In the case of finance, it does not mean that only the bank or the person working in the finance department should understand some important terms in it. We as a layman, it is also important to know about financial terms, because it is often used in everyday life.
Call it like the word asset, which can be interpreted as a property of a person or company. Well, understand this financial term, will certainly benefit us when making transactions.
In fact, if we run a business, understanding this financial term becomes very important, in order to make the bookkeeping well. Here are seven financial terms that need to be understood:
1. Compound Interest
The term interest rates in finance is usually encountered in banking transactions. The notion of the interest itself is a reward for the amount of money deposited by the customer.
Then, have you ever heard the term of combined interest? Unfortunately the interest rates of some transactions are combined.
For example, you use a credit card and on the bill there is a combined interest. The interest can mean the burden of interest to be borne plus the existing fine for late paying the installment.
This is the same as if investing and saving, you will get a combined interest, the accumulated interest and deposit interest.
2. Net Worth
The term net worth is also often referred to in the financial world. The understanding is the difference of assets owned and debt charged.
Then, what is meant by the asset itself is the treasure of money, vehicle, land or mutual fund. While debt is the burden of the loan, such as lease installment or loan installment.
3. Asset Allocation
Asset allocation in this term means how to place multiple assets owned. Keep in mind, there are 3 containers in finance, namely stocks, bonds, and cash.
Each container of the asset certainly has its own risk. We should be able to properly allocate assets. For example, short term deposits and stocks are suitable for the long term.
4. Capital Gains
Have you heard the term capital gains this? Capital itself means capital or related to price. When the capital gains are the price difference purchased today. The price difference will occur when we actually sell the capital.
5. Rebalancing Portfolio
The word balance means balance. If rebalancing, then the meaning is to return the portion of the stock portfolio as well as bonds.
If the target manages the stock portfolio by 60% for the stock, then by 20% for the bonds. The rest, 20% more for cash.
When the market condition is less stable, the stock decreases and does not reach 60% must be rebalancing. How to increase the amount of funds on the management of shares.
6. Term-Life Insurance
Insurance is a protection for our lives. In insurance, known term Term Life Insurance, which means a term condition term of protection up to 30 years.
If before reaching the age set as protection, then died, then the heir can make a claim. Without a claim, the heirs get nothing. If the time runs out, then it can be re-protected without penalty.
7. Insurance Umbrella
Another term that is also often used is umbrella insurance (umbrella insurance). This type of insurance not only plays a role to maintain the assets that we have. But insurance umbrellas can also protect assets from criminal acts, such as theft.
At the time of financial transactions, you will definitely find the terms that sometimes have not really understood. Instead, you equip yourself first with existing financial terms to facilitate and benefit you when doing activities related to finance.
The term interest rates in finance is usually encountered in banking transactions. The notion of the interest itself is a reward for the amount of money deposited by the customer.
Then, have you ever heard the term of combined interest? Unfortunately the interest rates of some transactions are combined.
For example, you use a credit card and on the bill there is a combined interest. The interest can mean the burden of interest to be borne plus the existing fine for late paying the installment.
This is the same as if investing and saving, you will get a combined interest, the accumulated interest and deposit interest.
2. Net Worth
The term net worth is also often referred to in the financial world. The understanding is the difference of assets owned and debt charged.
Then, what is meant by the asset itself is the treasure of money, vehicle, land or mutual fund. While debt is the burden of the loan, such as lease installment or loan installment.
3. Asset Allocation
Asset allocation in this term means how to place multiple assets owned. Keep in mind, there are 3 containers in finance, namely stocks, bonds, and cash.
Each container of the asset certainly has its own risk. We should be able to properly allocate assets. For example, short term deposits and stocks are suitable for the long term.
4. Capital Gains
Have you heard the term capital gains this? Capital itself means capital or related to price. When the capital gains are the price difference purchased today. The price difference will occur when we actually sell the capital.
5. Rebalancing Portfolio
The word balance means balance. If rebalancing, then the meaning is to return the portion of the stock portfolio as well as bonds.
If the target manages the stock portfolio by 60% for the stock, then by 20% for the bonds. The rest, 20% more for cash.
When the market condition is less stable, the stock decreases and does not reach 60% must be rebalancing. How to increase the amount of funds on the management of shares.
6. Term-Life Insurance
Insurance is a protection for our lives. In insurance, known term Term Life Insurance, which means a term condition term of protection up to 30 years.
If before reaching the age set as protection, then died, then the heir can make a claim. Without a claim, the heirs get nothing. If the time runs out, then it can be re-protected without penalty.
7. Insurance Umbrella
Another term that is also often used is umbrella insurance (umbrella insurance). This type of insurance not only plays a role to maintain the assets that we have. But insurance umbrellas can also protect assets from criminal acts, such as theft.
Recognizing Financial Terms Will Be Profitable
At the time of financial transactions, you will definitely find the terms that sometimes have not really understood. Instead, you equip yourself first with existing financial terms to facilitate and benefit you when doing activities related to finance.
