Investment Terms Starting with “P”
1. Portfolio
A portfolio is the complete collection of investments owned by an individual or institution. It may include stocks, bonds, ETFs, real estate, and other assets.
Illustration: An investor owns shares, mutual funds, gold, and rental property in one portfolio.
2. Portfolio Diversification
Portfolio diversification involves spreading investments across different asset classes and industries to reduce overall risk.
Illustration: A diversified portfolio contains stocks, bonds, commodities, and cash.
3. Portfolio Rebalancing
Portfolio rebalancing means adjusting investments to maintain the desired asset allocation.
Illustration: After stocks outperform, an investor sells some shares and buys bonds.
4. Preferred Stock
Preferred stock is a type of ownership that usually pays fixed dividends and has priority over common stock during liquidation.
Illustration: Preferred shareholders receive dividends before ordinary shareholders.
5. Price-to-Earnings Ratio (P/E Ratio)
The P/E ratio compares a company’s stock price with its earnings per share to evaluate valuation.
Illustration: A stock trading at $100 with EPS of $5 has a P/E ratio of 20.
6. Price-to-Book Ratio (P/B Ratio)
The P/B ratio compares a company’s market value with its book value.
Illustration: Investors use the P/B ratio to identify undervalued companies.
7. Price-to-Sales Ratio (P/S Ratio)
The P/S ratio compares a company’s stock price with its annual revenue.
Illustration: Young growth companies are often evaluated using the P/S ratio.
8. Principal
Principal is the original amount invested or borrowed before interest or returns.
Illustration: Investing $10,000 means your principal is $10,000.
9. Profit
Profit is the financial gain earned after deducting all costs and expenses.
Illustration: Selling a stock for $150 that was purchased for $100 results in a $50 profit.
10. Profit Margin
Profit margin measures how much profit remains from every dollar of revenue.
Illustration: A company with a 20% margin earns $20 from every $100 in sales.
11. Passive Investing
Passive investing aims to match market performance rather than outperform it by actively selecting investments.
Illustration: Investing in an index fund is a passive investment strategy.
12. Pension Fund
A pension fund pools retirement savings and invests them to generate long-term returns.
Illustration: Employers contribute to pension funds for employees’ retirement.
13. Private Equity
Private equity involves investing directly in privately owned companies rather than publicly traded ones.
Illustration: Investors provide capital to growing private businesses.
14. Public Offering
A public offering is the sale of securities to the general public through a stock exchange.
Illustration: A company raises capital by offering shares to investors.
15. Public Company
A public company has shares listed on a stock exchange and available for public trading.
Illustration: Investors can buy shares of public companies through brokerage accounts.
16. Put Option
A put option gives the buyer the right to sell an asset at a predetermined price before expiration.
Illustration: Investors buy put options expecting stock prices to decline.
17. Premium
A premium is the amount paid above an asset’s basic value or the cost of purchasing an option.
Illustration: Investors pay an option premium when buying options contracts.
18. Price Target
A price target is an analyst’s estimate of a stock’s future market price.
Illustration: An analyst predicts a stock currently at $80 will reach $100.
19. Present Value (PV)
Present value is the current worth of future cash flows after applying a discount rate.
Illustration: Future payments are discounted to estimate today’s investment value.
20. Purchasing Power
Purchasing power measures how much goods and services money can buy.
Illustration: High inflation reduces the purchasing power of savings.
21. Price Volatility
Price volatility measures how much an investment’s price fluctuates over time.
Illustration: Cryptocurrency prices generally show high volatility.
22. Preferred Dividend
Preferred dividends are fixed dividend payments made to preferred shareholders before common shareholders receive dividends.
Illustration: A company pays preferred shareholders before distributing profits to common investors.
23. Private Placement
A private placement is the sale of securities directly to selected investors instead of the general public.
Illustration: A startup raises funds from venture capital firms through private placement.
24. Prospectus
A prospectus is a legal document providing detailed information about an investment offering.
Illustration: Investors read a prospectus before participating in an IPO.
25. Price Discovery
Price discovery is the process through which buyers and sellers determine an asset’s market price.
Illustration: Continuous trading establishes the fair market value of shares.
26. Portfolio Manager
A portfolio manager is a professional responsible for selecting and managing investments for clients or funds.
Illustration: A mutual fund manager adjusts investments according to market conditions.
27. Performance Fee
A performance fee is compensation paid to investment managers when returns exceed agreed targets.
Illustration: Hedge fund managers receive bonuses for outperforming benchmarks.
28. Penny Stock
A penny stock is a low-priced share issued by a small company and generally carries high risk.
Illustration: Stocks trading below $5 are often classified as penny stocks.
29. Purchasing Managers’ Index (PMI)
The PMI is an economic indicator measuring business activity in the manufacturing and services sectors.
Illustration: A PMI above 50 usually signals economic expansion.
30. Price Action
Price action is the study of an asset’s historical price movements without relying heavily on technical indicators.
Illustration: Traders analyze chart patterns to identify potential buying and selling opportunities.