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Home 2017-11-14T11:54:57+00:00

6 Basic Business Terms Every Investor in the Entrepreneurship World Must Have In Their Back Pocket

Investing is an evergreen topic. Everywhere we turn; there is the talk of investing in the stocks, shares, and bonds. While investing can be a rewarding venture, it comes with an equal measure of risks. You can lose your money in a snap of a finger with a bad investment which is why you need to immerse yourself in this business to learn its ins and out before committing your money. The first step to learning the ins and outs of investing is to know the business terms used in the investing domain. This article looks at the top investing terms to have in your back pocket when looking to enter the investing market:

    Stocks and shares are some of the most critical business terms you should know

A lot of people get confused when shares and stocks are mentioned. Shares and stocks have a lot in common, but there are marked differences between the two. Stock, mostly, is a piece of ownership of a company. For instance, if you buy stock in Facebook, you own a tiny fraction of the company because it’s a large company. Because you own part of the Facebook, you’re able to contribute to decision making, which means you can vote for changes and things that the company should do.

A share, on the other hand, is a portion of ownership in a company. It’s an equal piece of the stock. Shares are usually issued in financial terms. For instance, a company can issue out part of its stock for purchase. If you purchase a piece of that stock, it called a share. You’re allowed to buy as many shares as possible of the stock on offer.

    Portfolio is a term commonly used in building business and investing

Portfolio is the collection of your investments in a company, for instance, stocks, shares, bonds, mutual funds, real estate, commodities and more.

    Return on Investment (ROI) is one of the most critical business terms to know

Every prospective entrepreneur must think of the ROI they will get from their investment. They have to take ROI seriously because, in the long run, the stock market is a gamble. You’ll have to consider investing in high risk or low-risk investment. Essentially, ROI is the profit you get out of investing in stock. For instance, if you buy shares worth $1000 and sell at $1500, your ROI is 500.

    A bond is another essential business term to know

A bond is a loan given to a company or government by individual investors. The government or company issues bonds to the public to get cash. The public or investor buys the bonds (in cash) and expects interest on the money they’ve loaned out. Governments and companies issue bonds to generate money to fund new projects. Bonds are safe, but they have low yields.

    Another business term you should know as an investor is mutual funds

The term mutual means a group of people converging together while funds, on the other hand, means pulling of money. So mutual funds mean a group of people putting their money together to purchase bonds and stocks. When the mutual funds go up, every member of the group gets their ROI. 

    Volatility is common term in investing or business building

Volatility, in the context of investment markets, is the fluctuation or the amount of movement of the price of a given stock or an index measured over a particular period. If there is more movement up and down of a given stock, the more volatile it is.

Conclusion

There are many more business terms you should know in the investing world. However, getting to know the ins and outs of the terms highlighted above first will put you in the driving seat if you’re looking to venture into the murky investing waters.