Glossary — S

Saddle up, investors! Let us ride into the world of S-terms!

Securities

Securities are like investment contracts! When you buy a security, you are entering into a contract with a company or government. Securities help you invest in companies or governments without directly running them! They allow you to support businesses or governments and potentially earn returns on your investment, without being directly involved in their operations. What are Financial Securities? Examples, Types, Regulation, and Importance STOCK A stock is a piece of a company that you can own. When you buy a stock, you are essentially buying a small or large part of that company's assets, profits, and debts. If the company does well, the value of your stock can go up. If the company does poorly, the value of your stock can go down. "A piece of a pie":

• Imagine a company is like a pie, and the pie is cut into many small pieces. Each piece represents a share of the company.
• When you buy a stock, you are buying one of those pieces of the pie. If the company grows and becomes more successful, the pie gets bigger, and the value of your piece (stock) increases!

Common Stock: What It Is, Different Types, vs. Preferred Stock

Spread

Spread refers to the difference between the buying and selling prices of a financial instrument, such as a stock, currency, or commodity. For example:

• Bid Price (sell price): R90
• Ask Price (buy price): R100
• Spread: R10 (R100 - R90)

This means that if you want to buy, you will pay R100, and if you want to sell, you will get R90. The spread (R10) is the profit made by the market maker or broker for facilitating the trade. In simple terms:

• Spread is the difference between what you pay to buy and what you get to sell. It is like the commission charged by a broker for buying or selling a financial instrument.

Spreads in Finance: The Multiple Meanings in Trading Explained

Swing-Trader

Swing trading is a popular trading strategy used in financial markets, particularly in stocks, forex, and cryptocurrencies. It involves holding positions for a shorter period than investing, but longer than day trading. Key characteristics:

• Holding period: Typically 1-5 days, but can be up to several weeks
• Goal: Capture medium-term price movements while minimising overnight risks

Swing trading offers a balance between short-term trading and long-term investing. By understanding market trends and using risk management techniques, swing traders can potentially capture significant price movements while minimising overnight risks. Swing Trading: Definition and the Pros and Cons for investors SHORT-TERM INVESTMENTS A short-term investment is a financial investment that is typically made for a brief period, usually less than 5 years and can even be a few minutes long. The goal is to earn a quick profit or return, often to achieve a specific financial goal or to park your money temporarily. Some examples are:

• High-yield savings accounts
• Money market funds
• Short-term bonds
• Certificates of Deposit (CDs)

Short-term investments are generally lower-risk and provide liquidity, making them suitable for short-term financial goals or emergency funds. Short-Term Investments: Definition, How They Work, and Examples

Stakeholders

Imagine you are planning a big event, like a music festival. You need a team of people to make it happen, like: Organisers (you), performers (artists), sponsors (funding), volunteers (helping hands), and attendees (the crowd). In business, stakeholders include:

• Shareholders (investors)
• Employees (team members)
• Customers (users)
• Suppliers (partners)
• Community (neighbors)

They all have a stake in the company's success and are affected by its decisions and actions. So, stakeholders are like the team behind the dream, working together to make it happen! What Are Stakeholders: Definition, Types, and Examples STOP LOSS A stop loss is an order you can place with your broker to automatically close your sell or buy position when it falls to a certain price of your choice. This helps limit your potential losses if the market moves against you. A stop loss could be seen as a safety net:

• You set a stop loss at a specific price (e.g., 10% below your buy price)
• If the security's price falls to that level, your stop loss is triggered.
• Your position is automatically closed, limiting your loss to the 10% you set.

However, if you did not place the stop loss, you could have potentially lost a lot more if the market kept going against you. The Stop-Loss Order--Make Sure You Use It STRATEGY A strategy is a plan for buying and selling investments, like shares or currencies, to make a profit. It is like a roadmap to help you make informed decisions when trading. A good strategy should: 1. Define your goals: What do you

• want to achieve? (e.g., long-term growth or short-term gains)

2. Identify your risk tolerance: How

• much are you willing to risk losing?

3. Choose your investments: What

• assets will you trade? (e.g., shares, currencies, or commodities)

4. Set entry and exit points: When

• to buy and sell based on market conditions or price levels

5. Manage your emotions: Stick

• to your plan, avoiding impulsive decisions based on fear or greed

Some common strategies: 1. Buy and Hold: Hold onto investments

• for the long term, regardless of short-term market fluctuations.

2. Day Trading: Buy and sell investments

• within a single trading day, aiming to profit from short-term price movements.

What Is an investment Strategy? How to Develop One

Shares

Shares are small parts of a company that you can buy and own. Imagine the shares as being a pizza party with your friends:

• The company is the whole pizza
• Shares are like slices of the pizza
• When you buy a share, you are buying a slice of the company

What happens when you buy a share?:

• You become a part-owner of the company
• You can receive a portion of the company's profits (called dividends)
• You can vote on company decisions (if you own enough shares)

What can you do with shares?;

• Keep them and hope they increase in value
• Sell them to someone else
• Use them as collateral for a loan

What Are Shares? How They Compare to Stocks

Sell High

Sell high is an investing strategy that means selling a stock or asset when the price is high, to make a profit from when you bought it at a lower price. Think of it like selling a toy you no longer need:

• You buy a toy (stock) at a low price
• You play with it (hold the stock)
• The toy becomes popular (price goes up)
• You sell the toy (stock) at a high price to someone else

"Sell high" is the opposite of "buy low" It is about selling your investment when it is worth more than you paid for it, to lock in your profit! For example:

• Let us say you bought a stock for $50 and it is now worth $75. If you sell it at $75, you are selling high and making a profit of $25!

A Look at the Buy Low, Sell High Strategy STOP HUNT A stop hunt is an investment phenomenon where price suddenly moves to trigger a lot of stop-loss orders, driving a cluster of people out of the market. This is done by driving the price of a security up or down to where a significant number of traders are expected to have set their stop-loss orders, usually leaving long wicks in the area of the stop hunt. Stop Hunting: Definition, How the Trading Strategy Works, and Examples

Simple Interest

Simple interest is like a fixed-rated bonus. The rate(%) at which your initial amount borrowed or invested grows by, stays the same. Breakdown:

• You lend someone money (or invest in something).
• They promise to pay you back with an extra amount (interest) that is a percentage of the original amount.
• The interest is calculated only on the original amount, not on any interest already earned.

For example:

• You borrow R1000 at a simple interest rate of 5%, you will pay R50 in interest.

It is like lending a friend money to buy a concert ticket, and they promise to pay you back the ticket price plus an extra amount for your trouble! Simple Interest: Who Benefits, With Formula and Example

Savings Account

Savings accounts are a low-risk way to save your money and earn interest. The average interest rates you can expect in South Africa is between 0,25% and 8% per annum (per year) when investing under R1000. The more you save, you will find that banks tend to give more interest. This means:

• If you save R1000 at an interest-rate of 8%(per annum) you will receive monthly gains of 0.66% (8%/12 months).
• In the first month you will receive an additional R6.66

Most banks offer savings accounts with different interest rates depending on how much you save, so it is important to compare rates before you open an account. They are also more liquid, meaning that you can access your money quickly and easily. What is a savings account and how does it work? There is more to come in the S-section, keep posted to learn more! Share this post: Categories STIOSTM: Terminology Sign up for blog updates! Join my email list to receive updates and information. Email address

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