Financial glossary
for new-age investors

Discover financial terms and learn new concepts.

Sovereign Wealth Fund

A fund with money from a country’s reserves that invests in activities that should benefit the country’s economy and citizens. The funding is usually from central bank reserves that accumulate through trade surpluses and through revenue generated from the exports of natural resources.

Stock

A financial product that indicates ownership of part of a business, typically with a claim on part of the earnings and assets of the business.

Stocks And Currencies

Typically, if a country’s currency is going up in value relative to other currencies, there’s downward pressure on the value of stocks in that country (and vice versa). One reason for this is that if the value of the US dollar, for example, rises, it becomes more expensive for international investors to buy US stocks, and thereby decreases demand for them (which exerts downward pressure on their value). Another is that it becomes more difficult for US companies to sell goods overseas when the dollar is more valuable. Goods produced in the US will be, relatively, more expensive for a European if the euro has declined in value versus the dollar – and so US companies tend to sell fewer goods. Additionally, profits made overseas are worth less when translated back to US dollars – i.e. a €100 profit is worth less in dollars, the more the dollar increases in value.

Stock's Beta

How much a stock moves when the market moves. Higher above 1 = bigger move. Say the stock market falls 10%: a stock with a beta of 1.5 is expected to fall 10 x 1.5 = 15%. So the higher the beta, the riskier the stock.

Streaming Services Vs Cable

In simple terms, ‘streaming’ is delivering content via the internet. The content isn’t downloaded and then viewed (like it would be with the Apple store) but it’s streamed continuously from a source (like Netflix). It has emerged as a major threat to traditional “cable TV,” which is delivered to viewers, literally, via a cable (using radio frequency). That’s why the term “cord-cutting” refers to households that stop paying for cable and instead stream their entertainment content through their internet connection.

Swing Trading

Swing trading is a dynamic strategy aiming to capture short-to-medium-term gains in financial markets. Typically, swing traders hold positions for several days to a few weeks, capitalizing on expected upward or downward market movements. The approach is typically best suited to investors who don’t want to monitor trades all day. By focusing on technical analysis, swing traders attempt to pinpoint the best times to enter and exit trades to maximize returns.

SWOT Analysis

SWOT analysis is a strategic planning technique for identifying the key strengths, weaknesses, opportunities, and threats related to a project or business venture. This fact-based, data-driven framework helps organizations assess both internal and external factors that could impact their objectives. Strengths and weaknesses are typically internal to the organization – attributes that it can directly control and change. Opportunities and threats, meanwhile, tend to be external factors – often outside a company’s control, but that it can capitalize on or address.

Synergy

Companies often combine because they have overlapping areas that can benefit from the new partnership. This might be complementary technology or geographical footprints that would allow the companies to increase their revenues if they combined. They could also be areas where duplicate costs could be eliminated: for example, one company only really needs one head office and the marketing budget for one large brand could be lower than for two smaller brands. The former are called “revenue synergies”, while the latter are called “cost synergies”, e.g. they decrease costs (as opposed to boosting revenue).

Target Interest Rate

The central bank – the Federal Reserve in the US and the European Central Bank in Europe – sets a target base interest rate. Technically, it’s the rate at which banks lend to each other for a period of 1 -day (e.g. extremely low risk lending). As such, it acts as the base interest rate on which all other interest rates are either formally or informally based on. Simply put, when the target rate goes up, it pushes up the interest rates that borrowers have to pay in the rest of the economy.

Tax Inversion Deal

A deal in which a company (usually US based) becomes a part of a bigger company that has its headquarters in a lower tax jurisdiction (like Ireland, for example). Many US companies have done this in the past because they can access a lower tax rate overseas but also because they can then use cash that has been “parked” overseas to avoid paying US taxes (it can be brought back to the US to do things like pay a dividend or invest in new businesses – but only when the company is no longer American).