Glossary Investment terms The following are explanations of some of the terms you would have come across in this guide. Asset Dividends Volatile Anything having commercial or exchange value Dividends represent a share in the profits of When the value of a particular share, market or Athat is owned by a business, institution or individual. a company and are paid out to a company’s sector swings up and down fairly frequently and/or Asset class shareholders at set times of the year. significantly, it is considered volatile. Category of assets, such as cash, company shares, Equities Volatility fixed income securities and their sub-categories, Shares of ownership in a company. The degree to which a given security, fund, or index as well as tangible assets such as real estate. Portfolio rapidly changes. It is calculated as the degree of Bond deviation from the norm for that type of investment A combination of investments held by an investor. over a given time period. The higher the volatility, A loan in the form of a security, usually issued by the riskier the security tends to be. a government or company, which normally pays a Return fixed rate of interest over a given time period, at the The amount of money you’ll make from an end of which the initial amount borrowed is repaid. investment. Capital Risk Z Refers to the financial assets, or resources, that A ratio comparing the expected returns of an a company has to fund its business operations. investment with the amount of risk undertaken. Capital growth Risk/reward ratio Occurs when the current value of an investment is A ratio comparing the expected returns of an greater than the initial amount invested. investment with the amount of risk undertaken. Diversification Shareholder The practice of investing in a variety of assets. This Someone who owns at least one share in a is a risk management technique where, in a well- company – they are part-owner of that company diversified portfolio, any loss from an individual through the shares they have. holding should be offset by gains in other holdings, thereby lessening the impact on the overall portfolio. 15