Basic Definition of Terms Flashcards
Investing
The act of using money as capital para bumili ng assets, o pag-aari, with expectation that it can produce more money for you in the future.
Investment
The actual purchased asset that is expected to produce income or grow in value overtime when you decide to sell or liquidate them.
Asset
From an individual person’s perspective, ang asset ay isang resource na may economic value. Basically ito ay mga pag-aari mo. All investments are assets, but not all assets are investments.
Liquidity
Defines yung ability ng isang asset o pag-aari na ma-convert into ready cash, that you can use right away to purchase commodities, material things that support your lifestyle needs, or i-convert to other assets, all while retaining its market price.
Capital Appreciation
Investor’s earnings due to the rise in an investment’s market price, or value. It is also the difference between the “purchase price” and “selling price” of your investment. Investments that aim for capital appreciation include stocks, commodities, Exchange Traded Funds (ETFs), Mutual Funds, and Real Estate.
Securities
Financial Instruments that are used to raise capital in public and private markets.
What are the 3 types of securities?
Equity - (Can be a stock or share) allows you to have ownership rights to a company
Debt - Loans or borrowed money paid with periodic payments.
Hybrid -Combination of both.
What are some of the investment options that you have?
- Bank Products
- Bonds
- Stocks/Shares
- Investment Funds
- Business
- Retirement Funds
- Insurance
- Real Estate
- Futures
What are the 2 types of investments that banks offer?
- Savings Accounts
- Certificate of Deposit
Bank savings account?
Basic type of banking account. Has compounding interest but not enough to beat the inflation. Allows you to withdraw your money anytime
Bank certificate of deposit?
Savings account that holds a money for a fixed time, promising higher interest than a normal savings account. There’s a fee if you opt to withdraw your money early. Though safer than stocks/bonds, it offers lower opportunity for growth. Commonly known as “Time Deposit” in most banks.
Bonds
Loans offered by investors to governments and corporations. In exchange, the borrowers pay interest, and return the principal or the loaned money. Think credit card pero sa government/corporate level.
Stocks
Units of ownership in a corporation. When you own a stock of a corporation, you are one of its “owners”.
Difference of stocks and shares
Stocks refer to a slice of ownership of one or more companies, while shares refer to a slice of ownership of a particular company.
e.g. I own stocks in the Philippines. My stock picks consist of Ayala Land, Mega World, and Jollibee. I also own private shares in my company, Accenture.
Investment Funds
A pool of money from different investors used to purchase securities collectively.
Mutual Funds
An investment option that gives small-time individual investors access to diversified portfolio of securities such as stocks, bonds, money market, and many more.
Money Market Funds
A mutual fund that aims to offer investors high-liquidity instruments with a very low risk. It invests in cash, cash-equivalent securities, and high credit rating debt-based securities with short-term maturity.
Business
Having your own small business. You can start with small capital (5,000php). It has high amount of return, but also a high amount of risk.
Retirement Fund
Building fund while able to have continuous cash flow when you retire from work
Futures
Allows you to purchase a fixed amount of shares and sell them at a specified price and future date
Insurance
Protects against potential financial loss and damages (e.g. death, sickness. or in other aspects as well such as automobile damages).
Real Estate
Generate income through purchasing, leasing, managing, or selling a real estate property for a price higher than it was bought as the property value appreciates over time.
Compound Interest
Interest gained on a deposit you made on your bank account, or a loan you availed, based on the initial principal (original amount of money). It is calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan (interest on interest).
