Account Designation
A method of registering shares where a designated party (e.g., a trustee) holds them on behalf of the actual owner (e.g., a child). The account is registered under the trustee’s name rather than the owner’s.

All Ordinaries (All Ords)
The primary benchmark index for the Australian stock market, tracking the performance of the 500 largest companies listed on the Australian Securities Exchange (ASX). Notable features:

• Represents over 95% of the total market capitalization
• Commonly referred to as the ‘All Ords’
• Used as a broad indicator of Australian market performance
• Movements (up or down) reflect overall market trends

Investors use the All Ords to gauge the general health and direction of the Australian share market.

Ask Price
The ask price, also known as the offer price, is the lowest price a seller is willing to accept for a security. It contrasts with the bid price, which is the highest price a buyer is willing to pay. The difference between the ask price and the bid price is known as the spread.

The Ask price can be viewed in the Trade for Good software, in the watchlist, and in the Market Depth. Check out our videos for more information:
Watchlist
https://youtu.be/bYXWXxvbn2A

Market Depth
https://youtu.be/45Iz0pU5Gts

Assets Under Management
Assets under management (AUM) refers to the total market value of investments managed by an individual or entity on behalf of clients. AUM is often considered alongside management performance and experience when evaluating a company. Depending on the institution, AUM may include bank deposits, mutual funds, and cash, or it may be limited to funds under discretionary management from individual investors.

ASX (Australian Securities Exchange)
The ASX is the primary stock exchange in Australia, where stocks, bonds, and other securities are traded. It operates markets for equities, derivatives, and fixed-income securities and is known for its innovative market technology and regulatory oversight.

 

Bear Market
A bear market refers to a prolonged period of declining stock prices, typically by 20% or more from recent highs. It reflects widespread pessimism and negative investor sentiment, often associated with economic downturns.

 

Bid Price
The bid price is the highest price a buyer is willing to pay for a security. It contrasts with the ask price, which is the lowest price a seller is willing to accept. The spread between the bid and ask prices is a measure of market liquidity.

The Bid price can be viewed in the Trade for Good software, in the watchlist, and in the Market Depth. Check out our videos for more information:
Watchlist
https://youtu.be/bYXWXxvbn2A

Market Depth
https://youtu.be/45Iz0pU5Gts

Blue Chip Stocks
Blue chip stocks are shares of well-established, financially sound companies with a history of reliable performance. These companies typically have a large market capitalization, strong earnings, and a reputation for quality management.

 

Board of Directors
A board of directors (BofD) is the governing body of a corporation or organization, consisting of members elected by shareholders (for public companies) to set strategy, oversee management, and safeguard the interests of shareholders and stakeholders.

Bond
A bond is a fixed-income investment where an investor loans money to an entity (typically corporate or governmental) that borrows the funds for a defined period at a fixed interest rate. Bonds are used to finance projects and operations.

 

Broker
A broker is an individual or firm that acts as an intermediary between buyers and sellers of securities. Brokers facilitate transactions and may provide additional services such as investment advice and market research.

 

Bull Market
A bull market is characterized by a sustained rise in stock prices, typically by 20% or more. It reflects optimism and positive investor sentiment, often associated with strong economic conditions.

 

Capital
The financial resources available for investment, including:

• Cash
• Valuable assets (e.g., property, equipment)
• Saleable items

Think of capital as the fuel for your investment journey, providing the means to start and sustain your financial growth.

 

Capital Gain
A capital gain is the profit realized when an investment is sold for a higher price than its purchase cost. Capital gains can be short-term (held for less than a year) or long-term (held for more than a year) and are subject to taxation.

 

Carry Trade
The currency carry trade is a widely used strategy in the currency market, similar to the principle of “buy low, sell high.” To implement a carry trade, the first step is to identify a currency with a high yield and another with a lower yield.

 

Contract Note
An official document detailing your stock trades for a specific day, including:

• Stocks bought or sold
• Quantities
• Prices
• Transaction fees

Serves as a legal record and confirmation of your market transactions, similar to a detailed receipt for your stock trading activities.

 

Current Portfolio Value
The present-day worth of all your investments, is calculated based on current market prices. It represents:

• Total value of all holdings were liquidated immediately
• A snapshot of your investment performance
• A key metric for tracking financial progress

Analogous to a scoreboard, it provides real-time feedback on your investment strategy’s effectiveness.

 

Derivative
A derivative is a financial instrument whose value is derived from the value of an underlying asset, index, or rate. Common types of derivatives include futures, options, and swaps. They are used for hedging risk or for speculative purposes.

 

Dividend
A dividend is a portion of a company’s earnings distributed to shareholders, usually in the form of cash or additional shares. Dividends provide a return on investment and are typically paid on a regular basis (quarterly, semi-annually, or annually).

Dividends can be found in the Trade for Good software in our fundamentals section, check out the video where to find it
https://youtu.be/0sP1hNB3Eto

Diversification
A risk management strategy involving the distribution of investments across various financial instruments, industries, and categories. Key aspects include:

1. Risk Reduction: Spreading investments to minimize potential losses
2. Portfolio Balance: Combining different asset types (e.g., stocks, bonds, real estate)
3. Market Exposure: Gaining access to multiple sectors and economies

Analogy: Akin to not putting all eggs in one basket, ensuring that a single market downturn doesn’t compromise the entire investment portfolio.

Benefits:

• Potentially steadier returns over time
• Decreased vulnerability to individual market fluctuations
• Improved long-term financial stability

Diversification aims to optimize returns by investing in different areas that would each react differently to the same event.

 

ETF (Exchange-Traded Fund)
An ETF is an investment fund that holds a collection of assets, such as stocks or bonds, and is traded on stock exchanges like a single stock. ETFs offer diversification, liquidity, and lower costs compared to mutual funds.

 

Equity
Ownership stake in a publicly traded company. Key points:

• Represents partial ownership of a business
• Also known as ‘equity investment’ or ‘equity security’
• Typically acquired through stock purchases

 

Exchange
An exchange is a marketplace where securities, commodities, derivatives, and other financial instruments are traded. Examples include the Australian Stock Exchange (ASX), Chix or the Chicago Board of Exchange Australia (CBOE) and New York Stock Exchange (NYSE).

Execution
Execution refers to the completion of a buy or sell order for a security. It occurs when the order is filled, not when the investor places it. After the investor submits the trade, it is sent to a broker, who determines the most effective way to execute it.

Franked Dividend
A dividend distribution with attached tax credits. Features:

• Reflects corporate tax already paid by the company
• Reduces or eliminates shareholder’s tax liability on the dividend
• Enhances after-tax return for investors

Gain/Loss
The financial outcome of an investment. Calculated as: Current value – (Original investment + Associated fees)

• Positive result = Gain
• Negative result = Loss

 

Hedge Fund
A hedge fund is a private investment partnership where funds from individual investors are pooled and managed by professional fund managers. These managers employ various strategies, such as leveraging borrowed money and trading nontraditional assets, to generate above-average returns.

Index
An index is a statistical measure that tracks the performance of a group of assets, representing a specific segment of the market. Examples include the S&P 500, which tracks 500 large-cap U.S. stocks, and the ASX 200, which tracks the top 200 Australian stocks.

IPO (Initial Public Offering)
An IPO is the process through which a private company offers shares to the public for the first time, transforming into a publicly traded company. IPOs allow companies to raise capital from public investors.

Leverage
Leverage involves using borrowed funds to increase the potential return on an investment. While it can amplify gains, leverage also increases the risk of losses. It is commonly used in trading and investment strategies.

 

Limit Order
A limit order is a type of order to buy or sell a security at a specified price or better. Unlike market orders, limit orders only execute if the price meets the specified limit, providing more control over the execution price.

For more information on limit orders, check our Buy order video: https://youtu.be/Svqi-_pu9-A

 

Liquidity
Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price. Highly liquid assets, like stocks of large companies, can be quickly bought or sold, while illiquid assets may take longer to trade.

 

Margin Call
A margin call occurs when a broker requests additional funds from an investor to meet minimum capital requirements in a margin account. This happens when the investor’s equity in the account falls below the broker’s required level.

 

Market Capitalisation
Market capitalization, or market cap, is the total value of a company’s outstanding shares, calculated by multiplying the current share price by the total number of shares. It is used to measure a company’s size and investment appeal.

Market Capitalisation can be found in the Trade for Good software in our fundamentals section, check out the video where to find it: https://youtu.be/0sP1hNB3Eto

Market Maker
A market maker is an individual or firm on an exchange that buys and sells securities for its own account. Market makers help provide liquidity to the market and ensure its continuous functioning.

Market Order
A market order is a type of order to buy or sell a security immediately at the best available current price. Market orders guarantee execution but not the execution price, which can vary with market conditions.

For more information on market orders, check our Buy order video: https://youtu.be/Svqi-_pu9-A

Market Price
The most recent price at which a stock was traded. Characteristics:

• Reflects current market valuation
• Subject to real-time fluctuations
• Determined by supply and demand dynamics

 

Netting
Is the process of aggregating multiple financial obligations between parties to simplify transactions and minimize risk. Netting offsets the value of multiple positions or payments due to be exchanged between two or more parties. It can be used to determine which party is owed remuneration

Order
An order is an instruction to buy or sell a security. Orders can be of various types, such as market orders, limit orders, or stop-loss orders, each specifying different conditions for the execution of the trade.

For more information on orders and types, check our Buy order video: https://youtu.be/Svqi-_pu9-A

 

P/E Ratio (Price to Earnings Ratio)
The P/E ratio is a valuation metric calculated by dividing the current price of a stock by its earnings per share (EPS). It indicates how much investors are willing to pay for a dollar of earnings and is used to assess a stock’s relative value.

For an in-depth into Price to Earnings Ratio check out our Trade for Good learn section and click on this link: https://tradeforgood.com.au/learn/peratio/

 

Portfolio
A portfolio is a collection of investments held by an individual or institution. Portfolios can include a mix of asset classes, such as stocks, bonds, and cash, and are designed to achieve specific investment objectives.

For more information on Portfolios, check our Portfolio video: https://youtu.be/_LcaFq0fkgE

Prime Brokerage

A prime brokerage is a comprehensive set of services offered by investment banks and financial institutions to hedge funds and other large institutional clients. These clients often require the ability to borrow securities or cash for activities like netting, which offsets the value of multiple positions or payments between parties.

Prime brokerage services typically include securities lending, leveraged trade execution, and cash management.

Securities Lending

 

Share Holders
A shareholder is an individual, company, or institution that owns at least one share of a company’s stock or a mutual fund. Shareholders effectively own the company and have the right to share in its profits.

Short Selling
Short selling involves borrowing and selling a security with the expectation that its price will decline, allowing it to be bought back at a lower price for a profit. It carries high risk, as losses can be unlimited if the price rises.

Spread
The spread is the difference between the bid price and the ask price of a security. It represents the cost of trading and is influenced by factors such as liquidity, market conditions, and the security’s volatility.

 

Stock
A stock represents ownership in a company and entitles the holder to a portion of the company’s profits and assets. Stocks are traded on exchanges and can provide returns through price appreciation and dividends.

 

Stop Loss Order
A stop-loss order is an order to sell a security when it reaches a specified price, designed to limit an investor’s loss on a position. It automatically triggers a sale if the market price falls to the stop-loss level.

For more information on Stop Loss Orders, check our Stop Loss Order video: https://youtu.be/KC_YEWSc1qU

 

Volatility
Volatility measures the degree of variation in a security’s price over time. High volatility indicates large price swings, while low volatility suggests more stable prices. Volatility is a key factor in assessing investment risk.

 

Yield
Yield refers to the income generated by an investment, expressed as a percentage of the investment’s cost or current market value. It includes interest or dividends received and is used to assess the return on investment.

Yield can be found in the Trade for Good software in our fundamentals section, check out the video where to find it: https://youtu.be/0sP1hNB3Eto