A glossary for understanding investing

If you’re new to pensions, investing or anything to do with managing your money then this is a guide for you. We’ve broken down what some of the key terms are and what they mean.

What are shares?

A share of a company is like a piece of that company. If you own a share, you own a piece of a company. People who own shares are called shareholders.

By owning part of a company, a shareholder benefits from company success. That also means if the company does not perform well, the value of the shares may go down.

What are bonds?

Bonds are loans split into smaller pieces. They allow companies, states and governments to finance projects and operations. Think of them as an ‘I owe you’. Organisations borrow your money and then return it with interest paid on top. Bonds have maturity dates. At this date, all the money must be paid back in full.

What are funds?

A fund is a collection of money put aside for a specific purpose. In the context of this platform, a fund is usually invested in shares in order to grow your money above the rate of inflation.

These funds are professionally managed by teams in investment firms (fund managers). They determine how best to invest the money for good financial returns. Usually, they invest the money in different companies on the stock market. So, through funds, you may own a small part of a company indirectly.

What is a portfolio?

A portfolio is a collection of financial assets and can include funds, bonds and cash.

Portfolios could be managed by a pension provider (meaning they pick the funds/financial assets to put in the portfolio, keep an eye on them over time and manage all of the admin and reporting). These financial professionals are trained and legally bound to make decisions in your best financial interest. They have to balance risk, financial performance and the investment objectives of the fund. When making financial decisions they will also consider timescale. Some investments are designed for shorter-term wins, others for long-term growth.

You can see your portfolio by clicking on ‘Dashboard’ in the left-hand menu or learn more by going to your provider’s website.

What is a shareholder?

A shareholder is someone who owns part of a company through owning shares.

Am I a shareholder?

A shareholder is someone who owns shares in a company. You probably own a pension, which is used to buy shares in lots of companies. Therefore, we refer to you as a shareholder.

Technically speaking, because you own shares via your pension, you are an ‘indirect shareholder’. You didn’t go out and buy the companies yourself, but your pension did, and you bought your pension. This keeps things simple from an investment perspective, and is generally a good thing (imagine buying all of those companies individually..)! However, it does mean that your fund manager (who is the ‘direct shareholder’) probably holds the legal right to the shareholder vote instead of you. Of course, since it’s your money, you should have a say, and that’s why we built Tumelo!

Not already using Tumelo? Sign up to our waiting list and we could be talking to your pension or investment provider next.