12 Terms you need to know if you plan on investing

12 Terms you need to know if you plan on investing

Even though investing isn't only for professionals, they do have an upper hand on others: they're familiar with the language of investment. Here's a quick guide of the most common terms so you can avoid rookie mistakes. Plus, a guide for you to clear all your doubts and start investing right away!

Let's start with the basics: in the market, companies don't appear as such. There's a certain organization that you need to know and isn't really hard to learn. Companies are divided into 11 sectors, each with a different amount of industries. This last number can vary from 2 to 15 industries.

Next, there are investment vehicles. There are many to choose from when it comes to investing, but the four most common ones are stocks, mutual funds, ETFs, and bonds. They each have their own advantages and disadvantages in terms of growth potential and volatility.

When someone mentions a company's growth potential, they're referring to how much or little it's expected to grow. This growth has an impact on the shares, whose value usually fluctuates according to the company's. Keep in mind that this potential can be under or overvalued, which means that the shares' value is expected to rise too little or too much than what'll happen in reality.

On the other hand, the term volatility indicates the stability (or lack of) in an investment. If its value changes rapidly, it's called a volatile investment. This is usually considered to carry a higher risk because it's harder to predict what'll happen next.

Another expression to pay attention to is a company's market capitalization. This is the value of all its outstanding shares, which is used to calculate and categorize the stocks' sizes. If you multiply the stock price by the total number of shares, you'll get the outstanding shares' total value.

Stocks are organized in so-called asset classes, which make reference to the size of the company whose shares are being considered. This means that you'll find micro-cap, small-cap, mid-cap, and large-cap stocks, going from smaller to larger companies' sizes.

The net earnings from a company are also important to consider. This extra money grows the bigger the amount of money the company makes in relation to how small it is the amount it spends. From this money, the company can pay its shareholders a certain amount of money for each share they own. That's called the dividend yield.

If you want to learn more, you can take this free course on how to invest in the Stock Market!


Starting to invest can seem like a leap of faith for beginners. However, you can get the most basic doubts clear on time to start investing!

1. Why?

Investing is all about generating a profit and increasing your savings. If you choose to do it correctly, you can save enough money for your future plans, which can include buying a house, a car, or simply growing your retirement funds.

2. When?

Since you're planning in advance, it's best to start investing ASAP. Whatever your goals are, you'll need less monthly investments the sooner you start making them. The power of compounding is big and you should try to keep it on your side.

All in all, waiting to invest for any possible reason is essentially costing you money. You're losing all profits you could've gained if you'd already started investing! This is why you shouldn't postpone it, no matter how distant into the future your goals seem to be. Here are some tips to invest during the Coronavirus pandemic.

3. What?

The issue of what investments to make is much more complicated because there are many different factors to take into account. These may indicate a company's growth potential to some people, but others prefer to take other variables into consideration before deciding what to invest in. It's a personal choice, which you'll be able to make once you're informed of what can affect a company's growth and decline.

4. How much?

As said before, the sooner you start to invest, the less you'll have to pay each month to meet your expected goals. There are also many calculators that'll help you know how much you should invest at the beginning and its results, taking into account many changeable variables.

5. What for?

Before investing you'll need to know what to expect in order to see if you're ready to face it. It won't be an easy and smooth trip, but you can take some measures to pretty much guarantee your success. It's important to stay through the good and the bad years of the market because you'll have more chances to receive positive returns the longer you stay invested.

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