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Basic Investing Terms You Should Know: Part 2

Read on, and add these words up in your investing vocabulary!

Apart from the words related to types of investments and investment structures, there are still a lot more investing terms you must learn.

However, if you have missed the first part of this “dictionary,” you can visit this: Basic Investing Terms You Should Know: Part 1

In this article, we give more of those basic terms. Read on, and add these words up in your investing vocabulary!

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Investing Terms about Portfolio Management

Asset Allocation

Asset allocation is simply a way to manage your money. It involves setting limits for different assets. And these assets include equities (stocks, or ownership), bonds, real estate, cash, or commodities. It is

Remember that different assets have different qualities and “behaviors.” You must think carefully before throwing such assets into the  mix. Getting the perfect combination can improve your chances for a successful outcome.

Investment Mandate

This is a set of rules or guidelines, and goals used to control a certain portfolio. For instance, a capital preservation investment mandate is used for a portfolio that can’t risk meaningful volatility.

Custody Account

This is an account that a keeper (custodian) controls for you to hold your portfolio of securities.

The keeper will monitor the flow of cash from interests and dividends. He or she will pass instructions for proxy voting  or corporate events. Additionally, he or she will take the delivery of spin-offs, making sure that shares end up in the custody account. Your keeper will do all these for you.

This kind of account is assessed custodial fees. However, some investors don’t know that they pay them. And that’s because brokers offer keeper services for free or lessened prices.

Asset management Company

An asset management company is a business that invests capital for their clients, shareholders, or partners.

The asset management business in Vanguard is one that buys and sells the underlying holdings of its mutual funds and ETFs.

For JPMorgan, its asset management business at its private client division serves individuals and institutions.

Registered Investment Adviser

An RIA is a firm, and this firm gives you and other investors advice. It also makes recommendations, issues reports, or furnishes analyses on securities.

RIAs may include asset management companies, and other kinds of investment businesses. RIAs are bound by a fiduciary duty to think first of its clients’ need before their own. You must also remember that registered investment advisor fees must be “reasonable.” It also must vary from firm to firm.

Fiduciary Duty

In the United States, a fiduciary duty is the highest duty owed to another person.

It requires the fiduciary to prioritize the interest of the client over its own needs. It goes without saying that it involves disclosing conflicts of interest.

Stock Broker

A stock broker is an institution or individual that serves you by doing buy or sell orders. Stock brokers make  sure that the money gets to the right hands. They see to it that  the security goes to the right party, all by a certain deadline.

Stock Trade

Stock trades can be of twelve different types. You can place them with a broker to buy or sell ownerships in companies, including market orders, limit orders, and stop loss orders.

Selling short

This happens when an investor or speculator borrows stocks shares or other assets, and then sells it. That investor gets the money, promises to replace the property someday, and hopes for a decline in the asset’s price. If that happens, he will repurchase it at a lower cost, and the differential will be the profit.

If you do this incorrectly, you can be bankrupted.


Brokers usually lend customers some money against the value of securities within their custody accounts. But first, the client must agree to promise the entire account balance as collateral. He or she must also give a personal guarantee.

The moment you open a brokerage account, you must say whether you want a cash account or a margin account.

Moreover, if you borrow on margin, the broker can give you a margin call any moment. The broker can do this for any reason, and he or she can demand you pay off some or all of your balance.

Investment terms about Companies

Board of Directors

In a company, stockholders elect people who will look after their interests. The board will also hire and fire CEOs, and set official dividend payout policy. They can also recommend or vote against merger proposals.

Enterprise Value

This simply refers to the total amount of all of the company’s stock and debt.

Market Capitalization

This is the value of outstanding shares of the company’s stock when you buy them at the current stock price.

Income Statement

An income statement shows the revenues, expenses, taxes and net income of the company.

Balance Sheet

This shows the company’s assets, liabilities, and the shareholders’ equity.

Form 10-K

This is a document that the company must file with the SECs. It has a very detailed information about the business. Apart from that, it must include the firm’s finances, business model, and much more.

Final word

Knowing your way around the market and the investing world demands you to be familiar with these words. Moreover, there are plenty more words, terms, and phrases you must familiarize yourself with. Sometimes, it can get confusing. So it is better  to arm yourself with more knowledge relating to these words.

HQBroker is here to give you the daily news roundup about market news, as well as tech and informative articles to help you get ahead of your investments! You can open an account now, and grab your chance to success!


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