Portfolio

This refers to a range of investments or basket of investments held by a person or company.

Inflation

It describes a general increase in the prices and fall in the value of money.

Equity

This refers to the ordinary shares issued by a company. Companies raise capital through shares or loan stock( bonds). The people who own shares in a company are its owners. An individual may have a few shares out of many issued by a company. Nevertheless, that individual still owns a small part of the company.

GDP

This refers to the total value of income / production from economic activity within a country. Gross Domestic Product (GDP) is one of the primary indicators used to gauge the health of a country’s economy. You can think of it as the size of an economy.

Bond (Loan Stock)

Bonds are also known as debt securities .They are a form of loan instrument where a borrower often a government, supranational authority or a corporate firm issues a bond in return for funds. The person who invests in a bond is the lender or the investor and the organization issuing the bond is the borrower. People who own loan stocks are creditors of the company. The company owes them a debt which they have to pay but they have no ownership interest in the company.

Mutual Funds

A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other similar assets.

Diversification

Diversification can be thought of as not having all your eggs in one basket. Just as it increases risk to be exposed to any one company or sector so it may be risky to be exposed to only one market. A portfolio can be diversified against various regions, sectors, asset classes or currencies. Research shows that a portfolio of shares is well diversified if it has roughly equal amounts invested in 15-20 different holdings across different sectors.

 

Real Returns

This refers to the return an investment gives after stripping out the effects of inflation. For example a bank account or an investment paying 4% has a nominal return of 4%. If inflation is 3% per annum then the real return is 4% – 3% = 1% real return.

Bull Market

Bull market refers to a group of securities in which prices are rising or are expected to rise.The term bull market can be applied to anything that is traded e.g bonds, currencies , stocks.

Bear Market

This refers to a condition in which securities prices are falling. A persistent downward trend in equity prices is called a bear market. A downturn of 20% or more over a two month period is considered an entry into a bear market.

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