Asset classes
These are general types of investments. The three most common types of investments are cash equivalent , which means investments you can sell on a moment's notice; fixed income, which are investments that tell you right up front how much interest you're going to earn; and equities, which are actual shares of ownership in businesses like Nike or Microsoft.

Bonds
Bonds are contracts between you and a corporation or a government. You buy a company's bonds (that is, you lend a company a certain amount of money), and they promise to give you your money back plus interest after a specified period of time.

Cash equivalent investments
These are the safest investments and the easiest to cash in. That's why they're called cash equivalent investments. But they usually offer lower rates of return compared to other asset classes (see Rate of return). A good example is a Treasury Bill (see Treasury bills).

Compounding
This means when you invest your money, your money earns a rate of return, and when you leave your earnings in your investment, these earnings will earn more money. That's because the rate of return will be applied to your money as well as to the money you earn.

Equity investments
Many companies offer us an opportunity to actually own a piece of their company. You can buy 'shares,' commonly known as stocks, in the company. Your investment returns are then related to how profitable and successful that company has been, and may go up or down.

Fixed income investments
Unlike equity investments, these investments may guarantee you a return on your investment that is predictable. You know from the moment you invest what your investment return will be at any time. Fixed income mutual funds invest primarily in fixed income investments/securities, but their rate of return is not guaranteed, and may go up or down.

GICs
Guaranteed Investment Certificates (GICs) are fixed income investments available from your local bank. You let the bank hold your savings for you for a certain period of time (the term of the certificate), say, three years, and the bank guarantees a return on your money that can't be changed for the entire GIC term.

Interest
Interest is the money you earn when you let someone else use your money for a specific period of time. Your $100 becomes $110 if you lend it to your sister for a year, and she agrees to pay you 10% interest for that year.

Long-term investing
Long-term in investing generally means investing for more than a few years. It refers to an investment you don't plan on cashing in for a long time, such as your university fund. This means you take advantage of the time to let your money increase through compound growth (see Compounding).

Market downturn
Stocks, bonds and other investment options are bought and sold in markets (e.g. stocks are bought and sold in the stock market, bonds in the bond market). When investments sold in this marketplace start to go down in value, it is said to be a market downturn.

Mutual funds
A mutual fund is an investment that puts your money together with the money from other investors for the purpose of making money.

Rate of return
This is the increase or decrease in the value of your investment. Interest is one of the ways you see a rate of return, but there are other ways. When the value of the stocks you buy go up in value because of company success, this growth is also a rate of return.

Risk
With some investments, there is a possibility that you might lose some of your money. Investment options such as stocks are capable of going down in value (see Stocks/Shares in companies). Some investors take investment risks because they could earn a higher rate of return. An investor may buy a stock believing it will go up in value, even though there is the risk that it could go down too. 

Short-term investing
Short-term in investing generally means investing for less than a year. It's an investment you think you might need to cash in within a year.

Simplified Prospectus
When you invest in a mutual fund, you get a booklet full of fund information, rules and regulations about your mutual fund. This booklet is called a Simplified Prospectus, and you should read it before you make your investment decision.

Stocks/Shares in companies
Stocks are certificates of ownership in a company. As a stockholder, you are entitled to a rate of return on your investment based on the success of the company (see Equity investments).

Treasury bills
Treasury bills are short-term bonds (see Bonds) sold by the government. While they may not pay a very high rate of interest, they are easy to cash in, and they are very safe.

Units
Mutual funds are divided into equal units. When you invest in a mutual fund, you are buying a certain number of these units. The units can either increase or decrease in value over time.