Finance/economy/investing phrases that you should know #2

 

1. ROI

ROI stands for "Return on Investment". It is a metric used to assess the profitability or effectiveness of an investment. ROI is calculated by dividing the profit from an investment by the cost of the investment and expressing the result as a percentage.

ROI is used in various fields, from personal finance to evaluating the effectiveness of marketing campaigns or business projects.

2. Dividend

A dividend is a portion of a company's net profit that is distributed to shareholders as a form of reward for owning shares in that company. Dividends are most commonly paid in cash, but can also be paid in the form of additional shares or other assets.

3. Assets

Assets are resources controlled by an economic entity (such as a company, individual, or organization) from which future economic benefits are expected. In other words, they are all the resources that can generate income or other economic benefits in the future. Examples include:

• Real Estate
• Gold
• Stocks
• Bonds

4. Liabilities

Liabilities are sources of financing for the assets of an economic entity. They represent the obligations and equity of a company, reflecting where the funds came from to finance the assets. Liabilities are presented on the right side of the balance sheet and show the sources of the capital used to purchase assets.

5. Compound Interest

Compound interest is a method of calculating interest on capital, where interest is reinvested (added to the initial capital) and generates further interest in subsequent periods. Unlike simple interest, where interest is calculated only on the initial capital, compound interest accrues with each period.

6. Rentier

A rentier is a person who lives off passive income generated by their assets, such as real estate, stocks, bonds, bank deposits, or other investments, instead of earned income from work. Rentiers derive a steady income from their assets, allowing them to sustain themselves without the need for active employment.

7. ETF (Exchange-Traded Fund)

An ETF is a type of investment fund traded on stock exchanges, designed to mimic the performance of a specific stock index, commodity, currency, market sector, or other asset basket. ETFs combine the characteristics of traditional investment funds and stocks, offering investors an easy and cost-effective way to diversify their investment portfolios.

8. REIT (Real Estate Investment Trust)

A REIT is a type of investment company that manages a portfolio of real estate properties or finances real estate investments that generate income. REITs operate similarly to investment funds, allowing investors to purchase shares in portfolios of commercial real estate assets such as office buildings, shopping centers, warehouses, apartments, and hotels. The goal of REITs is to generate steady income from property rentals and potential capital gains from property sales.