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Basic Investment Terms - Terminology Used in Investing

Updated on June 20, 2011

Investing Terms and their meanings

Everyone would like more money, even if not for selfish reasons but just to live peaceably or to give to those in need, etc. Investing is such a great way to help your money go to work for you. Below are some commonly used terms and words used regarding investing.

* Capital Gains Distribution - This is a yearly payment of gains that are the result of investment sales. This distribution measures the amount of gain that was earned on an investment or capital.

* Back-End Load - This is the commission that is charged when a person is redeeming shares from an investment.

* Bidding or Offer Price - This is what the prospective owner of a security or a commodity (or other property) formally offers to buy. Also, it is the price at which a company will buy the stock back. It is usually computed at the net asset value per share.

*  Redeem - To redeem a mutual fund for instance, is to sell it. 

* Diversification - an example of diversification is how mutual funds tend to spread out their investments among different securities in order to minimize risk. Its one way to "not put all your eggs in one basket", so to speak. It provides greater protection for the investment and the investors in that case.


* Objective - There is always an objective just like in any business plan. An investment program will have an objective to help define what the best investing strategy will be.

* No Load Fund - This is when shares of an investment are able to be purchased at a net asset value. This is without the addition of a sales or service charge.

* Portfolio - This is the sum total of a company's investment activity. It will include bonds, stocks, funds and other investments.

* Net Asset Value per Share - You can find an investments share value by subtracting the liabilities from the aggregate assets. This includes cash and securities. The NAVPS usually represents the market price. It is subject to a possible sales or redemption charge.

* Dividend - This is the distribution of assets of corporation to its stockholders. It is in proportion to the number of shares held by each person. The board of directors will decide whether or not to declare dividends and determines that amount.

* Redemption Price - When redeeming or selling the shares, you get an actual amount, and that is the redemption price. It is the price with the redemption charge subtracted from it.

* Sales Fee - This is the sellers commission or just the charge for their facilitating of the transaction. It is added to the net value per share and this is what the buyer pays. There is a maximum fee (like 8.5% for example) that is part of the amount.


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    • oceansnsunsets profile image

      Paula 6 years ago from The Midwest, USA

      Thank you!

    • PhoenixV profile image

      PhoenixV 6 years ago from USA

      Great info voted up!