Your financial lingo cheat sheet
Do you ever find yourself confused by the financial lingo and jargon you hear coming out of the mouth of your bankers or financial advisors, or that you hear during market economics segments on radio or TV. Here are simple explanations for some of the most common terms:
Disposable Income: The amount of money you have left over from your salary after deducting living expenses and debt repayments.
Secured Loan: A loan that has a specific asset attached to it, for example a house or car.
Unsecured Loan: A loan that is not attached to any particular asset. These loans tend to be for smaller amounts and have higher interest rates than secured loans as they are more risky for lenders.
Principal: The sum of money borrowed before interest has been added by the lender.
Term: The length of time over which a loan must be repaid.
Prime Rate: The lowest rate at which money can be borrowed commercially. Many loans have the interest calculated in relation to the prime rate. For example prime plus two – meaning 2% above the current prime rate.
Bear: a person that believes the stock market will lose value. A Bear Market is when share prices are decreasing.
Bull: a person that believes the stock market will gain in value. A Bull Market is when share prices are increasing.
Balanced Portfolio: A type of stock market investment that spreads the money invested across a variety of shares in different sectors in order to reduce risk.
Collective Investment Schemes: A type of investment where money from many investors is consolidated and then invested collectively, usually in many different shares across different industries. In the past Collective Investment Schemes were referred to as Unit Trusts or Mutual Funds.