Investment Club Education Series: Investing Terms | Part 2

 Lauren Wilson

June 28, 2019

Build Your Vocabulary with These Common Investment Terms - Part 2

When beginning to invest, you will likely encounter new terms, strategies, and ways of thinking that may make your research seem daunting. There is no reason to be intimidated by investing and by learning a few key basics, you’ll quickly be able to ‘speak the lingo’ and participate in investment discussions.

In our first Investment Club Education series, we are sharing common investment terms to help you build your investing vocabulary.

How many of the terms from part 2 do you know?

Assets: Assets are tangible or intangible resources held by individuals or companies that are expected to provide a future economic output. Financial assets are investments in the assets and securities of other companies. Financial assets include stocks, bonds, and other securities and are valued based on the assets category, motive and market demand.

Cash: Cash is more than just the paper money and coins in your wallet. In investing, cash investments refer to either short-term obligations (fewer than 90 days), or the direct financial contribution to a venture made by an individual or business, as opposed to borrowing the funds.

Maturity: Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. Often this aligns to the final payment.

Coupon: A coupon is the annual interest rate paid on a bond, expressed as a percentage of the face value. While the coupon rate will be expressed in an annual term, it may be paid on different payment intervals.

Principal: Principal is the initial amount put into an investment. 

Call: A call is an option for giving the owner the right, but not the obligation, to buy a specified amount of a security at a specified price within a specified time.

Perpetuity: Perpetuity is a constant stream of identical cash flows with no end. 

Bonds: Bonds are a debt security meaning that the issuer owes the holder a debt. Generally, the issuer is obligated to pay interest (coupon) and/or repay the principal at a later date (maturity). 

Stock: A stock is a type of security that represents ownership in the issuing corporation. They are also known as ‘shares’ or ‘equity’. Being a stockholder or shareholder means that you are entitled to that proportion of the corporations' assets and earnings.

Common Stock: The value of commons shares is regulated by demand and supply of the market. Common stock may or may not be paid dividends as dividends are declared by the board of directors and never guaranteed. Common stockholders are able to vote.

Preferred Stock: The value of preferred stock operates similarly to bonds as usually investors are guaranteed a fixed dividend in perpetuity. As well they have a par value which is affected by interest rates so when interest rates rise, the value of the preferred stock declines. Preferred stockholders do receive any voting rights. If a company goes into liquidation, preferred stockholders have a higher priority of claim of assets and earning, so would be paid ahead of holders of common stock. Preferred stocks also have a callability feature which gives the issuer the right to redeem the shares from the market.

Fixed Income: a type of investment security that pays investors fixed interest payments until its maturity date. At maturity, the principal amount that was invested is paid to the investor. The most common types are Government or corporate bonds.

Liquidation: Liquidation is the process of bringing a business to an end and distributing its assets to claimants. As a company operations end, the remaining assets are used to pay creditors and shareholders, based on the priority of their claims.

Redemption: Redemption is the return of an investor's principal in a fixed-income security, such as a preferred stock or bond.

Penny Stocks: Penny stocks are a security issued by a very small company that trades at less than $5 per share. Some penny stocks trade at large exchanges; however, must generally trade over-the-counter. They are sometimes also referred to as OTC Stocks.

Over the Counter: Over-the-counter (OTC) refers to the process of trading securities for companies that are not listed on a formal centralized exchange such as Rather, they are traded through a broker-dealer network as opposed to on a centralized exchange.

Want to learn more investing terms? We've got you covered. View all of our Investment Club Education Series: Investing Terms here.

 

Ready to try out your new vocabulary? Start your own investment club with Voleo.

Disclaimer: If specific securities are mentioned they are for illustrative purposes only and such mention shall not be seen as a recommendation to buy and/or sell. None of the opinions expressed by Voleo or participating guests should be construed as investment advice. Securities offered through Voleo USA, Inc. Member of the Financial Industry Regulatory Authority (FINRA), Securities Investor Protection Corporation (SIPC). Security products are not FDIC insured, not bank guaranteed, and will fluctuate in value. We do not solicit, recommend, or offer investment advice. Voleo USA, Inc. is a wholly owned subsidiary of Voleo, Inc.