A
Asset Allocation – The process of spreading your money across different investments, such as shares, bonds, money market funds (MMFs), and property, to reduce risk.
Annual Return – The percentage gain or loss an investment earns over one year. For example, if you invest KSh 100,000 and it grows to KSh 110,000 in a year, your annual return is 10%.
B
Bear Market – A period when share prices fall by 20% or more over several months, often because investors expect slower economic growth.
Blue-Chip Stock – Shares of large, well-established companies with a history of stable earnings. Examples on the Nairobi Securities Exchange (NSE) include Safaricom and Equity Group.
Bond – A loan you give to a government or company in exchange for regular interest payments. In Kenya, Treasury Bonds issued by the government are among the most popular.
Brokerage Account – An investment account that allows you to buy and sell shares, ETFs, bonds, and other investments through a licensed broker.
Bull Market – A period when stock prices are generally rising and investor confidence is strong.
C
Capital Gain – The profit made when you sell an investment for more than you paid.
Capital Loss – The loss incurred when you sell an investment for less than its purchase price.
Compound Interest – Interest earned on both your original investment and previously earned interest, allowing your money to grow faster over time.
D
Diversification – Owning different types of investments instead of putting all your money into one asset. This helps reduce risk.
Dividend – A payment made by a company to its shareholders, usually from profits. Many Kenyan investors buy shares specifically for dividend income.
Dollar-Cost Averaging (DCA) – Investing a fixed amount of money at regular intervals, regardless of market prices.
E
Earnings Per Share (EPS) – A company’s profit divided by the number of shares it has issued. Higher EPS generally indicates stronger profitability.
Emergency Fund – Savings set aside to cover unexpected expenses before you begin investing. Most financial experts recommend keeping three to six months of living expenses.
Exchange Rate Risk – The possibility that changes in the Kenyan shilling’s value against foreign currencies will affect your investment returns.
Exchange-Traded Fund (ETF) – A fund that holds many investments and trades like a share on a stock exchange. ETFs provide instant diversification.
F
Foreign Withholding Tax – Tax deducted by another country on dividends paid to foreign investors before the money reaches your account.
Fractional Shares – Buying part of a share instead of a whole share. This allows investors to own expensive companies with smaller amounts of money.
G
Growth Stock – A company expected to increase its earnings faster than average. Growth stocks often reinvest profits instead of paying dividends.
H
High-Risk Investment – An investment with greater potential returns but also a higher chance of losing money.
I
Index Fund – A fund designed to match the performance of a stock market index, such as the S&P 500.
Inflation – The gradual rise in prices over time, which reduces the purchasing power of your money.
Initial Public Offering (IPO) – The first time a private company offers its shares to the public through a stock exchange.
K
Know Your Customer (KYC) – The identity verification process required before opening an investment account.
L
Liquidity – How quickly an investment can be converted into cash without significantly affecting its price.
M
Market Capitalization (Market Cap) – The total value of a company’s outstanding shares. It is calculated by multiplying the share price by the number of shares.
Money Market Fund (MMF) – A professionally managed investment fund that invests in low-risk, short-term securities. MMFs are popular among Kenyan investors seeking relatively stable returns.
Mutual Fund – A pooled investment where professional managers invest money from many investors into various assets.
N
NASDAQ – A major U.S. stock exchange known for listing many of the world’s largest technology companies.
Net Worth – The value of everything you own minus everything you owe.
P
Passive Investing – A long-term strategy focused on buying and holding investments, often through index funds or ETFs.
Portfolio – The collection of all your investments.
Price-to-Earnings (P/E) Ratio – A measure comparing a company’s share price to its earnings. It helps investors judge whether a stock appears expensive or inexpensive.
R
Real Estate Investment Trust (REIT) – A company or trust that owns or finances income-producing real estate, allowing investors to earn from property without buying buildings directly.
Return on Investment (ROI) – The percentage profit or loss earned from an investment relative to the amount invested.
Risk Tolerance – The amount of investment risk you’re comfortable taking.
S
S&P 500 – An index tracking 500 of the largest publicly traded U.S. companies. Many investors use it as a benchmark for the U.S. stock market.
Share (Stock) – A unit of ownership in a company.
Stock Exchange – A marketplace where investors buy and sell shares. In Kenya, this is the Nairobi Securities Exchange (NSE).
Stock Split – When a company increases the number of its shares while reducing the price per share proportionally. The company’s overall value does not change.
T
Time Horizon – The length of time you expect to keep your money invested before you need it. Your time horizon helps determine how much risk may be appropriate for your investment strategy.
Treasury Bill (T-Bill) – A short-term government security with maturities of up to one year. T-Bills are considered among the safest investments in Kenya.
Treasury Bond (T-Bond) – A longer-term government security that pays regular interest over several years.
U
Unrealized Gain – An increase in the value of an investment that you still own.
Unrealized Loss – A decrease in the value of an investment that you haven’t sold.
V
Value Investing – A strategy of buying companies that appear undervalued compared to their true worth.
Volatility – The degree to which an investment’s price rises and falls over time. Higher volatility usually means greater risk.
Y
Yield – The income an investment generates, usually expressed as a percentage of its price.
