Category: Investment Basics

The Federal Reserve Systems’ Board of Governors that oversees Federal Reserve Banks and establishes monetary policy in the US.

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Authorised Share Capital is the amount of share capital that a limited company is authorised to issue. This does not provide any indication of the worth of the company which is related to its issued capital and reserves, its Net Asset Value (NAV) and its profitability.

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The Bear market is a market where prices decline against a background of widespread pessimism.

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The Bull Market is a market where prices increase against a background of widespread optimism.

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Bid-offer spread is the difference between the price at which financial securities and units in a pooled fund can be sold (bid price) and bought (offer price).

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Ordinary shares usually have associated voting rights that enable the holder to influence the management of the company.

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Accrued Interest is interest earned on a bond since the last interest payment date. If the bond is sold, the accrued interest is paid (gross of tax) to the seller at the time of the transaction in addition to the clean price of the bond.

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Investing in any securities not denominated in the investor’s own base currency introduces currency risk due to the volatility of foreign exchange rates.

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Gold is potentially attractive as an investment due to its high liquidity, its status as an asset held by central banks, and because it is seen as a good source of diversification for funds and an inflation hedge.

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Lifestyle Investment is a process whereby a member’s investments are adjusted depending on their age. Typically, assets are switched from equities to bonds and cash as retirement approaches.

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A measure of the income return earned on an investment. In the case of a share, the yield expresses the annual dividend payment as a percentage of the market price of the share.

For bonds, the running yield is the annual interest payable as a percentage of the current market price. The redemption yield (or yield to maturity) allows for any gain or loss of capital which will be realised at the maturity date.

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Illiquid assets are those assets that cannot be easily bought, sold or converted into cash. It may often be impossible to convert the asset to cash until the end of the life of the asset. Illiquid funds are those that take time for investors to trade.

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Market Capitalisation is the total value of a company, as determined by the market price per share multiplied by the number of shares in issue.

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Alternative Investments are investments other than mainstream equities and bonds. New capabilities sometimes referred to as “alternatives” include hedge funds, private equity, infrastructure, gold and commodities.

Real estate is also sometimes described as an alternative.

Alternatives may be asset classes in their own right (e.g. gold) or may be new strategies for investing in established asset classes (e.g. hedge funds).

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Each bond issue is given a credit rating according to how much investment risk is associated with the bonds – i.e. how likely it is that the issuer will be able to meet interest (coupon) and capital (principal) repayment obligations.

The higher credit ratings (such as AAA) mean that the issuer is highly likely to be able to meet these obligations and thus can offer bonds with lower interest rates and still attract investors.

Bonds with higher ratings are referred to as investment grade, those with lower ratings as non-investment grade (i.e. D to BB+).

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What does it take to become entrepreneurs? 
Do you have what it takes?

Find out here.
Here are five attributes that set successful entrepreneurs apart:

1. Passion and Motivation

Although many traits make entrepreneurs successful, perhaps the most important are passion and motivation.

Can you handle the frustration when your ideas fail? Remember, success is a function of passion and determination.

2. Risk Takers
Entrepreneurs are risk takers, diving into a future of uncertainty. But just because you take risks doesn’t always make you successful.
Successful entrepreneurs are willing to risk their time and money on unknowns, but they also keep resources, plans and bandwidth for dealing with “unknown unknowns” in reserve.

When evaluating risk ask yourself, “Is this risk worth it?”

3. Market Knowledge
Most become successful because they came up with something revolutionary or fixed a problem that most if not all users experience. It is essential that entrepreneurs have a good sense of the market.

• Who is the target market?
• What do they need?
• What makes my idea different/ better than the rest?

Remaining unaware of changing market needs, competitor moves and other external factors can cause even great products to fail.

4. Making Money Moves
It takes time for any venture to become profitable. As such, capital is a limited resource and needs to be utilised wisely. It is essential to plan for present and future financial obligations and set aside an emergency fund. Even after securing funding or going fully operational, a successful businessperson keeps a complete handle on cash flow, as it is the most crucial aspect of any business.

5. The Right Connections
No man is an island. No man stands alone.
Having friends and colleagues is great but what I’m talking about is knowing the right people who can help you bring your ideas to life.
Such as a mentor with extensive networks to seek valuable advice.

Do you have what it takes to be an entrepreneur? 

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An Initial Public Offering referred to as an IPO is the first time that the stock of a private company is offered to the public.

IPOs are often used to raise capital for companies seeking to expand their venture.

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An Asset Class is a collective term for investments of a similar type with a unique combination of investment characteristics.

The main asset classes are:

• Equities
• Bonds
• Cash
• Real estate

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Hedging is a strategy that aims to reduce risk. For example, a forward currency transaction might be executed when investing in overseas shares or bonds to avoid the volatility of returns due to exchange rate movements.

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There are millions of equities on the markets but not all are worth your time, and as such, all dividend stocks are not the same, so here are five tips to keep in mind when choosing dividend stocks:

 

1. Consistency Payout

An excellent indicator of a company’s profitability is consistency in paying dividends. Dividends are paid from the company’s earnings so if a company is doing well.

 

2. Companies You Know

Think about the bank [NYSE: BNS] you have been saving with since you were a child, your favourite cereal [NYSE: K], or the phone [NYSE: AAPL] you are addicted to, chances are the company is listed on the stock market. Since you trust them to use their products, why not consider them for your portfolio chances?

 

3. Diversification

Putting all your money in one security or one industry exposes you to unnecessary risk, and, while you cannot avoid all risk associated with investing, being smart about the risk you take will save you much grief. Remember the saying, don’t put all your eggs in one basket.

 

4. Risk – Reward

It is true the greater the risk, the greater the reward but there is also a flip side. The key is to understand your risk tolerance: Are you an aggressive, moderate or conservative investor?

 

5.  Reinvest Your Dividends

If you do not need the income immediately, reinvest the dividends, and you will notice how much your portfolio will grow, even without you adding to the principal amount.

 

There is no one size fits all in investments but understanding the basis is important. Remember no one woke up knowing everything about investing, everyone started with the basics.

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