17 Common Investment Terms Every Investor Should Know

As you move through the investment world, there are many terms and phrases that you will need to understand. Here are 17 of the most common investment terms and a description of what they mean.

1. Allocation of Investments: This term is also known as asset allocation. It defines where you have placed your investments and how. For example, how many bonds, stocks, funds etc., that you own.

2. Asset: Investments, items, money and property that you own that are of some monetary value are considered assets.

3. Bear Market: When the value of stocks in the market continues on a downward trend over several months, it is known as a bear market.

4. Bid Price: This refers to the price paid for a security, or the current amount that a stock can be sold for.

5. Blue Chip: Well established and profitable company stocks that show constant growth and pay regular dividends are considered blue chip shares.

6. Bull Market: When the value of the stock markets consistently goes up over several months, it is referred to as a bull market.

7. Common Stock: When you purchase shares of a corporation and receive the right to vote on the company’s affairs, you have purchased a common stock. This is the most common type of investment, especially for beginners.

8. Discretionary Account: An account where the investor gives a broker, bank, or another person authority to make investment decisions on the investor's behalf.

9. Diversification: This term refers to having different types of investments in your portfolio, or not putting all your eggs in one basket. For example, you may have investments in stocks, bonds and mutual funds. It also refers to having one type of investment in various places, such as shares in a variety of companies, or both domestic and international bonds. In other words, spreading your investments around.

10. Index: The stock market index helps you to compare the value of share prices as they move up and down. The Dow Jones Industrial Index, otherwise known as “the Dow” is the most well known.

11. Market Order: If you are working with a market broker and you want to buy a security at its current price, you would place a market order with your broker.

12. NASDAQ: This acronym stands for the National Association of Securities Dealers Automated Quotation system, and is the largest stock exchange in the world.

13. Prospectus: A document that describes an investment and fully discloses its risks, policies, and fees. Proxy: The right a shareholder gives another to represent their vote at a shareholder’s meeting.

14. Securities and Exchange Commission (SEC): The government agency responsible for monitoring the issuance and sale of securities.

15. Total Shares Outstanding: This term refers to the number of shares in a company that is held by investors.

16. Wrap Fee: Charge for an investment program that bundles or "wraps" a number of services (brokerage, advisory, research, consulting, management, etc.) together and covers them with a single fee based on the value, of assets under management.

17. Yield: Dividends that are paid to you from shares you own in a company are described as yield. For bonds the effective interest rate is known as yield.

Get more tips on how to invest your money wisely here: http://cherryshareblog.blogspot.com