27 financial market terms to know before investing

Do you know the main terms in the financial market and their meanings? Read the text and find out!

The financial market has a variety of terms that are unknown to those who do not understand the subject. 

Some with difficult pronunciations, but with a very simple meaning. 

Knowing these terms is essential for anyone who wants to start investing, as it makes the process simpler and easier to understand. In addition, it can help you avoid unwanted situations.

In today's text you will learn about the main financial market terms and their meaning, so be sure to read until the end to increase your investor vocabulary!

What are financial market terms?

Terms are words that represent a concept, idea, etc. They can be made up of just one word or a group of words. 

The financial market has its own glossary of terms and understanding what the main terms represent is essential for investors. 

Many beginners give up on applying because they don’t understand these terms and think they are “seven-headed beasts”.

However, most of them are very simple to understand, and since many of these names are in English, it seems even more difficult.

Collection? Liquidity? Amortization? Amount? Do they have the same meanings as the names we use in everyday life?

Let's find out together?

1. Tax rate

This is certainly a very common term in the financial market, you may have heard it and wondered what it means. 

A tax rate is a fixed value or even a percentage calculated on a monetary amount, usually the value of some tax model.  

For example, in the investment world, the Income Tax rate represents a rate that the investor must pay in taxes, this rate is based on what he invested or on his income. 

It is very important to know what the IR rate calculation will be on your investments, as it impacts the return on your investments.

2. Amount

In everyday life, the amount represents a quantity, it is normally related to a considerably large amount. 

In the financial market, the term also represents an amount, in fact, the value accumulated at the end of a financial transaction. 

That is, the money you invested + income. 

Therefore, let's look at an example to make it clearer: the IR rate can be charged on this amount, that is, it will be discounted from the sum of the amount invested + the interest earned. 

See, how simple it was to understand what tax rate and amount mean? Let's increase the level of difficulty a little and learn more financial market terms. 

3. Contribution

The contribution is the amount of money you apply, that is, the monthly contribution is how much you invest every month in your portfolio. long term. 

A single contribution is when you invest just once, that is, the investor's first investment, but to obtain better results it is important to do so continuously.

4. Assets

Assets are the valuable goods or products that a natural or legal person has. Basically, anything that can be converted into money can be considered an asset, in practice. 

For example:

• Company cars;
• Stock that can be sold and turned into cash;
• Money in the bank.

5. Liabilities

Liabilities are almost the opposite of assets. They represent everything that can be a cost, for example, all of a company's expenses. 

Among the financial obligations of a company we can highlight:

• Mortgages;
• Taxes;
• Suppliers;
• Employee salaries;
• Rent;
• Water;
• Energy.

6. Amortization 

This is one of the financial market terms widely used and known. Amortization is a common term in loans and financing. 

It refers to the payment of an amount that is owed, which can be paid in full or in installments. 

However, in investments, amortization is the payment on the return of the amount invested at the beginning.  

7. Collection

In the financial market this word can have different meanings. 

Firstly, it represents the collection that investment platforms, banks or financial institutions make when the investor buys a security.

Furthermore, it can represent the raising of financial resources that a company makes, that is, the financial contributions that it needs to make to its cash flow.

8. Issuer

Issuer is the owner of an investment, they can be private or federal companies, for example. 

They emit government bonds or make their shares available for sale on the market. 

9. Liquidity of the title

Liquidity is the flow with which the security is transformed into money. For example, when we say that a yield has daily liquidity, this means that it yields every day, that is, it multiplies. 

10. Actions

Certainly, this is one of the financial market terms better known and easier to understand, as it is common in our society. 

The actions or papers represent a part that makes up the share capital of a company. 

They are traded on the Stock Exchange or on the over-the-counter market, normally when they are issued by publicly traded companies. 

11. After Market

It's extra time after the end of the workday at Stock exchange. Investors gain this time to carry out their last operations after the stock exchange's normal opening hours.

12. Leverage

Leverage is a strategy where the investor uses third-party resources to increase profits. 

Typically, this technique is used in short-term investments, including by Day Traders, who make trades within 24 hours.

At this stage, it is necessary to operate with a value greater than your equity, thus making it easier to leverage financial returns.

13. Dividends

Dividends are related to the portion of the company's profits distributed among shareholders.  

14. Debentures

Debentures are securities that are equivalent to an organization's medium to long-term debts. 

15. Expiration date

It is the closing date for your investments, where you also have access to the income from your investments. 

Investments are classified as short, medium and long term and they should be chosen according to your objectives. 

For example, your goal is to private pension, you should choose long-term investment. 

Short-term investments last up to 2 years, medium-term investments last more than two years and less than 5 years.

Now, long-term investments last for more than 5 years and are essential for larger goals. 

17. Policy

A policy is a document obtained when insurance is taken out. 

18. Bear Market and Bull Market

Bear Marketing translated means “Bear Market”, Bull Market, in turn, in a free translation means “Bull Market”. 

The term Bear Market is used in the financial market when there is an expectation of a price drop.

However, when the expectation is for prices to rise, the term used is Bull Market.

19. Stock portfolio

A group of actions from different organizations. 

20. Investment portfolio

A group of stocks with different types of risk. It is very important that your stock portfolio is well diversified to ensure greater security in your operations.

21. Exchange

Exchange rate is one of the financial market terms, in fact, very well known. Exchange is when you exchange one currency for another. 

For example, when traveling to the United States you need to exchange money, that is, exchange reais for dollars to have cash in the country to use on the trip.

22. CBD

Bank Deposit Certificates are fixed-term securities issued by banks. They represent investment models that can be pre-fixed, floating or post-fixed.

23. CDI

Interbank Deposit Certificates are securities issued by banks as a way of raising funds or applying surplus funds, that is, lending to banks that need to raise financial resources. 

24. Selic rate

A Selic rate It is the rate that governs the financial market. It is determined by the Central Bank and serves as a reference for interest rates in the country's economy. 

25. Quotation

Stock Exchange Price is the current price of assets. They are defined based on supply and demand levels in the market.

26. FGC (Credit Guarantee Fund)

The FGC is the organization that protects investors in the event that the asset issuer goes bankrupt or intervenes in some way.  

27. Profitability

Income is the interest earned while your money is invested, in other words, it is the return you have on the amount invested. 

It can be defined in different ways, for example, through pre- or post-fixed rates.

Conclusion

These are just a few of the financial market terms that you need to know before you start investing. 

However, it is not necessary to learn everything at once, but it is important to learn it frequently, as it is essential for your progress in the financial market. 

Here on our blog you will find a lot of content about terms and other topics in the financial market. 

Start your learning by discovering how to build a conservative portfolio and bring more security to your investments.🔜Read our full content.

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In site From the official Brazilian Stock Exchange you will find a glossary with some more financial market terms.