6 Investment Terms You Should Know

If you’re new to investing, the world of finance can feel like a foreign language. Terms like “ROIC,” “margin of safety,” or “index funds” might sound intimidating — but once you understand them, everything starts to make sense.

This blog is your friendly introduction to the basic knowledge of trading and investment. You’ll learn the most essential investment terms every beginner should know, how they affect your financial decisions, and how to start building your wealth smartly — step by step.

These terms will be helpful to understand, so you don’t end up missing something you should know, or veering away from your financial goals. And it never hurts to know the basics. By the end, you’ll also discover how Jeton Wallet and Jeton Card can make managing and growing your investments easier in today’s digital world.

Let’s begin your journey to smarter investing!

What Is Investment?

Before diving into complex jargon, let’s start simple: what is investment?

Investment means putting your money into something — like stocks, real estate, or gold — with the goal of earning a return in the future. Instead of letting your money sit idle, you’re making it work for you. Investments can be short-term (meant for quick gains within a year) or long-term (focused on steady growth over many years). Both have their place, depending on your financial goals and risk tolerance.

Types of Investment

There are several different investment options to choose from, including:

  • Stocks and shares – owning part of a company.
  • Mutual funds and index funds – pooling money with other investors.
  • Gold or commodities – tangible assets that hold value.
  • Real estate – investing in property.
  • Cryptocurrency – digital assets that trade on blockchain networks.

Understanding these types of investment will help you choose what fits your goals best.

Investment for Beginners: Where to Start

Starting your investment journey can feel overwhelming — but the good news is that investment for beginners doesn’t have to be complicated.

Here’s a step-by-step guide on how to invest in the stock market for beginners:

  1. Educate yourself. Read blogs like this one to understand key concepts.

  2. Set clear goals. Are you saving for retirement, travel, or financial freedom?

  3. Start small. Even small, consistent investments can grow over time.

  4. Diversify. Don’t put all your money into one company or sector.

  5. Be patient. Long-term thinking beats impulsive trading every time.

If you’re wondering how to learn trading step by step, start by following stock market news, studying company performance, and using demo trading apps to practice risk-free.

And yes — if you’ve ever thought about how to invest in gold for beginners or how to invest in SIP (Systematic Investment Plans) for beginners, don’t worry. We’ll touch on those, too.

Investment Terms: Basics

1. Assets

Let’s begin with the first essential investment term: assets.

An asset is anything that has value and can be converted into cash. Individuals, companies, and governments own assets. Think of your house, car, jewelry, or stocks — they’re all assets.

For businesses, assets are even more important. A company’s assets can include equipment, patents, buildings, or even software. For a company, an asset might generate revenue, or a company might benefit in some way from owning or using the asset.  

Assets are listed on the balance sheet and netted against liabilities and equity. When investors look at a company, they check its assets to understand how strong it really is.

Example: Imagine you own a bakery. Your ovens, shop furniture, delivery van, and even your brand reputation are your assets.

In investing, you want your assets to grow in value over time — and that’s what makes them the foundation of wealth creation.

investment-terms

2. Return on Invested Capital

Return on invested capital (ROIC) is a profitability ratio. It measures the return that an investment generates for those who have provided capital, i.e. bondholders and stockholders. ROIC tells us how good a company is at turning capital into profits.

In simple terms, it tells you how good a business is at using its money. A high ROIC means the company is efficient and profitable; a low one might mean it’s struggling to generate returns.

ROIC is most useful when you’re using it to calculate the returns generated by the business operation itself, not the ephemeral results from one-time events. Gains/losses from foreign currency fluctuations and other one-time events contribute to the net income listed on the bottom line, but they’re not really recurring results from business operations. 

Try to think of what your business “does” and only consider income related to that core business. When analyzing long-term investment stocks, checking ROIC helps you identify businesses that create real, sustainable value — not just hype.

Example:
If Company A and Company B both earn $1 million, but Company A used $5 million to earn it while Company B used only $2 million — Company B has a higher ROIC. It’s the smarter business.

3. Margin of Safety

Margin of Safety (MoS) is the principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value. It means buying stocks or assets when their market price is lower than their true (intrinsic) value. This margin protects you from unexpected market drops.

Why is the Margin of Safety so important?

Stock markets are volatile (with a large upside followed by a downslide within moments in a single day) the rate of stock can skyrocket at one time and can rapidly come down in a single day. Since time immemorial, it is only a high MoS that can protect you from making extreme losses in this kind of market volatility.
Also, in case an investor misjudges the value of a company, a high MoS would always protect him from huge losses.

Think of it like shopping during a sale — you get something valuable for less than it’s worth. Because stock markets can be unpredictable, having a Margin of Safety ensures you won’t lose heavily if things go wrong. That’s why this concept is critical in long-term investment strategies.

4. Payback Time

Payback Time is the amount of time it takes before you get the return on your invested capital. Payback is measured in terms of years and months, though any period could be used depending on the life of the project (e.g. weeks, months).

Payback focuses on cash flows and looks at the cumulative cash flow of the investment up to the point at which the original investment has been recouped from the investment cash flows.

If a business makes a million dollars a year, you want to know how long it would take you to get your money back in eight years or less at whatever price you were to buy it for. Once you earn all that money back, you have no risk. You’re just playing with house money.

If you buy a small café for $50,000 and it earns $10,000 in profit each year, your payback time is 5 years.

Investors use this to compare projects — shorter payback times mean less risk. But remember, quick returns aren’t always better; some long-term investments grow slowly but yield bigger rewards later.

For short-term investments, you’ll want faster payback to reinvest quickly. For long-term ones, patience pays off.

5. Index Funds & Mutual Funds

Index funds and mutual funds are two of the easiest ways for beginners to invest.

An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the S&P 500.
Mutual funds are doing the same thing that index funds are doing, except they charge higher fees. Both diversify your portfolio across hundreds of stocks. Index funds are just very specific to the index that it’s tracking.

The main difference is that index funds follow a specific market index (like the S&P 500), while mutual funds are managed by professionals who try to outperform the market.

If you’re just learning how to invest in the share market for beginners, index funds may be a great place to start — they’re simple, low-cost, and diversified.

investment-for-beginners

6. Earnings Per Share

Earnings per share are the net earnings of the company divided by the number of shares in the company. If a company earns $10 million and has 5 million shares, its EPS is $2. The higher the EPS, the more profitable the company.

EPS, also known as profit per share, is used to calculate the value of a business. EPS is one of the most common indicators investors use when deciding whether to buy or sell a stock. But remember — EPS should always be analyzed with other financial data, like cash flow and return on investment, to see the full picture.

What Is Long-Term Investment?

A long-term investment is when you hold an asset for several years — often 5, 10, or even 20 years — to benefit from steady growth.

This approach focuses on time and patience rather than short-term profit. Long-term investments might include stocks, real estate, or index funds that grow gradually over time.

Example:
If you invest $1,000 in a company with strong fundamentals and hold it for 10 years, your returns could multiply — even if the market fluctuates in the short run. Long-term thinking turns volatility into opportunity.

Short-Term Investments: Quick Returns

While long-term investing builds wealth slowly, short-term investments aim for quick profits. These include short-term bonds, certificates of deposit, money market accounts, or even cryptocurrency trading.

If you’re new, short-term investing might sound exciting — but it also carries more risk. That’s why understanding trading basics and having at least basic knowledge of trading is crucial before diving in. For anyone wondering how to learn trading from scratch, start small, stay curious, and never invest money you can’t afford to lose.

Trading Basics: What Every Beginner Should Know

Trading isn’t about guessing — it’s about strategy and discipline.

Here are some trading basics to remember:

  • Study market trends before buying or selling.

  • Avoid emotional decisions. Don’t let fear or greed drive your actions.

  • Diversify. Spread risk across assets.

  • Keep learning. Follow news and take online courses to learn trading for beginners.

The best way to learn trading is by doing — slowly, carefully, and consistently.

Wrapping Up

Understanding these key investment terms is your first step toward becoming a confident investor. Whether you’re focusing on long-term investments, short-term opportunities, or just learning the basics of trading, knowledge is your best asset.

And when it comes to managing your money smartly, Jeton is here to make your financial journey smoother.

With Jeton Wallet, you can securely manage funds, make international transactions, and handle multi-currency accounts. Meanwhile, Jeton Card lets you make safe, contactless payments — anywhere, anytime.

Start your investment journey the smart way with Jeton! Open your Jeton account today and download the Jeton App via Google Play or the App Store to experience seamless, global money management.

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