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There’s enough financial jargon being used that even experienced investors get tripped up now and again. Today we’re going to talk about the investment terms you should know, what they mean and why they’re important to you and your financial future.

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Show Notes

Do you have a clear understanding of investment terms you see on your 401k statements, in the media and in conversations with your financial advisor? Today we’ll share some terms you should know and help you understand why they’re important.

We’ll discuss a few here on the blog but make sure to listen to the episode to hear the full breakdown.

Stocks and bonds

A stock, also known as equity, is a security that represents the ownership of a fraction of a corporation. This entitles the owner of the stock to a proportion of the corporation’s assets and profits equal to how much stock they own. Units of stock are called shares.

Stocks are bought and sold predominantly on stock exchanges, though there can be private sales as well, and they are the foundation of nearly every portfolio.

Stockholders do not own corporations; they own shares issued by corporations. Owning stock gives you the right to vote in shareholder meetings, receive dividends, which are the company’s profits, if and when they are distributed, and it gives you the right to sell your shares to somebody else.

A bond is a fixed-income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental. A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

Asset Allocation and Diversification

Here’s a place where many investors might get tripped up. Most people know what the word diversification means but not many are able to properly allocate their money to reflect proper diversification. Often times you end up with the same investment in multiple places or you put money into different custodians, and you end up with a portfolio that’s not diversified. We’ll take you through what these mean on the show and how we go about helping clients allocate their money.

We’ll go through some other investment terms on the show as well but if you have any others that you need help with, give us a call or shoot us an email.

Listen to the full podcast or use the timestamps below to jump to a specific section. 

[1:37] – Financial literacy month

[6:32] – Stocks

[13:39] – Bonds

[17:45] – Asset allocation and diversification

[20:11] – Fruit stand analogy

[27:05] – ETFs and mutual funds

[32:50] – What does this mean to you?

Thanks for checking out this episode. We’ll talk to you again soon.

“There’s certain investment terminology that you’re going to see on your 401k statements … Do you have a clear understanding of what they are?”

-Scott Sierens