Investment Terminology

This page will list down commonly mentioned terms. Below each term is a short and simple description of what it means.

Click on the underlined topic header to learn more about it.

Robo-Advisor

A type of investment that has gained popular in the last few years. Robo-advisor invests based on certain mathematical rules and needs little human intervention. Usually to invest through a robo-advisor, one would need to answer a few questions such as how much risk they are willing to take on. From the answers, the robo-advisor will decide based on its rules on what to invest in.

Share

A share represents a unit of a company so owning any share of the company will make the person an owner of the company. Because the person is an owner of the company, profits made by the company belongs to the person.

Equity Investment

Equity investment is investing in companies by owning its shares. This makes you an owner of the company.

Bond

Bonds are a form of IOU. So when a company issues bond, investors buying the bond are actually lending money to the company. There are many types of bonds, each offering different forms of returns.

Market Index

Market Index tracks a segment of the stock market to provide a benchmark for the overall performance of the stock market. For example, In Singapore there is the Straits Time Index (STI) which tracks the performance of the Singapore Exchange stock market.

Exchange-Traded Fund (ETF)

ETFs are designed to track the value of an underlying asset or index. Popular examples of ETF will be the SPY and VOO which tracks the S&P500 index. Investors can purchase shares of ETFs to align their investment returns to what the ETF is tracking.

Broker

Brokers help to bring seller and buyers together so investor generally needs the services of a broker to start trading shares. An example of a popular broker would be Interactive Brokers (IBKR).

Financial Ratios (such as P/E Ratio, EPS etc)

You might have heard of terms such as P/E Ratio (Price-Earning Ratio), EPS (Earnings Per Share) during conversations on investments. These are Financial Ratios which helps investors understand the financial performance of a company.