Investment Terms

Short-term investments, also known as marketable securities or temporary investments, are those which can easily be converted to cash, typically within 5 years. Many short-term investments are sold or converted to cash after a period of only 3-12 months.
Some common examples of short-term investments include CDs, money market accounts, high-yield savings accounts, government bonds, and Treasury bills. Usually, these investments are high-quality and highly liquid assets or investment vehicles.
Short-term investments may also refer specifically to financial assets—of a similar kind, but with a few additional requirements—that are owned by a company. Recorded in a separate account,
and listed in the current assets section of the corporate balance sheet, these are investments that a company has made that are expected to be converted into cash within one year.

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Short-term investments, also known as marketable securities or temporary investments, are those which can easily be converted to cash, typically within 5 years. Many short-term investments are sold or converted to cash after a period of only 3-12 months.Some common examples of short-term investments include CDs, money market accounts, high-yield savings accounts, government bonds, and Treasury bills. Usually, these investments are high-quality and highly liquid assets or investment vehicles.Short-term investments may also refer specifically to financial assets—of a similar kind, but with a few additional requirements—that are owned by a company. Recorded in a separate account,and listed in the current assets section of the corporate balance sheet, these are investments that a company has made that are expected to be converted into cash within one year.

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A long-term investment is an account on the asset side of a company's balance sheet that represents the company's investments, including stocks, bonds, real estate, and cash. Long-term investments are assets that a company intends to hold for more than a year.
The long-term investment account differs largely from the short-term investment account in that short-term investments will most likely be sold, whereas the long-term investments will not be sold for years and, in some cases, may never be sold.
Being a long-term investment means that you are willing to accept a certain amount of risk in pursuit of potentially higher rewards and that you can afford to be patient for a longer period of time.
It also suggests that you have enough capital available to afford to tie up a set amount for a long period of time.

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A long-term investment is an account on the asset side of a company's balance sheet that represents the company's investments, including stocks, bonds, real estate, and cash. Long-term investments are assets that a company intends to hold for more than a year.The long-term investment account differs largely from the short-term investment account in that short-term investments will most likely be sold, whereas the long-term investments will not be sold for years and, in some cases, may never be sold.Being a long-term investment means that you are willing to accept a certain amount of risk in pursuit of potentially higher rewards and that you can afford to be patient for a longer period of time. It also suggests that you have enough capital available to afford to tie up a set amount for a long period of time.

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Fixed-term describes an investment vehicle, usually some kind of debt instrument, that has a fixed time period of investment. With a fixed-term investment, the investor parts with his or her money for a specified period of time and is repaid his or her principal investment only at the end of the investment period. In some cases, even though a fixed term is stated on the investment, the investor or issuer may not have to commit to it.
A common example of a fixed-term investment is a term deposit in which the investor deposits his or her funds with a financial institution for a specified period of time and cannot withdraw the funds until the end of the time period, or at least not without facing an early withdrawal penalty. The investor, for the most part, is committed to the fixed term of this financial instrument.
Once a term deposit reaches or approaches maturity, the investor must notify his or her financial institution to either reinvest the money into another fixed-term investment or deposit the cash proceeds into his or her account.

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Fixed-term describes an investment vehicle, usually some kind of debt instrument, that has a fixed time period of investment. With a fixed-term investment, the investor parts with his or her money for a specified period of time and is repaid his or her principal investment only at the end of the investment period. In some cases, even though a fixed term is stated on the investment, the investor or issuer may not have to commit to it.A common example of a fixed-term investment is a term deposit in which the investor deposits his or her funds with a financial institution for a specified period of time and cannot withdraw the funds until the end of the time period, or at least not without facing an early withdrawal penalty. The investor, for the most part, is committed to the fixed term of this financial instrument.Once a term deposit reaches or approaches maturity, the investor must notify his or her financial institution to either reinvest the money into another fixed-term investment or deposit the cash proceeds into his or her account.

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Risk management is the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management occurs when an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment, such as a moral hazard, and then takes the appropriate action (or inaction) given the fund's investment objectives and risk tolerance.
Risk is inseparable from return. Every investment involves some degree of risk, which is considered close to zero in the case of a U.S. T-bill or very high for something such as emerging-market equities or real estate in highly inflationary markets. Risk is quantifiable both in absolute and in relative terms. A solid understanding of risk in its different forms can help investors to better understand the opportunities, trade-offs, and costs involved with different investment approaches.

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Risk management is the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management occurs when an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment, such as a moral hazard, and then takes the appropriate action (or inaction) given the fund's investment objectives and risk tolerance.Risk is inseparable from return. Every investment involves some degree of risk, which is considered close to zero in the case of a U.S. T-bill or very high for something such as emerging-market equities or real estate in highly inflationary markets. Risk is quantifiable both in absolute and in relative terms. A solid understanding of risk in its different forms can help investors to better understand the opportunities, trade-offs, and costs involved with different investment approaches.

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Mid-cap or mid-capitalization is the term that is used to designate companies with a market cap or market value between $2 and $10 billion. As the name implies, a mid-cap company falls in the middle between large-cap (or big-cap) and small-cap companies. Classifications, such as large-cap, mid-cap, and small-cap are approximations of a company's current value; as such, they may change over time.
There are two main ways a company can raise capital when it's needed: through debt or equity. Debt must be paid back but can generally be borrowed at a lower rate than equity (due to tax advantages). Equity may cost more, but it does not need to be paid back in times of crisis. As a result, companies strive to strike a balance between debt and equity. This balance is referred to as a firm's capital structure. Capital structure, especially equity capital structure, can tell investors a lot about the growth prospects for a company.
One way to gain insight about a company's capital structure and market depth is by calculating its market capitalization. Companies with low market capitalization, also referred to as small-caps, have $2 billion or less in market capitalization. Large-capitalization firms have over $10 billion in market capitalization, and mid-cap firms fall somewhere in between these two categories (ranging from $2 billion to $10 billion in market capitalization). Additional categories such as mega-cap (over $200 billion), micro-cap ($50 million to $500 million) and nano-cap (less than $50 million) have been added to the spectrum of market capitalization for the sake of clarity.

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Mid-cap or mid-capitalization is the term that is used to designate companies with a market cap or market value between $2 and $10 billion. As the name implies, a mid-cap company falls in the middle between large-cap (or big-cap) and small-cap companies. Classifications, such as large-cap, mid-cap, and small-cap are approximations of a company's current value; as such, they may change over time.There are two main ways a company can raise capital when it's needed: through debt or equity. Debt must be paid back but can generally be borrowed at a lower rate than equity (due to tax advantages). Equity may cost more, but it does not need to be paid back in times of crisis. As a result, companies strive to strike a balance between debt and equity. This balance is referred to as a firm's capital structure. Capital structure, especially equity capital structure, can tell investors a lot about the growth prospects for a company.One way to gain insight about a company's capital structure and market depth is by calculating its market capitalization. Companies with low market capitalization, also referred to as small-caps, have $2 billion or less in market capitalization. Large-capitalization firms have over $10 billion in market capitalization, and mid-cap firms fall somewhere in between these two categories (ranging from $2 billion to $10 billion in market capitalization). Additional categories such as mega-cap (over $200 billion), micro-cap ($50 million to $500 million) and nano-cap (less than $50 million) have been added to the spectrum of market capitalization for the sake of clarity.

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