English for investing

Multiplying your money

Do you like talking about investing? There’s so much information out there, but sometimes the terminology can be overwhelming. This guide clarifies key English investing vocabulary for normal people and newbies like me (not day traders or crypto bros).

Introduction

Let’s start with some common phrases and expressions.

Comprehension Tip

If you encounter an unfamiliar word, keep reading to see if there are any context clues. This could include punctuation like dashes — brackets () or semicolons ; followed by an explanation or rewording of the key term. You can also look for conjunctions like “because” and “so” or relative pronouns like “this”, “that”, and “which”. These words connect ideas together, so they’re really helpful when figuring out the meaning of new terms.

At a basic level, people invest money in order to beat inflation. As time passes and the economy changes, money loses its value. Investing helps your money grow continuously (hopefully even more than inflation) so you keep your purchasing power in the future. This means you’ll still be able to afford the same goods and services as before, even when their prices rise.

When you first start investing, you need to do some research and figure out an investment strategy—a plan for how and where you’ll invest. Advisors recommend determining your risk tolerance first; are you comfortable with higher risk and potentially better returns (earnings) or do you prefer lower risk with more moderate returns?

It’s a good idea to not put all your eggs in one basket. Diversify your investments rather than putting all your money into one type of opportunity. This minimizes your risk if one of your investments isn’t performing so well. That way, you build a strong and stable investment portfolio or collection of investments.

Speaking Practice

Discuss the meaning of the phrases and expressions in the word cloud. Try to think of some examples or scenarios.

Vocabulary Preview

Here are some more useful words you’ll need to know when talking about investing.

Instructions

Drag and drop the correct word to match each definition. You won’t use all the words.

Types of Investments

Now let’s get into some of the most popular investment options.

Stocks

Think of stocks as pieces of a company. When you buy a stock, you own a small share of that company. If the company does well, the stock price can go up, and you can sell it for more than you paid. Shareholders can also receive dividends, which are payments some companies make to investors as a way of sharing profits.

Fractional Shares

If you don’t want to buy a whole share of stock, you can purchase just a portion of one, like getting one slice of a pizza instead of the whole thing. Fractional shares are particularly useful for investing in expensive stocks like Amazon or Tesla.

Indexes

Instead of buying one company’s stock, you can invest in an index, which is like a basket of stocks that shows how a group of companies is doing. For example, the S&P 500 includes 500 of the biggest companies on the US stock exchange. An index offers lower risk than an individual stock because it spreads your money across many companies. When people invest in indexes, they usually do so via index funds or ETFs (see below). You can't directly "buy" an index because an index is a benchmark, not a tradable asset.

Bonds

A bond is like lending money to a company or the government. They promise to pay you back later with interest. Bonds are safer than stocks, but they usually don’t grow your money as much. Bond risk varies (for example, government bonds are typically safer than corporate bonds), and inflation can impact their real return.

Mutual Funds

These are like team investments. Everyone puts in money, and a professional manager decides which stocks or bonds to buy. You don’t trade mutual funds during the day; they’re updated at the end of the day after the market closes. Mutual funds often have higher fees due to active management, which can affect returns over time.

ETFs (Exchange-Traded Funds)

These are also collections of investments, but you can buy and sell them anytime during the day, like stocks. They usually have lower fees than mutual funds and are easier to manage yourself. ETFs typically track indexes or specific sectors, making them good for diversification.

Cash Deposits

These are the least risky options, like regular savings accounts where your money is safe and slowly grows due to low interest rates. However, the growth is often minimal and the returns may not keep up with inflation, which can reduce your purchasing power over time.

High-Yield Savings Accounts

These accounts offer slightly higher returns than standard accounts, typically ranging from 1.5% to 3% annually. They provide flexibility and are suitable for short-term goals or emergency savings, as your money remains accessible.

Fixed-Term Deposits

Fixed-term deposits (known as GICs in Canada, CDs in the US, and Fixed Deposits in India) allow you to earn predictable returns by locking away your principal for a specific period, such as six months, one year, or longer. These are low-risk investments, often with higher interest rates than savings accounts. However, you usually pay a penalty for early withdrawal, losing some or all of the earned interest.

Money Market Funds

Money market funds are similar to mutual funds. They invest in very short-term, high-quality, low-risk debts. These funds preserve your capital while offering slightly better returns than a savings account. They provide good liquidity, meaning you can typically access your money quickly, making them a safe and flexible option for conservative investors.

Commodities

Commodities are physical things you can buy and sell, like gold, oil, or even crops like wheat. People invest in these because their prices can go up, especially if they’re in high demand. For example, if there’s less gold in the world, the price of gold might go up. Commodities are often used to hedge against inflation or economic uncertainty.

Cryptocurrency

Crypto is digital money (think Bitcoin or Ethereum). It doesn’t exist as physical coins. Cryptocurrency operates on blockchain technology and is not controlled by governments or banks (though regulations vary by country). Some people love it for precisely these reasons, but it’s important to know that Cryptocurrency prices can rise or fall dramatically, often within hours, making it one of the riskiest investments.

Practice Scenarios

Instructions

Drag and drop the phrase that best describes each scenario. You won’t use all the phrases.

Discussion

• If you could invest in one company, product, or idea, what would it be?

• Do you think schools should teach students about investing?

• Do you believe new technologies, like AI or green energy, are good areas to invest in?

• Do you think cryptocurrency is a good investment, or is it too risky?

• Would you invest in a company even if you disagreed with its values or business practices?