The 52-week high refers to the highest trading price at which a particular stock or security has traded over the past 52 weeks (one year). It represents the peak level of the security's price within that timeframe.
The 52-week low refers to the lowest trading price at which a particular stock or security has traded over the past 52 weeks (one year). It represents the bottom level of the security's price within that timeframe.
Alpha refers to a measure of investment performance that indicates the excess return of an investment compared to its expected return based on its level of risk. A positive alpha indicates outperformance, while a negative alpha suggests underperformance.
Asset allocation refers to the strategy of dividing an investment portfolio among different asset classes, such as stocks, bonds, and cash, to achieve an optimal balance between risk and return.
Blue chip stocks
Blue chip stocks refer to shares of well-established, financially stable companies with a long track record of reliable performance. Blue chip stocks are considered less risky compared to smaller or less-established companies and are often favoured by conservative investors seeking stable, long-term investments.
Bonds are fixed-income securities representing loans made by investors to entities such as governments or corporations, in which the issuer agrees to pay periodic interest and return the principal amount at maturity.
A bear market refers to a financial market condition characterised by a prolonged period of declining prices and a pessimistic outlook among investors. It is typically marked by widespread selling and a general sentiment of negativity in the market.
Beta is a measure of a stock or investment's sensitivity to market movements. It quantifies the relationship between the price movements of an investment and the overall market.
A brokerage is a financial institution or firm that facilitates the buying and selling of financial securities, such as stocks, bonds, and mutual funds, on behalf of investors. Brokers act as intermediaries, executing trades and providing access to various financial markets while charging fees for their services.
A bull market refers to a financial market condition characterised by a sustained upward trend in prices. It is typically associated with investor optimism, high buying activity, and positive market sentiment.
Cyclical stocks are shares of companies that tend to be highly influenced by economic cycles. These companies operate in sectors such as consumer discretionary, industrials, or materials, whose performance is closely tied to the overall health of the economy.
Capitalisation, also known as market capitalisation, refers to the total value of a company's outstanding shares of stock. Market capitalisation is used to assess the size and relative value of a company in the market and is often categorised into different groups, such as large-cap, mid-cap, and small-cap.
A dividend is a distribution of a portion of a company's earnings to its shareholders. It is typically paid in cash but can also be in the form of additional shares of stock. Dividends are often declared and paid regularly, providing investors with a return on their investment in the form of income.
Defensive stocks are shares of companies that are known for providing stable performance and consistent dividends regardless of economic conditions. These companies often operate in sectors such as consumer staples, healthcare, or utilities, which offer products or services that are considered essential and in demand even during economic downturns.
Diversification is an investment strategy that involves spreading investments across different assets, sectors, or geographic regions to reduce risk. Investors aim to minimise the impact of any single investment's performance on their overall portfolio. The goal is to avoid putting all your eggs in one basket.
Dollar-cost averaging is an investment strategy where an investor regularly invests a fixed amount of money at predetermined intervals, regardless of the asset's price.
The Dow Jones Industrial Average (DJIA) is a stock market index that tracks the performance of 30 large, publicly traded companies listed on U.S. stock exchanges. It is often considered a key indicator of the overall health and direction of the U.S. stock market, representing a diverse range of industries.
The dividend yield is a financial ratio, expressed as a percentage, that shows how much a company pays out in dividends each year relative to its stock price. The dividend yield is calculated by taking the annual dividend per share and dividing it by the price per share.
Equities, also known as stocks or shares, represent ownership in a company. When individuals or institutions purchase equities, they become shareholders and have a claim on the company's assets and earnings.
Fixed income instruments
Fixed-income instruments, also known as fixed-income securities, are debt instruments that generate a fixed stream of income for investors. These instruments include government bonds, corporate bonds, money market instruments, and term deposits. They are considered less risky than equity investments.
Federal funds rate
The federal funds rate refers to the interest rate at which depository institutions, such as banks, lend reserve balances to each other overnight in order to meet their reserve requirements. It is a key monetary policy tool used by the U.S. Federal Reserve to influence borrowing costs, stimulate or cool economic activity, and maintain price stability.
Growth stocks are shares of companies that are expected to grow at an above-average rate compared to the broader market. These companies often operate in sectors associated with emerging technologies, innovative products, or disruptive business models. They also typically reinvest their earnings into research and development initiatives to drive future growth.
A gearing ratio is a financial ratio that compares some form of capital or owner equity to funds borrowed by the company. Gearing is a measurement of a company's financial leverage. As such, the gearing ratio is one of the most popular methods of evaluating a company's financial fitness. This article tells you everything you need to know about these ratios, including the best one to use.
Hedge funds are privately managed investment funds that pool capital from accredited investors and employ various investment strategies with the goal of generating high returns. These funds are often more flexible in their investment approach compared to traditional investment vehicles, allowing them to take both long and short positions in a wide range of assets.
Intrinsic value refers to the true or underlying value of an asset, such as a stock or a company, based on its fundamental characteristics and future cash flows. It represents the fair value of the asset as determined by investors' assessment of its fundamental qualities.
Inflation refers to the general increase in prices of goods and services over time, resulting in a decrease in the purchasing power of a currency. It is typically measured by tracking the changes in a specific price index, such as the Consumer Price Index (CPI), and can erode the value of savings and investments if not accounted for properly.
Junk bonds, also known as high-yield bonds, are fixed-income securities issued by companies with lower credit ratings. These bonds offer higher interest rates to compensate for the increased risk of default.
KYC stands for "Know Your Customer." It refers to the process implemented by financial institutions to verify and gather information about their customers' identities, financial activities, and risk profiles. KYC procedures help prevent fraud, money laundering, and other illicit activities by ensuring that customers are legitimate and their transactions are transparent.
Leverage refers to the use of borrowed funds or financial instruments to increase the potential return of an investment. It involves utilising debt or derivative products to amplify gains or losses. By employing leverage, investors can control a larger position in an asset than their initial investment would allow, but it also exposes them to higher risk due to the magnification of market movements.
A market correction refers to a temporary reverse movement or decline in the overall value of a financial market or specific asset, typically characterised by a decline of at least 10% from recent highs. It is often considered a natural and healthy adjustment following a period of prolonged market gains, allowing prices to align with underlying fundamentals and reducing excessive speculation.
A mutual fund is an investment vehicle that pools money from multiple investors to collectively invest in a diversified portfolio of securities, such as stocks, bonds, or other assets. It is managed by a professional fund manager who makes investment decisions on behalf of the investors.
Market risk refers to the potential for losses in investment value due to broad market factors that affect the overall economy or a specific market segment. It arises from factors such as economic conditions, geopolitical events, interest rate changes, and overall market sentiment. Market risk is a systematic risk that cannot be diversified away.
Margin refers to borrowed funds from a broker to purchase securities. It allows investors to increase their purchasing power and potentially amplify their investment returns. This is done at a higher risk as losses can exceed the initial investment.
So what’s the difference between leverage and margin? The former refers to the concept of using borrowed funds to magnify returns. The latter is the specific mechanism of borrowing funds from a broker for trading purposes. Leverage can be achieved through various means, including margin trading.
NASDAQ, short for the National Association of Securities Dealers Automated Quotations, is a global electronic marketplace for buying and selling securities, primarily stocks. It is known for its focus on technology companies and is one of the largest stock exchanges in the world. NASDAQ operates as a fully automated trading system and is home to many high-profile technology companies.
Net Asset Value (NAV) represents the per-share value of a mutual fund or exchange-traded fund (ETF). NAV is typically calculated at the end of each trading day and serves as a reference point for determining the price at which investors can buy or sell fund shares.
OTC stands for "Over-the-Counter." It refers to a decentralised market where financial instruments, such as stocks, bonds, and derivatives, are traded directly between parties without the involvement of a centralised exchange. OTC markets provide greater flexibility and accessibility but may involve higher risks and less regulatory oversight compared to exchange-traded markets.
The occupancy rate is the ratio of rented units to the total number of available units in a building, tower, housing unit, state, or city. It is one of the critical concepts for those investors who are fairly interested in dealing with real estate transactions.
Penny stocks are shares of small, low-priced companies that typically trade at a relatively low market price, often below $5 per share. These stocks are considered to have higher risk and volatility due to their small market capitalization and limited liquidity.
Quantitative easing is an unconventional monetary policy tool used by central banks to stimulate the economy. It involves the central bank buying government bonds or other financial assets from the market, and injecting new money into the economy. The goal is to increase the money supply, encourage lending and investment to promote economic growth, and combat deflationary pressures.
Also known as real estate investment trust, REITs own and operate income-generating property assets such as shopping malls and office buildings. The rental income from these assets are then distributed to unitholders.
A recession is typically defined as two consecutive quarters of contraction or decline in a country's real gross domestic product (GDP). It is characterised by increased unemployment rates, reduced consumer spending, and overall economic slowdown. Recessionary periods are often accompanied by decreased business activity, declining corporate profits, and negative market sentiment.
Risk to return
Risk to return refers to the trade-off between the potential reward or return on an investment and the level of risk associated with it. Investors often evaluate the risk-to-return ratio to assess the balance between the likelihood of gaining profits and the possibility of incurring losses.
Revenue per available room (RevPAR) is a metric commonly used in the hospitality sector to measure performance of hotels. It is calculated by multiplying a hotel's average daily room rate by its occupancy rate.
Short selling is a trading strategy where an investor borrows securities from a broker and sells them in the market with the expectation that the price will decline. The investor aims to buy back the securities at a lower price in the future, returning them to the broker and profiting from the price difference.
Securities essentially refer to tradable financial instruments that represent ownership or a creditor relationship in a company, government, or other entity. Examples of securities include stocks, bonds, options, futures, and mutual funds. Securities are bought and sold in financial markets, allowing investors to participate in capital markets and potentially earn returns on their investments.
The Sharpe ratio is a measure that quantifies the risk-adjusted return of an investment or portfolio. It calculates the excess return earned per unit of risk taken, with risk measured by the volatility or standard deviation of returns. A higher Sharpe ratio indicates better risk-adjusted performance, reflecting a higher return relative to the amount of risk undertaken.
The S&P 500, also known as the Standard & Poor's 500, is a stock market index that measures the performance of 500 large publicly traded companies listed on U.S. stock exchanges. It provides a snapshot of the overall performance of the U.S. stock market and is widely regarded as a benchmark for the broader economy and equity investments.
A stock split is a corporate action where a company divides its existing shares into multiple shares, thereby increasing the total number of outstanding shares. The split does not change the overall value of the company, but it effectively reduces the price per share, making the stock more affordable for individual investors and potentially increasing liquidity.
A stock represents ownership in a publicly traded company. When individuals purchase stocks, they become shareholders and have the potential to earn profits through capital appreciation and dividends. Stocks are traded on stock exchanges, and their prices can fluctuate based on market demand and the performance of the issuing company.
The terms "stock" and "share" are often used interchangeably and generally refer to the same thing. However, "stock" is a more general term that can refer to the collective ownership in a company, whereas "share" typically refers to a specific unit of ownership in that company. For example, an investor may own shares (individual units) of a company's stock (overall ownership).
A ticker symbol is a unique combination of characters used to identify a particular publicly traded company's stock on an exchange. It serves as a shorthand representation of the company's name and is widely used by investors to quickly and easily identify and track stocks in the market.
Unit trusts are collective investment vehicles that pool money from multiple investors to invest in a diversified portfolio of securities. They are professionally managed and offer investors the opportunity to access a wide range of assets, such as stocks, bonds, and other financial instruments. Unit trusts are divided into units, and investors own a proportional number of units based on their investment amount.
Unit trusts are often used interchangeably with mutual funds though their meanings can vary slightly in different jurisdictions.
Volatility refers to the degree of variation or fluctuation in the price or value of a financial instrument, such as a stock, bond, or market index. It is a measure of the market's or an asset's potential for price movements, with higher volatility indicating greater uncertainty and potential for larger price swings.
Weighted average maturity (WAM) is a measure used in fixed-income investments to calculate the average time it takes for the cash flows (interest and principal payments) to be received. It considers the proportion of each bond's maturity in relation to the total portfolio, providing insight into the overall maturity profile and interest rate sensitivity of the investments.
Year-to-date (YTD) refers to the period starting from the beginning of the current calendar year up to the present date. It is commonly used in financial contexts to measure the performance of an investment or financial indicator over the course of the year. YTD returns or changes are often expressed as a percentage to show the cumulative performance during that period.
A zero-coupon bond is a type of bond that does not pay periodic interest (coupons) to the bondholder. Instead, it is issued at a discount to its face value and provides the full face value to the bondholder at maturity. The bondholder earns a return through the difference between the purchase price and the face value.