Our glossary of financial terms helps explain concepts in the financial services and product industry with quick easy to follow animated videos.  We will continue to build out this glossary over the next coming months.

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By Wealth Know How in Glossary

A bond is issued by a government or company as a way of borrowing money.  Investors buy the bonds, and receive an interest payment on the fixed dates, at the stated interest rate, or ‘coupon.’  The bond has a known maturity date, at which the investors are entitled to be repaid the money lent via the bond.  It is possible that at maturity date the company or government cannot repay the bond or is unable to pay the coupons: .this is the main risk associated with owning a bond.  Bonds can usually be bought and sold like shares, but if you sell or buy a bond before maturity it may have a different value than the initial amount loaned, which can give rise to a capital gain or loss. 

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By Wealth Know How in Glossary

A share is issued by a company to raise money. A share also represents a unit of ownership in the company, its assets and in its profits, as well as allowing the investor to vote on major decisions associated with the company.  Shares may also pay dividends, which are a share of the company’s profit.  Shares can be transferred from one investor to another.   For listed companies this happens on a stock exchange or stock market which allows the selling and buying of shares. A company may also issue shares through the stock market to raise extra capital. Investors buy shares, expecting the value of the share to rise and dividends to be paid. 

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Stock Market

By Wealth Know How in Glossary

The stock market is the marketplace in which ‘listed’ shares are traded: it is also known as a stock exchange. Buyers and sellers indicate the price levels at which they are willing to buy or sell their shares: if the buy and sell price match, the shares are transferred.  The day-to-day trading of listed shares is known as the ‘secondary’ market.  The other function of the stock market is to allow companies to raise money to fund their business from investors.  Companies will sell shares directly to investors to raise the money: this is called the ‘primary’ market.  These markets co-exist.

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