The ASX (Australian Securities Exchange): The ASX is the primary stock exchange in Australia. It is one of the largest and most important financial marketplaces in the Asia-Pacific region. The ASX operates as a platform for buying and selling various financial products, including equities (shares), fixed-income securities (bonds), derivatives, and exchange-traded funds (ETFs).

The FTSE/“Footsie” (Financial Times Stock Exchange): Refers to a group of global market indices which are widely used as benchmarks for various segments of the global stock market.

NASDAQ (National Association of Securities Dealers Automated Quotations): The NASDAQ is a global marketplace for buying and selling securities. It is known for listing many technology companies and provides a platform for trading stocks, options, futures, and other financial instruments.

NYSE (New York Stock Exchange): The NYSE is the world's largest stock exchange by market capitalisation and is located on Wall Street in New York City. It still operates a traditional an auction-based market where buyers and sellers physically meet on the trading floor to trade stocks, bonds, exchange-traded products, and other securities.

FX (Foreign Exchange): FX refers to the global market for trading currencies. It involves buying one currency and selling another simultaneously. The FX market is the largest and most liquid financial market in the world, with participants including banks, central banks, corporations, governments, and individual traders. It is also one of the only markets available for trading 24 hours a day (excluding weekends) – and because of this it is split up into four local sessions, being Sydney, Tokyo, London, and New York.

IPO (Initial Public Offering): An IPO is the first sale of shares by a company to the public. It occurs when a private company decides to go public and offers its shares to investors on a stock exchange.

ETF (Exchange-Traded Fund): An ETF is a type of investment fund that trades on a stock exchange. ETFs allow investors to gain exposure to a particular index or sector in and cost-effective and easily tradable manner.

EPS (Earnings Per Share): EPS is a financial metric that represents a company's profitability on a per-share basis. EPS is calculated by dividing the company's net income by the average number of outstanding shares during a specific period, typically a quarter or a year.

P/E (Price-to-Earnings) ratio: The P/E ratio is a valuation ratio that measures the price investors are willing to pay for each dollar of a company's earnings. It is calculated by dividing the market price per share by the earnings per share (EPS). A higher P/E ratio generally indicates that investors expect higher earnings growth in the future, but it could also indicate overvaluation.

Yield: Typically refers to the return or income generated by an investment, usually expressed as a percentage of the investment's cost. Yield is an important concept which helps investors assess the potential income they can expect from an investment. The most common types of yield that you are likely to encounter relate to interest payments on bonds, dividends paid on shares and rental income from investment properties.

Debt-to-equity (D/E) ratio: A financial metric that compares a company's total debt to its shareholders' equity. It is calculated by dividing the company's total debt by its total shareholders' equity. The D/E ratio provides insights into a company's capital structure and the proportion of debt and equity financing it employs. It can be useful when researching shares to identify highly indebted companies.

Beta: Refers to a measure of a stock or investment's sensitivity to market movements. It quantifies the relationship between the price movement of an individual stock or investment and the overall market, typically represented by a benchmark index such as the S&P 500.

Franking: A tax system which aims to eliminate or reduce the double taxation of corporate profits. In Australia, when a company earns profits and pays corporate income tax on those profits, it has the option to attach franking credits to the dividends it distributes to its shareholders. These credits represent the tax already paid by the company on its profits. Therefore, when a shareholder of the company receives a dividend with attached franking credits, they can use those credits to offset their own personal income tax liability.

Risk free rate: The risk-free rate is the theoretical rate of return on an investment that carries no risk. It is often considered to be the rate of return on a government bond or treasury bill that is considered to be free from default risk. This is because the government is generally considered to be a safe borrower and is unlikely to default on its debt obligations.

A Separately Managed Account (SMA): is an investment account that provides individual investors with direct ownership of a professionally managed portfolio of securities. In an SMA, each investor's funds are segregated and managed separately according to their specific investment objectives and preferences. SMAs often have higher minimum investment requirements compared to other managed funds and ETFs. This is because they offer personalised investment management services and customization based on individual needs.

Central Bank: Typically refers to a national bank which provides financial and banking services for its country's government and commercial banking system. They also engage in implementing monetary policy and issuing currency in an attempt to control outcomes within their respective economies. Central banks that often encounter include the RBA (Reserve Bank Of Australia), ‘The Fed’ (United States Federal Reserve), BoE (Bank of England), RBNZ (Reserve Bank of New Zealand), BoJ (Bank of Japan, PBOE (People’s Bank of China).

Monetary Policy: Central banks use monetary policy to stimulate their country’s economy or to slow its growth. They typically achieve stimulus by lowering interest rates, which results in people and businesses borrow more and spending. Central banks can also ‘print’ money which has the effect of lowering their currency against the rest of the world – making the country’s goods and services cheaper to international customers. These actions result in increased economic activity. Conversely, raising interest rates and limiting money supply encourages people to spend less and save, monetary which acts as a brake on an overheated economy.

Fiscal Policy: refers to the level of spending by a government within their economy. If a government believes there is not enough business activity in an economy, it can increase the amount of money it spends on things like Centrelink, Medicare/health, Education, Infrastructure etc. If there are not enough tax receipts to pay for the spending increases, governments must borrow money by issuing debt securities, such as government bonds. At times, this can work against what central banks are trying to achieve via monetary policy.

GDP (Gross Domestic Product): GDP is a measure of the total value of goods and services produced within a country's borders over a specific period. It is commonly used to gauge the economic health and growth of a nation. GDP is typically reported on a quarterly or annual basis.

Until next time, all the best.

Wayne

Founder of Retire School