A student’s guide on different investment terms

A student’s guide on different investment terms

You are ready for investment. Being a college student when it is the right time to take an investment plan, many of them often invest their valuable fund in high-risk shares. Now, this happens due to a lack of knowledge. 

Until you know what type of fund you should select for investment purposes, there is a chance of facing great loss. 

Apart from winning, then a student has to connect with another personal loan to repay lenders of Ireland. To avoid such a scenario, you should prepare yourself from the very beginning. 

Make sure you have invested funds in less risky shares so that there will be a high chance of getting back the invested money.

Here we will discuss such important terms that should be familiar to a student when he opts for investment plans. Just take 5 minutes to learn about these entirely important terms before opening the trading account. 

Description of terms associated with investments 

  • Asset – 

In simple words, an asset is something that you own after investment. If you have chosen the right investment plan, your asset will hopefully be a valuable one. For instance, jack, a student he has invested in mutual fund shares. Therefore, those shares are jack’s asset. 

  • Asset Class – 

Although the term ‘class’ may cater to you the sense of schooling, it is not. Actually, the term asset class denotes the type of investment, i.e., your invested money belongs to a particular type of fund. 

For instance, you have invested money in stocks, bonds, shares, CDs, or a simple bank account. All these types of investment are also the asset class. 

  • Asset allocation – 

By the term allocation, it may be quite clear what it exactly means. When you invest in buying assets, then there will be a construction of a portfolio. Now, there is a standard of the portfolio. Some portfolios are also as highly diversified, while some are as low diversified. 

Financial advisors always prefer a highly diversified portfolio because the chance of making a profit is higher than others. 

  • Diversified portfolio – 

A portfolio will be taken into account as a well-diversified one when allocated between different asset classes. In simple words, diversification is the process of distributing different assets to ensure good profit. 

For instance, a portfolio consisting of stocks, bonds, and CD will be considered a diversified one because it comprises more than 2 asset classes. 

Diversification is the core need of every portfolio as it minimizes the risk factor and increases the possibility of earning a high profit. Besides, it also ensures good performance of investment and good return. 

On the other hand, if you own a portfolio comprised of only one type of asset class, the market faces a bearish flow. Then, all your money will be exhausted, and there will be no other option left without taking personal loans in Ireland as bad credit.   

  • Dividends

 Dividend denotes income. Income that generates from the invested money. Generally, it is the bulk of funds that a particular company provides as you have invested money. 

The dividend is a yearly payment that comes from of profit earned by that company in a financial year. But you should also note that all companies don’t pay dividends. 

Even if a company is paying the dividend, it varies from one organization to another. It depends upon the present financial situation of the company. However, it is better to invest in such companies that offer dividends because it will ensure an additional fund source. 

  • Holding –

The number of assets one holds during investment is known as holdings. One can easily interchange with his present holdings and add different assets at any time. 

  • Index – 

It is quite similar to the word index that we can see at the beginning of every book. Unlike books, the index also refers to the list of stocks, bonds, shares, and equity in the trading market. Still, apart from showing the list, it also displays the ongoing performance of these investment instruments. Although you may consider it as a bag full of stocks, it is not. It is a collection of all these investing instruments. 

One of the popular indexes of Ireland is ISEQ20. Therefore, you can get the entire performance of the share market by visiting the index of Ireland. 

  • Return – 

Return is something for which all these investments one makes. It is the main purpose of investment. However, a good return depends upon the successful following of several factors. To get a good return, you get the allocated fund properly. 

A portfolio should be well-diversified and risk-taking ability comes into consideration. It says, High risk often leads to a high return. So, one cannot avoid the role of risk while desiring for goof return.

  • Risk – 

Risk plays the main role in investment. Here risk denotes, the investment fund is put into a share, and the performance of the share is not up to the mark, then your fund is at low risk. 

On the other hand, if you have put the fund in such a share that is at its peak, it denotes you have invested the fund at high risk. When the performance of share is at its peak, it hints at the upcoming downfall. 

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