Financial markets use a wide range of specialized terms, ratios, and concepts. While many of these terms have been introduced throughout this guide, investors will frequently encounter additional terminology when researching companies, reviewing financial statements, reading market news, or analyzing investments.
This glossary serves as a quick reference guide to some of the most used investment terms. Understanding these concepts will help investors interpret financial information more confidently and navigate financial markets more effectively.
Common Investment Terms
| Term | Definition |
| Asset Allocation | The process of dividing investments across different asset classes. |
| Bear Market | A prolonged period of declining market prices. |
| Bond | A debt security through which investors lend money to an issuer. |
| Bull Market | A prolonged period of rising market prices. |
| Capital Gain | Profit earned from selling an investment at a higher price than it was purchased. |
| Coupon Rate | The annual interest paid on a bond as a percentage of its face value. |
| Credit Risk | The risk that a borrower may fail to meet its financial obligations. |
| Dividend | A distribution of profits made by a company to its shareholders. |
| Diversification | The practice of spreading investments to reduce risk. |
| Equity | Ownership in a company, typically represented by shares. |
| ETF | An Exchange-Traded Fund that trades on a stock exchange. |
| Inflation | The rate at which the prices of goods and services increase over time. |
| IPO | Initial Public Offering; the first public sale of a company’s shares. |
| Liquidity | The ease with which an investment can be bought or sold. |
| Market Capitalization | The total market value of a company’s outstanding shares. |
| Maturity | The date on which a bond’s principal is repaid. |
| Portfolio | A collection of investments held by an investor. |
| Price-to-Earnings (P/E) Ratio | A valuation metric comparing share price to earnings per share. |
| Risk Tolerance | An investor’s ability and willingness to accept investment risk. |
| Volatility | The degree to which an investment’s price fluctuates over time. |
| Yield | The income generated by an investment, usually expressed as a percentage. |
| Yield to Maturity (YTM) | The total expected return from a bond held until maturity. |
Common Financial Statement Terms
| Term | Definition |
| Assets | Resources owned by a company that have economic value. |
| Liabilities | Financial obligations owed by a company. |
| Equity (Accounting) | The residual interest in a company’s assets after liabilities are deducted. |
| Revenue | Income generated from a company’s operations. |
| Gross Profit | Revenue minus the direct costs of producing goods or services. |
| Operating Profit | Profit generated from core business activities before financing costs and taxes. |
| Net Income | The profit remaining after all expenses, taxes, and costs have been deducted. |
| Cash Flow | The movement of cash into and out of a business. |
| Earnings Per Share (EPS) | The portion of a company’s profit allocated to each outstanding share. |
Common Market Terms
| Term | Definition |
| Ask Price | The lowest price at which a seller is willing to sell a security. |
| Bid Price | The highest price a buyer is willing to pay for a security. |
| Bid-Ask Spread | The difference between the bid and ask prices. |
| Index | A measure tracking the performance of a group of securities. |
| Market Order | An order to buy or sell immediately at the best available price. |
| Limit Order | An order that executes only at a specified price or better. |
| Trading Volume | The number of securities traded during a given period. |
| Primary Market | The market where new securities are issued. |
| Secondary Market | The market where existing securities are traded between investors. |
Common Economic Terms
| Term | Definition |
| Central Bank | An institution responsible for managing monetary policy and maintaining financial stability. |
| GDP | Gross Domestic Product; the total value of goods and services produced in an economy. |
| Interest Rate | The cost of borrowing money or the return earned on savings. |
| Monetary Policy | Actions taken by central banks to influence economic activity. |
| Recession | A period of declining economic activity. |
| Unemployment Rate | The percentage of the labour force that is unemployed and actively seeking work. |
Using This Glossary
This glossary is intended as a reference tool rather than a chapter that needs to be read from beginning to end. Investors may return to it whenever they encounter unfamiliar terms while using Investi, analysing securities, reading company reports, or following financial news.
As financial markets evolve, additional terminology may emerge. Developing familiarity with these concepts will help investors build confidence and improve their understanding of financial markets.
Key Takeaways
✓ Financial markets use specialised terminology that investors encounter regularly.
✓ Understanding key investment terms improves financial literacy and decision-making.
✓ Financial statement terminology helps investors interpret company performance.
✓ Market terminology helps investors understand trading activity and investment analysis.
✓ Economic terminology provides context for broader market developments.
✓ This glossary can be used as a quick reference guide whenever unfamiliar terms arise.
Next Chapter
Chapter 17 | Your Investing Journey
The final chapter brings together the key concepts covered throughout this guide and outlines how investors can continue developing their knowledge, process, and long-term investment approach.