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Most of you know that I am both an investment advisor and an educator. I truly enjoy the teaching and learning process and being able to employ those skills in both of my professional roles. One of the most common questions I get is about the "language" of finance. To help with that I would like to provide a basic Top Ten Investing Terms list.

Feel free to read through the terms, and then take the 5-question quiz I have posted to https://qz.app.do/basic-investing-terms. The first five people to score 100% on the quiz will receive a $5 Starbucks gift card in the mail! When you are on Facebook, be sure to check out the post for this topic on my page where you can ask questions about other terms that may be of interest to you.

  1. Asset allocation:
    A fancy phrase for different types of investments, including things like stocks, bonds, real estate, and cash. Controlling the weights of those assets so that you have the optimal mix can help diversify your portfolio and attain the desired investment goals based on your age and investment strategy.
  2. Bear market:
    A market where prices are generally falling. While bear markets are not usually desired, savvy investors know they are inevitable and look to take advantage of the opportunities downturns present.
  3. Bull market:
    The opposite of a bear market, a market where prices are generally rising. Also, if you are "bullish" on the market or a particular stock, you think it will rise.
  4. Bond:
    Considered a somewhat safer investment than stocks, bonds represent a loan that you give to a company or government entity. You earn a return on bonds primarily from the interest the borrower pays.
  5. Stock:
    If you are a stockholder, you own a piece of a company (you will also hear stock referred to as "equity" - both terms are used interchangeably in investing).There are two reasons people buy stock: a) to receive income in the form of dividends paid to stockholders and b) to make a profit from selling the stock later at a higher price (neither of which are guaranteed).
  6. Yield:
    The return you receive on your investment, similar to the interest rate you earn in a savings account.
  7. Diversification:
    Choosing different types of investments (see "asset allocation") in different sectors, industries, or geographic locations. The "only free lunch in investing" is gained by not putting all your eggs in one basket. You know you are properly diversified when you always dislike at least one thing in your portfolio. That means your investments are not all moving together – some are up while others are down.
  8. Dow Jones Industrial Average:
    An index, or stock market subset, of 30 blue-chip stocks (nationally recognized, well-established) in a wide array of industries. The Dow is often used as a gauge of the health of the stock market even though the 30 companies make up a very small part.
  9. S&P 500:
    The Standard & Poor's 500 is an index, or stock market subset, similar to the Dow (see "Dow Jones Industrial Average") except that it tracks the value of 500 of the largest companies across 11 different sectors in the United States.
  10. ETF:
    Exchange-traded funds are similar to mutual funds in that they offer professionally managed, diversified portfolios that you can invest in even with a small initial investment. They offer many advantages including trading flexibility, portfolio diversification, risk management, lower costs, and tax benefits. These are several of the reasons we primarily use ETFs when investing your portfolio.
As always, I am here to help you achieve your investment goals and hopefully learn about investing along the way. Good luck on the quiz. Class dismissed.

If you have questions or if you would like to discuss investment terminology further with me, you can e-mail me at mhaertzen@wtwealthmanagement.com or call (520) 204-1058.

Sincerely,

Matt Haertzen
Matt Haertzen, CFA, CFP



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At WT Wealth Management we strongly suggest having a personal financial plan in place before making any investment decisions including understanding your personal risk tolerance and having clearly outlined investment objectives.

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