.
Budget: Your financial roadmap, charting your income and expenses. Treat it like a GPS, it helps you navigate towards your financial goals.
Balance Sheet: A snapshot of a company's financial health, revealing what they own and owe.
Benchmark: Your investment performance yardstick. Compare yourself to similar assets or indexes to see how you're stacking up, but remember, sometimes focusing on your own race is wiser.
C is for Cultivating Your Financial Garden.
Capital: The seeds of your financial harvest. It's the money you use to invest and build wealth, like fertile soil for your financial plants.
Capital Gain: The sweet sunshine that warms your investment returns. It's the profit you make when you sell an asset for more than you paid.
Capital Loss: The occasional cloud passing over your financial sky. It's the money you lose when you sell an asset for less than you paid.
Compound Interest: Your financial magic beanstalk! Reinvested earnings snowball over time, making your money grow exponentially, like watering a tiny sprout that becomes a towering money tree.
Cash Flow: The lifeblood of your financial kingdom. It's the money coming in and going out, like the gentle ebb and flow of a healthy river.
Collateral: The security deposit for your financial adventure. It's an asset pledged to secure a loan, like leaving your bike with the pizza guy until you pay for your extra-large pie.
Call Option: The right, but not the obligation, to buy an asset at a set price by a certain date. Think of it as chope-ing a table at a restaurant, with the option to cancel if something better comes up, but you need to pay to buy the option.
Covered Call: Renting out your reserved table at the restaurant that you paid earlier! You sell a call option on an asset you already own, collecting a premium but giving up the potential for higher gains if the price soars.
Correlation: How two asset prices dance together. Some tango in perfect harmony, while others do the awkward shuffle, understanding their relationship helps diversify your portfolio.
Cost Average: Smoothing out the bumpy investment roller coaster. You buy smaller amounts of an asset at regular intervals, averaging out the price over time.