Investment Terms Starting with “E”
1. Earnings
Earnings are the profits a company generates after deducting all expenses, taxes, and costs. Strong earnings often indicate a healthy business.
Illustration: A company earns $20 million after all expenses, which is reported as its annual earnings.
2. Earnings Per Share (EPS)
EPS measures how much profit is earned for each outstanding share of a company. It helps investors evaluate profitability.
Illustration: If a company earns $10 million with 5 million shares outstanding, its EPS is $2.
3. Equity
Equity represents ownership in a company or asset after deducting liabilities. Shareholders own equity through stocks.
Illustration: Buying company shares gives you a small ownership stake in the business.
4. Equity Market
The equity market is where shares of publicly listed companies are bought and sold.
Illustration: Investors trade company stocks daily on stock exchanges.
5. Exchange-Traded Fund (ETF)
An ETF is a collection of investments that trades on a stock exchange like an ordinary stock.
Illustration: A single ETF may contain hundreds of company shares from different industries.
6. Exchange
An exchange is a regulated marketplace where securities such as stocks, bonds, and ETFs are traded.
Illustration: Investors buy and sell shares through a stock exchange during trading hours.
7. Ex-Dividend Date
The ex-dividend date is the first day a stock trades without the right to receive the upcoming dividend.
Illustration: Buying shares after the ex-dividend date means you won’t receive the next dividend.
8. Expense Ratio
The expense ratio is the annual fee charged by mutual funds or ETFs for managing investments.
Illustration: A fund charging a 0.50% expense ratio deducts $5 annually for every $1,000 invested.
9. Emerging Markets
Emerging markets are developing economies with high growth potential but generally higher investment risks.
Illustration: Investors often consider countries like India, Brazil, and Vietnam as emerging markets.
10. Economic Cycle
The economic cycle consists of expansion, peak, recession, and recovery phases that influence investments.
Illustration: Stock prices often perform well during economic expansion.
11. Economic Growth
Economic growth is the increase in a country’s production of goods and services over time.
Illustration: Rising GDP usually reflects stronger business activity and investment opportunities.
12. Equity Fund
An equity fund primarily invests in stocks to achieve long-term capital growth.
Illustration: A mutual fund holding shares of 100 companies is an equity fund.
13. Exit Strategy
An exit strategy is a predefined plan for selling an investment to secure profits or limit losses.
Illustration: An investor decides to sell once a stock gains 25%.
14. Entry Price
The entry price is the amount paid when purchasing an investment.
Illustration: Buying shares at $75 means your entry price is $75.
15. Exit Price
The exit price is the amount received when selling an investment.
Illustration: Selling shares at $95 determines your final investment return.
16. Equity Financing
Equity financing raises business capital by selling ownership shares instead of borrowing money.
Illustration: A startup issues shares to investors to fund expansion.
17. Enterprise Value (EV)
Enterprise value measures a company’s total value, including debt and cash, making it useful for business valuation.
Illustration: Investors compare EV when evaluating acquisition opportunities.
18. Efficient Market Hypothesis (EMH)
EMH suggests that stock prices already reflect all publicly available information.
Illustration: According to EMH, consistently outperforming the market is very difficult.
19. Execution Price
The execution price is the actual price at which a buy or sell order is completed.
Illustration: You place an order at $100, but it executes at $99.80.
20. Escrow
Escrow is an arrangement where a third party temporarily holds funds or assets until agreed conditions are met.
Illustration: Home buyers deposit money into escrow before the property transfer.
21. Exponential Growth
Exponential growth occurs when an investment grows at an increasing rate due to compounding.
Illustration: Reinvesting returns allows wealth to grow faster each year.
22. Exchange Rate
An exchange rate is the value of one currency compared with another.
Illustration: A stronger U.S. dollar affects international investment returns.
23. Expected Return
Expected return is the estimated profit an investor anticipates earning from an investment.
Illustration: An investor expects an annual return of 8% from a diversified portfolio.
24. Equity Capital
Equity capital is money raised by issuing shares to investors instead of taking loans.
Illustration: A company sells new shares to finance a manufacturing plant.
25. Economic Indicator
Economic indicators are statistics used to measure the health of an economy.
Illustration: Inflation, unemployment, and GDP growth guide investment decisions.
26. Equity Risk
Equity risk is the possibility of losing money due to stock market price fluctuations.
Illustration: Stock prices decline sharply during a market downturn.
27. Earnings Growth
Earnings growth measures how much a company’s profits increase over time.
Illustration: A company’s profits rise from $10 million to $12 million within one year.
28. Equal Weight Index
An equal weight index gives every company the same importance regardless of its market size.
Illustration: Each stock receives a 1% allocation in a 100-company index.
29. Endowment Fund
An endowment fund is an investment portfolio created to provide long-term financial support for an institution.
Illustration: Universities invest endowment funds to finance scholarships and research.
30. Equity Allocation
Equity allocation refers to the percentage of a portfolio invested in stocks compared with other asset classes.
Illustration: A portfolio invested 70% in stocks and 30% in bonds has a 70% equity allocation.