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9 investing terms to get you started

9 investing terms to get you started

Posted on: December 14, 2011
Author: Staff

If you’re new to investing, unfamiliar terminology is sometimes discouraging. There’s a lot you can learn about investing, but there are only a few things you need to know to get started. And getting started is all you really need to do. The rest will follow.

The best place to start is with words, so you can figure out what everyone’s talking about and what you’re reading. Here are some of the basics.

Basic investing terms you need to know

Stock. A stock is a security that signifies ownership in a company. That ownership represents a proportional share of a company’s assets and earnings. Also known as equity in a company, they are commonly bought and sold on stock exchanges.

Dividend. A payment by a company to its stock-holding shareholders. The payment comes out of a company’s current or retained earnings.

Bond. A debt security used by governments and corporations to raise capital by borrowing. A bond is a promise to repay the principal along with interest on a specified date.

Mutual Fund. A pool of money contributed by investors with similar investment objectives. Investors in the mutual fund share the fund’s income, expenses, gains, and losses that the fund makes on its investments, in proportion of the number of units they own.

Portfolio. A collection of investments owned by an individual or organization. Your portfolio can be as simple as holding one investment or can be made up of many stock, bonds, mutual funds, and other investments.

GIC. An acronym for a Guaranteed Investment Certificate. Issued by Financial Institutions, it’s an investment that guarantees a rate of return over a fixed period of time.

TFSA. An acronym for Tax Free Savings Account. A TFSA is a Canadian investment account that provides certain tax benefits. This account has a wide array of uses.

RRSP. An acronym for Registered Retirement Savings Plan. An RRSP is a Canadian investment account that provides certain tax benefits and is normally used to save for retirement.

RRIF. An acronym for Registered Retirement Income Fund. A RRIF is a Canadian account that’s funded by funds converted from an RRSP and is used to provide an income in retirement years.

Here’s your challenge: Even if these terms still seem a bit fuzzy, start using them. Read articles about them, and start conversations about investing even if it’s just to ask questions. Pay attention to how others are using these terms. Soon, they’ll make sense and you’ll be able to speak about investing more confidently.

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