The 11 most important investment terms

Do you want to make more of your assets? Get active now and invest your money. We will familiarize you with the technical vocabulary.

by UBS Insights 22 Jan 2020

Source: Martina Meier

Keeping a lot of money in your savings account does not make sense in the long run. This is because cash loses value due to inflation. You can influence your asset growth yourself. There are investment opportunities for every degree of risk appetite. But before you make any important decisions, you should get to know the basics. We explain the most important technical terms.

Investor profile

The investor profile is defined during the first meeting with your advisor. It provides information about your personal situation, your needs and goals. Would you prefer to have your investments managed by the bank, or take them into your own hands? The investor profile is also based on your investment horizon. This is the only way to determine how to invest your money best and most successfully.

Risk profile

Your risk profile is established on the basis of your asset situation, risk appetite and risk capacity. Risk appetite describes how well you are able to handle fluctuations in value from an emotional point of view. Risk capacity, on the other hand, is about finding out up to what level you can bear losses due to your living and financial situation.

Investment horizon

How long can you manage without the money you invest? This period is defined as the investment horizon. The longer the investment horizon, the higher risks you can take. Price fluctuations balance each other out over longer periods of time. The investment horizon ranges from a few months to decades.

Investment strategy

Once you decide to invest, you should define a plan – an investment strategy. Financial markets constantly experience ups and downs. It is difficult to assess the situation and keep track. People who act on impulse often overestimate themselves. The investment strategy should be seen as a compass to guide all your investment decisions. Based on the risk profile and investment horizon, the strategy includes the weighting of asset classes such as equities and bonds.

Diversification

Diversification means that your assets are spread across various investment instruments, sectors, currencies and countries. This reduces the risk of loss and increases the chance of sustained asset growth.

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Portfolio

A portfolio comprises all the financial investments owned by an investor. It may include, but is not limited to, equities, bonds, currencies, precious metals, real estate, commodities and cash.

Index/Indices

In the financial world, an index is a key figure that reflects the performance of selected rates, such as equities, bonds, currencies and investment funds. In equity indices, for example, shares in different companies are pooled according to certain criteria. This makes it easier to observe trends in the overall market. Indices are regarded as market barometers.

All-in fee

An all-in fee is a flat fee that includes all the costs related to an investment. It is calculated as a certain percentage of the assets under management.

Asset allocation

Asset allocation describes the distribution of the overall portfolio across different asset classes. These can be equities, bonds or real estate. Asset allocations are prepared individually according to risk appetite, risk capacity and investment horizon, and are derived from the investment strategy.

Investment funds

An investment fund is an asset that consists of deposits from several investors. Fund assets are invested in equities, bonds and other investments in accordance with the investment strategy of investment experts. Investors own investment fund units that are proportional to the amount of their deposits. The value of these units is based on the price of all the securities purchased by the investment fund.

ETF

ETF stands for Exchange Traded Fund. These are passively managed funds, i.e. they track an index. ETFs are more economical than actively managed funds because of their passivity.

Would you like to become active and invest your money? For further information, please contact your UBS advisor.