Buzzword Busting: Decoding Financial Jargon

The more uncertainty there is in global financial markets, it seems the more voices there are using complicated jargon, often leading to confusion.

The problem with jargon is that it tends to put people off obtaining information. It’s hard to understand your options when everything appears to be in code. In this article we address key financial terms and how they are used when people are talking about the financial markets. Here are some of the more common terms and market-speak:

Stocks/shares/equities/actions

All different ways of saying a small portion of a big company that you can buy or sell on a stock exchange. If you invest in this asset class, you are most often holding ‘shares’, or a small slice of a company. A public company is one that has its shares on a stock exchange, where shares are traded. You may also hold shares in a private company. This is where the company is not publicly (listed) on a stock exchange. A share is a piece of ownership.

Markets 

Where assets are traded. The ‘stock markets’ are reported in the news and regular reports as an increase or decrease in their index (see below).

Index 

Refers to stocks on a stock exchange. For example, the CAC40 is a selection of 40 companies traded on the French stock exchange that broadly represent the French economy. The S&P500 represents the five-hundred biggest companies in the USA by market capitalisation.

Bonds/debt instruments/fixed interest 

A government bond is where you lend money to the government and they promise to pay you a set rate of return every month or year, and at the end of the set period of time, you will receive your initial investment back. A corporate bond is the same format but lending to a corporation.

Commodities 

Physical materials that can be traded, either because they can be used by consumers (like coffee or cotton), used by industry (like iron and coal) or used to store value, like gold.

Funds/collectives 

You can buy and sell units in funds at a price often called a unit price or share price. There are many types of funds, with different combinations of assets within them, including shares, bonds and other asset types.

ETFs 

‘Exchange Traded Funds’ hold a range of assets like a fund but are traded on a stock exchange like a share. There are specific ETFs for different parts of the financial markets and very broad ones known as index or tracker funds.

Index funds/ passive funds

Also called index trackers, these are set up to follow the performance of a particular stock market index or sector without active decision-making. They may be in the form of a fund or an ETF. 

Reach out to us at Black Swan Capital at info@blackswancapital.eu and we will be happy to see how we can help. Or visit our website at www.blackswancapital.eu

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