Investment Club Education Series: Investing Terms | Part 6

 Lauren Wilson

August 28, 2019

Build Your Vocabulary with These Common Investment Terms - Part 6

When beginning to invest, you will likely encounter new terms, strategies, and ways of thinking that may make your research seem daunting. There is no reason to be intimidated by investing and by learning a few key basics, you’ll quickly be able to ‘speak the lingo’ and participate in investment discussions.

In our first Investment Club Education series, we are sharing common investment terms to help you build your investing vocabulary.

In Part 6 we share some roles individuals play in investing and some duties they have.

Asset Allocation: Asset allocation is an investing strategy that aligns a portfolio’s assets to investors goals, risk tolerance, and planned investment timeframe. Doing so is thought to balance risk and reward, unique to that individual investor.

Investment Mandate: An investment mandate is the instructions provided on how to manage a pool of capital, using a specific strategy and within certain risk parameters. Some common mandates include long-term growth investment mandate, income investment mandate, and speculation investment mandate.

Fiduciary Duty: Fiduciary duty means a fundamental obligation to provide advice, such as investment advice, that always acts in their clients best interests.

Custody Account: A custody account is a savings account, investment or fund set up for a minor which is controlled by an adult custodian. Approval from the custodian is mandatory for any transactions.

Asset Management Company (AMC): An asset management company (AMC), referred to as money managers or money management firms are firms that invested a pool of client provided funds through a number of different investments. They often manage high-net-worth individual portfolios, hedge funds, pension funds as well as created pooled mutual funds, index funds, or exchange-traded funds which are managed centrally.

Registered Investment Advisor (RIA): A registered investment advisor (RIA) is an individual or firm who advises high-net-worth investors and manages their portfolios. In the US, they are required to register with the Securities and Exchange Commission (SEC) or state securities administration and have a fiduciary duty to their clients.

Stockbroker: A stockbroker, also known as an investment adviser, broker, or registered representative, is a professional who executes buy and sell orders for stocks and other securities for their clients. Stockbrokers often make a commission for their services but compensation can vary greatly. Brokerage firms and broker-dealers are also sometimes referred to as stockbrokers.

Brokerage firms: Brokerage firms, or brokerage companies or brokerage, connect buyers and sellers to facilitate a transaction As the middleman, they generally receive a commission, flat fee or percentage of the transaction, for each successful transaction. 

Broker-dealers: Independent broker-dealers function as full-service brokerage firms but are free from the constraints and demands of a large Wall Street company. They are often able to offer a very large investment offering including those which may be considered alternative investments. They will generally also work based on commission but have more leeway as to how much they can charge.

Board of Directors (B of D): A board of directors is an elected group, with the role to represent shareholders. Corporate boards contribute by both establishing management and oversight programs and policies but also are active in making decisions on major issues such as hiring/firing of senior executives, as well as their compensation, and options and dividend policies. Board members may be an ‘inside director’ meaning they are active in the day to day business, potentially as a C-level executive, or ‘outside director’.  By balancing inside and outside board members you gain objective, independent views.


Want to learn more investing terms? We've got you covered. View all of our Investment Club Education Series: Investing Terms here.


Ready to try out your new vocabulary? Start your own investment club with Voleo.

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