Glossary — I

It cannot be an investment without the letter `I'. Let us dive right into it!

Investments

Investments are like a garden where your money can grow! Imagine planting a seed (your money) in different types of soil (investments). Some examples of investments include:

• Stocks: like planting a tree that can grow big and strong, but may face storms (risks)
• Bonds: like planting a flower that produces steady blooms (interest)
• Real Estate: like planting a vine that spreads and grows in value over time

Your garden (investment portfolio) can grow and flourish over time, but it may require care, patience, and occasional pruning (rebalancing). The goal is to harvest a bountiful crop (returns) that meets your financial goals! Investment: How and Where to Invest

Interest

Interest is like a thank-you payment! When you lend someone money, like a bank lending you money for a loan, you pay them back with extra money as a thank-you for using their money. This extra money is called interest! Think of interest like a fee for using someone else's money! Simple Interest vs. Compound Interest: What's the Difference?

Investment Risk

Imagine you are planting a garden! You put seeds in the ground, water them, and hope they grow into beautiful flowers or delicious veggies. But, there is always a chance that something might go wrong - like a storm might come, or a rabbit might eat your plants! Investment risk is like the uncertainty of gardening! When you invest your money, it is like planting seeds in the ground. You hope they will grow and flourish, but there is always a chance that something might go wrong - like the market might go down, or a company might not do well. But, just like how you can take steps to protect your garden - like building a fence to keep out rabbits - investors can take steps to manage their risk and try to make smart choices to help their money grow! Risk: What It Means in Investing, How to Measure and Manage It

Indicators

An indicator is a tool that helps you make sense of the market by analysing data and providing insights. It is like a gauge on your dashboard, giving you a reading on the market's conditions. Indicators can help you:

• Identify trends and patterns
• Predict potential price movements
• Confirm your investment decisions
• Warn you of potential dangers

Think of indicators like a weather forecast for the market. They can help you prepare for what is ahead, but they are not always 100% accurate. Popular indicators include:

• Moving Averages
• Relative Strength Index (RSI)

Indicators can be used alone or combined to create a trading strategy. They are not a crystal ball, but they can be a helpful tool in your trading journey! What Is an Indicator? How It's Used, Types, and Examples

Index Fund

An index fund is like a copycat! It is a type of investment that tries to mimic the performance of a specific group of stocks, bonds, or other assets, called an index. By owning an index fund, you are essentially buying a small piece of the entire index, which means you own a tiny bit of each asset in the index. Index funds are like a "best of" compilation, they give you broad diversification and exposure to a wide range of assets, which can help spread out risk and potentially increase returns over the long term. For example Nasdaq and the S&P500 are index funds. What are index funds and how do they work?

Insider Trading

Insider trading is when someone uses secret information about a company to trade its stocks or bonds unfairly. For example:

• Imagine you have a friend who works at a company and tells you they are about to launch a new product that will make the company very successful.
• If you use that information to buy the company's stock before the product is announced, that is insider trading!

It is like getting the answers to a test before you take it. You are using information that not everyone else has, which is unfair and illegal. Insider trading is against the law because it gives an unfair advantage to those who have access to confidential information. It is important to play by the rules and only trade based on publicly available information or there may be serious legal consequences. What Is Insider Trading and When Is It Legal?

Inflationary Risk

Inflationary risk is the danger that inflation (a rise in prices) will erode the value of your money and investments over time. This is mainly a concern for long-term investors, as they hold their investments for longer than 5 years, which will inevitably be affected by inflation. Think of it like a silent thief:

• Inflation reduces the purchasing power of your money
• The same amount of money can buy fewer goods and services
• Your savings or investments may lose value

For example, if inflation is 5%:

• Something that cost R100 last year now costs R105
• Your R100 has effectively lost 5% of its value

Inflationary risk is a concern for investors and savers, as it can quietly chip away at the value of their money over time. Inflationary Risk Definition, Ways to Counteract It

Investment Portfolio

An investment portfolio is like a pizza with different toppings! Imagine you are ordering a pizza and you want to make sure it is just right: You choose a mix of toppings like cheese, pepperoni and mushrooms. Each topping represents a different type of investment, like stocks, bonds, or real estate. Just like a pizza with different toppings, an investment portfolio is a mix of different investments! When you create an investment portfolio, you are combining different investments to achieve your financial goals. Just like how you might choose different toppings for your pizza depending on your taste, an investment portfolio is tailored to your individual financial goals and risk tolerance. And, just as you might adjust your pizza toppings over time, an investment portfolio can be adjusted as your goals and circumstances change! Financial Portfolio: What It Is, and How to Create and Manage One

Initial Public Offering

Initial Public Offering, is when a company decides to go public and issue stocks to the public for the first time. This means:

• The company is transitioning from private ownership to public ownership.
• It is raising capital by selling shares to investors.
• The company will be listed on a stock exchange (Such as JSE, NYSE, NASDAQ).

Think of it like a big debut! The company is essentially saying, "Hey, we are ready to share our success with the public and raise funds to grow even more!" Here is a simple example:

• Company X is a private business owned by a few individuals.
• They decide to go public and issue 1 million shares at R100 each.
• The public buys these shares, and
• Company X raises R100 million.
• Company X is now a publicly traded company, and its shares can be bought and sold on the stock market.

That is an IPO in a nutshell! What is an IPO? How an Initial Public Offering works

Insurance

Insurance is a financial safety net designed to protect individuals, businesses, and organisations from various types of risks and uncertainties. It provides a way to manage and mitigate potential losses by transferring the risk to an insurance company in exchange for a premium (The amount paid to the insurance company to maintain coverage - usually monthly payments). Types of insurances include: 1. Life insurance (e.g, term life, whole life) 2. Health insurance (e.g, medical,

• dental, vision)

3. Property insurance (e.g, home,

• car, business)

4. Liability insurance (e.g, personal,

• professional, business)

5. Specialised insurance (e.g, travel,

• cyber, event)

Insurance provides financial protection and peace of mind, allowing individuals and organisations to manage risks and focus on their goals and aspirations. Insurance: Definition, How It Works, and Main Types of Policies Well done! You are already done with `I', you will be done with `J' in no time! Share this post: Categories STIOSTM: Terminology Sign up for blog updates! Join my email list to receive updates and information. Email address

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