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Financial jargon simplified: investing

Doing some homework to understand important jargon can help you navigate investing with confidence.

Financial jargon can be confusing to navigate, for both the ‘new-to-managing-my-finances', and even those who are more experienced at it. If you've ever felt like you need a healthy dose of ‘just the facts', you're in luck.

It's time to feel empowered to own your financial conversations. Brushing up on these terms may help you make more informed, confident decisions in your financial life - ultimately getting you to your goals faster and smarter.

Maybe you've heard you're supposed to, or know you want to, start investing. But putting money at risk can be scary and complicated - especially if investment terms seem like a foreign language.

Trouble is, often times when you search the web, you might find "hot stock tips-galore" before you find simple, just-the-facts style information on investing for beginners. Get a good start on understanding investing options by knowing these key terms.

Jargon Simplified: Investing

  • Cash Equivalents: Think savings account. Cash equivalents are highly liquid assets that pay you interest for holding your money in them. They are a low-risk, low-reward investment.
  • Bonds: Think loan. Bonds are loans investors make to governments or corporations. The bond issuers promise to pay back the investor the full loan amount plus interest. Investors link bonds because they generally give a fixed interest rate.
  • Stocks: Think own. When you buy a stock, you are buying a share of the company. You make money when the stock price goes up and lose money when the stock price goes down. The company may also issue you a dividend, which is the company sharing its profits with shareholders.

What Now?

Did you know you might already be an investor? If you are putting money a retirement accounts (like a 401k or IRA), the best next step is to know what you're invested in, and whether it's right for you. Look into your retirement accounts and review your "asset allocation" - a fancy way of saying how your money is split up between stocks, bonds, and cash equivalents, and in what amounts.

If you're not an investor yet, check out this guide to investing to feel more prepared to take your first steps. Once you understand the different options for investing, you may better select which accounts (or a combination of a few) are right for you.

What is Financial Friday?

Financial Friday is a series dedicated to financial education and actionable tips meant to inspire progress toward your financial well-being. Subscribe to Next Door® to get Financial Friday articles delivered to your inbox.

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