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Investing Terms You Should Know

Before you start investing, many terms you hear from your financial institution can sound foreign and be intimating. Within your circle of friends and in the media you hear about "diversifying your portfolio", but what does that actually mean?

You don’t need to understand every financial term before you start investing; however, we believe you should learn some common terms before you get started.

Fund:

A group of stocks, bonds, or other assets that you can invest in. ETFs, mutual funds, and Index Funds are all examples of types of funds.

Portfolio:

The collection of investments that you have made.

Stock:

A sliver of ownership in a company. When you buy a stock, you are an owner of that company.

Capital gains:

The profit you make when you sell an asset. This profit is sometimes subject to taxation, called a “capital gains tax”, which is calculated by your income bracket and the amount of time you’ve held the asset.

Diversification:

Spreading your money across a number of different (largely unrelated) investments to reduce the risk of losing your money if one of them goes down.

Index:

A way of measuring the performance of a stock exchange or a certain subset of it. For example, the Dow Jones Industrial Average and S&P 500 are examples of Indexes.

Dividend:

When a company shares earnings with its qualifying shareholders, paid out as cash or additional stocks.

 

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