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Investment Glossary

An important aspect of saving for retirement is investing. When researching investing you’ll

come across a lot of the same terms such as mutual fund, index fund, bull market,

diversification and so on. They are terms we hear someone mention or see in an article. It

clicks that we understand the term but may not fully grasp its meaning.

The point of this post is to provide a glossary of sorts for some of the investment terms you’ll

come across.

Bear in mind this does not cover every term nor is it a list of the important ones

to know.

This list is just based on questions I’ve had over the years from clients and prospects.

This is merely for informational purposes.


Asset Class

This is a grouping of investments with similar characteristics and laws/regulations. The most

common asset classes are real estate, stocks – US and international, emerging markets, and fixed income – US and international bonds

Asset Allocation

This means spreading your investments across multiple asset classes rather than just one.

Doing this will give you greater diversification within your portfolio


This is basically the old adage don’t put all your eggs in one basket. Diversifying means rather than just invest in say real estate or emerging markets you invest in multiple asset classes. The idea is that if one asset class is down another you may be in could be up, balancing out your portfolio and hopefully limited risk.

Risk Tolerance

A questionnaire you take to help determine the level of risk you are comfortable having in your investment strategy. There is no right or wrong answer when it comes to risk. Each person’s risk is different. I’m a moderate conservative investor – not quite aggressive but not quite conservative. Meanwhile my wife is a very conservative investor.

Dollar Cost Averaging

Dollar cost averaging is where you set up an automatic investment plan, say $200 a month, to the same fund. You are buying into this fund no matter the price. This helps avoid the

temptation to time the market hoping to buy low and sell high.

Mutual Fund

These are run by portfolio managers. It’s a type of investment that pools money together from many investors so a portfolio manager can purchase a greater share of stocks, bonds or other securities than you or they could on their own. According to, most mutual funds fall into four categories – money market funds, bond (fixed income) funds, stock (equities) funds or target date funds.

For more information on mutual funds click this link,

Index Fund

This is a type of mutual fund whose focus is to mirror an index such as the Dow Jones or

S & P 500. The goal isn’t to beat the market but to replicate it’s performance. The thought is

investing in this type of fund will keep your fees lower as there should be less buying and selling which should lead to lower operating costs.

Bull Market

The stock market is one the rise and investor/consumer confidence level is very optimistic.

Bear Market

The stock market is trending down and investor/consumer confidence levels are pessimistic.

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