Getting into the world of investment is fun, especially when you see your portfolio continue to be green. But, have you ever felt confused by the terms that often appear when reading financial news, opening investment applications, or discussing with other investors?

Well, in order for you to understand better and not make the wrong decision, it is very important to recognize various terms in investment. Knowing investment terms is not just for fun.

It will help you take the right steps, avoid fatal mistakes, and of course, build confidence as a beginner or experienced investor. Let’s take a look at the following 8 important terms!

1. Diversification

This investment term refers to the strategy of spreading funds across different instruments, sectors or assets to reduce risk. The goal is for losses in one instrument to be covered by gains in another.

Diversification is very important for all investors, including beginners. By diversifying, you will not be “putting all your eggs in one basket”. This will make your portfolio more resilient to market shocks.

2. Volatility

Volatility is a measure of how much an asset’s price fluctuates within a certain period. Assets that have high volatility are usually high-risk, but also have the potential to provide great returns.

This term in investing is very important as it can determine what strategy should be used. Conservative investors tend to avoid assets with high volatility, while aggressive investors can take advantage of it.

3. Inflation

Inflation is the general increase in the price of goods and services over a period. Inflation eats away at the purchasing power of money, so the value of your money now will be worth less in the future if it is not invested.

In the context of investment terms, inflation is the main reason why people should start investing. The goal is to keep your money from being eaten up by inflation and keep growing in value over time.

4. Spot Price

Spot price is the current market price for buying or selling a commodity such as gold for cash and instantly. It is the main reference price in physical and digital gold trading.

For those of you who invest in gold, understanding this investment term is important so that you don’t confuse the spot price with the retail price, which includes the seller’s margin.

5. Bullion

Bullion is gold or silver bullion that has a high level of purity and is traded by weight and market price. Bullion is commonly used by large investors or institutions as a hedging asset.

This investment term is also commonly used in the context of physical precious metals. So, if you hear the word bullion, don’t be confused-it means pure gold bullion.

6. Capital Gain

Capital gain is the profit obtained from the difference between the purchase price and the selling price of an investment asset. For example, if you buy shares at Rp1,000 and sell them at Rp1,500, you get a capital gain of Rp500.

This is one of the most common sources of profit from investments. In the context of investment terminology, capital gains are often an indicator of the short- and long-term success of an asset.

7. Buyback

Buyback is the process by which a company or investment platform buys back products or assets that have been sold to investors. In digital gold investing, buyback means selling gold back to the platform.

Understanding this investment term is important so that you know how to exit your investment and what the liquidation value of your assets is. The buyback procedure also affects your liquidity and short-term strategy.

8. Hedging

Hedging is a strategy to reduce the risk of loss in investment. You can do this by buying another asset that is in the opposite direction of the main asset.

For example, if you invest in stocks and want to avoid losses when the market goes down, you can protect the value of your assets by buying gold. This term in investment is very close to mature risk management.

Now you know 8 investment terms that must be understood by anyone who wants to seriously build a portfolio. Being an investor is not just about profit and loss, but also about knowledge and mental readiness to face the market.

It would be better if after knowing these terms, you immediately try investing. One easy and affordable investment option for beginners is digital gold. Through the Treasury application, you can start investing in digital gold with only Rp5,000.

Let’s practice the investment knowledge that you have learned by starting to invest in digital gold at Treasury right now!