Investment terms explained

Many of us may have been tempted to invest in the stock market at some point in our lives but have been put off by the seemingly impenetrable jargon involved. It can be hard to decide where to invest if you don’t completely understand what you’re doing.

Speaking to a financial advisor is a good place to start. As a completely independent company with years of experience, Alan Boswell & Company can help you to invest your money in the way that’s right for you, with a level of risk that you’re comfortable with. However, even with the help of a trusted advisor, it’s helpful to understand some of the basic terminology, so here’s our guide to negotiating investment terminology.

Active management

This refers to an investment fund overseen by a professional fund manager, who makes decisions on your behalf in terms of acquiring, allocating and disposing of assets in order to (hopefully) maximise your return.

Ask

This is the lowest price an asset can be bought for.

Asset

Your portfolio is likely to be made up of different assets, which could be cash, bonds or stocks. Asset allocation is the process of balancing these against each other in your portfolio; a diversity of assets is one way to protect against risk while still having a chance of turning a healthy profit.

Bear market

This is when the price of a particular commodity (for instance, oil, cotton, gold etc) is falling. A bear describes someone who predicts such a drop.

Bid 

This is the highest price a buyer is prepared to pay for an asset.

Blue chip

A blue chip company is solid and reliable. It is unlikely to provide spectacular returns but tends to be a good and safe investment.

Bonds

A corporate bond is an investment in the form of a loan. When it matures you should get your money back plus interest, barring a disaster, such as a company becoming insolvent. If the worst happens, the bondholders are paid out before the shareholders but you probably won’t get all your money back. Government bonds (gilts) are also available and are a less risky investment.

Bull market

This is when the price of a commodity is rising. A bull describes someone who predicts such a rise.

Dividend

A regular payment made to company shareholders, representing a share of that season’s profits.

Fund

This is a collection of investments made by financial institutions and individuals overseen by a fund manager on their behalf. Different kinds of funds have different rules, risks and ways of paying out. Types of fund include unit and investment trusts.

Stocks

Stock is part-ownership in a company, represented in shares that are bought and sold on the stock market. These will increase or decrease in value depending on a wide range of factors.

For additional help with your investments, Alan Boswell & Company can help. Get in touch with our financial planners today to discuss your options.