If you've just started investing, and you're more lost than a tourist with a foreign-language map, this is the cheat sheet for you.
You asked for more, so we delivered!
There is oh so much to learn about the wonderful world of investing, and the more familiar we get with the language of investing, the easier it is to make clear, informed decisions in our investing journey.
So here are 7 more investing terms that every investor should know.
Before long Flux Fam, you’ll be spitting investing jargon like a finance expert.
PS: this is the follow up article to 8 investing terms every investor should know, so if you haven’t already, check that out first.
EBITDA stands for Earnings Before Interest Tax Depreciation and Amortisation.
It’s a bit of a mouthful but it is used to measure how the main activities of a business are performing (ie the selling of goods and cost of running the business) - without the added complexity of accounting deductions.
EBITDA is often used over net profit as a metric to compare the performance of companies because it strips out all of the extra costs and accounting complexities.
ETF stands for Exchange-Traded Funds and it basically operates like a basket with a bunch of different investments like stocks, bonds, or commodities.
This basket allows you to buy a little piece of many investments all at once, instead of picking and choosing individual ones.
They might track the performance of an index like the ASX200, a market sector, or a commodity.
For example, you might buy shares in an ETF that invests in a group of mining stocks or tech stocks in Asia.
In Australia, companies pay taxes on their profits before they distribute some of these profits as dividends to shareholders.
In order to prevent the same income from being taxed twice (once with the company and once with shareholders), shareholders are given “franking credits” for the tax already paid by the company.
Growth investing is an investing strategy that’s focused on capital appreciation.
As a growth investor, you’re keeping your eyes peeled for stocks that you think will grow faster than other companies in their industry, even if they might not be making much profit yet.
IPO stands for Initial Public Offering. This is when a company first sells a portion of its business to the general public - via a stock exchange.
For investors, it’s a chance to buy into a company that they believe has potential to grow.
A stock exchange is a market that brings together buyers and sellers who want to trade their investments.
Stock exchanges used to be IRL, and packed with investors and brokers, but now they are almost entirely online.
Stock exchanges include the ASX (Australian Securities Exhange), NYSE (New York Stock Exchange) and LSE (London Stock Exchange).
These exchanges enable shares of companies to be traded to people all over the world.
Value investing is all about finding companies that you think are undervalued in the market and trading below its value.
Value investors believe that the market isn’t always accurate in how it responds to new information, and they try to leverage that to make their money.
Warren Buffet is big on value investing.
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