Key investing terms

What do the basic words mean?

Share, or stock

A piece of a company. Own one and you own a fraction of that business, not a guaranteed payment. More in What is a stock?

Dividend

Money a company chooses to pay its shareholders from profit. It can be skipped. It is not interest on a bank deposit. More in What is a dividend?

Ghana Stock Exchange

The market in Ghana where listed shares are bought and sold through licensed dealing members. See gse.com.gh.

Broker

A firm licensed to buy and sell securities for customers. In Ghana, dealing members of the exchange do this for listed shares. You still make the decision.

Treasury bill

A short-term loan to the Government of Ghana, often for 91, 182 or 364 days, usually bought at a discount. See Treasury bills in Ghana.

Face value

The amount a bill or bond says it will pay at the end, if it is paid as the terms say. It is not always the price you pay to buy it.

Maturity

The date a bill or bond ends. A share does not have one.

Mutual fund

A pool. Many people put money in, and a manager buys a mix of investments under rules set out in the fund's documents. You own units in the pool, not a personal pile of each share. Funds charge fees and can fall in value.

Yield

A return expressed against the amount you put in, over a stated period. Always check the period and the date.

Interest

The cost of borrowing, or the payment a lender receives. On a treasury bill, the return is often the gap between the discount price and the face value, rather than a separate interest payment along the way.

Compounding

Earning a return on earlier returns, if those earlier returns stay invested. The worked example on How compounding works uses made-up cedis.

Portfolio

The set of investments you own: shares, bills, fund units, cash you have set aside, or a mix.

Risk

The chance that what you get is different from what you hoped, including the chance that you get less money back. Every investment in this list carries it.

Inflation

A rise in prices. More cedis later can still buy less. The Ghana Statistical Service publishes the figures.

Which words are warning signs?

"Hot", "safe", "guaranteed" and "you should" are slogans, not definitions. If you hear them about a share or a bill, go back to Know the business you invest in.

Where can you check a word against a primary source?

• Ghana Stock Exchange for listed shares and dealing members.
• Bank of Ghana for treasury-bill auction results.
• Securities and Exchange Commission for who regulates the securities business in Ghana, and for its list of licensed firms.