12 Terms Every Investor Needs to Know

For this last weekend in July I thought it would be nice for some light summer reading to get back to basics.  This week's U.S. News Invested not only reintroduces us to the meanings of 12 essential terms of investing but also provides an investing dictionary, something that along with Investopedia should prove to be an invaluable resource in anyone's financial library.  Hope everyone is enjoying the wonderful weekend.  The big heat is coming back.  

JULY 25, 2022 Invested Advice, rankings and stock market news for investors.

Good morning, investors. Markets broke a three-day winning streak with the tech-heavy Nasdaq leading the pack. Highlights of today's newsletter include our market insights plus these new articles: 12 Terms Every Investor Needs to Know How to Invest In Lithium Stocks as EV Demand Grows 7 Stocks That Benefit From Strong Dollar-to-Euro Exchange Rates 7 Best Pet Stocks to Own in 2022 Prepare for a First Financial Advisor Meeting TODAY'S FEATURED STOCK STORY 12 Terms Every Investor Needs to Know Investing is a broad subject. Not everyone takes an interest in it, and yet few other topics play such an important role in one's quality of life. And so it's only practical that everyone develops a basic fluency in the language of investing. While, like other domains, there's more jargon in the field than you'd ever want to encounter, some terms are more important than others. Here's a rundown of 12 finance and investing terms that every investor should know. For a more comprehensive list of important investing and financial terms, see the U.S. News Investing Dictionary. Compounding. The principle of compounding is hands-down one of the most important concepts in finance. With the exception of lottery winners, heirs and others who are independently wealthy, it's the basic formula everyone must use to build wealth. Compounding is what happens when you invest money, earn a return, and then reinvest both your principal and your return. In essence, it's the principle of earning returns on previous returns, over and over again. Price-earnings ratio. One of the most prominently used investment metrics in the stock market is the price-earnings ratio, or P/E ratio. As with any ratio, it's calculated by simple division: The company's current price per share is divided by its earnings per share over the past year, or four quarters, of financial reports. A high multiple means investors are willing to pay more for each dollar of trailing earnings. This is often because such companies are growing more quickly than companies with lower multiples. Click here to continue reading. Compounding. Equity. Opportunity cost. Price-earnings ratio. Competitive advantage. Exchange-traded fund (ETF). Debt-to-equity ratio. Beta. Interest rates. Federal Reserve Bank. Index fund. Capital gain.