English for Finance: 7 Key Terms

What?

What?

What the hell?

What?

What?

E?

Dollar dollar bill, y'all.

It's raining.

E. Okay, Mr. E has been bothering me for a while because we do all these English words,

but he says it's not making him any money.

So today, we're going to learn seven financial words that you should learn in order to help

you make more money.

E. That's not how you spell dollar.

It's d-o-l-o-a-r.

That worm's crazy.

Look, he's got money in his eyes.

He's not thinking.

So, seriously, today, I mean, I've read things before, and what they've said is if you don't

understand the language of money, you're going to have problems with money.

So even though we're an English site, we're going to do our best to teach you English

and a little bit of finance so we can have some fun and learn a little.

Right?

Not just English, a little more.

So let's go to the board.

I have seven things written up here, and some of you have never seen these before or a few

you're going to ask me questions about, and it's my job, which I will fulfill - that means

I will do it - to teach you what they are.

A lot of people, English speakers, whatever, and wherever you are in the world, get involved

with investments, and this is what we're talking about.

Taking your money and investing it.

That means putting into something else to make more money for you.

Those investments can be real estate, which is land and houses; they can be bonds, which

are basically loans that you can get or governments are looking for money, or corporations are

looking for money to do more business, so they give out a bond, and it pays a certain

amount of interest so you can make money for lending it to them.

Just like when you go to the bank and ask for a loan, except now you are the bank.

Cool?

All right.

The next thing are...

We're going to talk about stocks and shares.

I'll keep it brief.

Stocks and shares are not exactly the same.

I want you to think of it like this.

"Stocks", like apple stocks, are like an apple pie; it's the whole pie, while a "share" is

a piece of the pie.

So when you say you own stocks, it means you own companies, pieces of companies.

When you talk about shares, it's how much or what percentage of the company you own.

That's what basically an investment is.

So we're investing in stocks, which is companies; we buy shares, which is pieces of the company;

we buy bonds, which is giving loans to businesses so they will pay us interest to make money;

or we buy real estate and hope the real estate goes up to make money, or we rent it.

Now that I've given you the basics of an investment - whew, that's a first-year university course

in two minutes - let's talk about what you need to know to make this work for you.

One of the first things we want to look at is called "risk tolerance".

A lot of people, even though they have money, don't think about risk tolerance.

And this is basically the first place you should start at.

If you're the type of person who goes to sleep at night and worries about your money, you

are probably...

You are a conservative investor.

You want your money to be safe so you can sleep at night and not worry.

You will probably invest in things - I'm not saying you have to, but you would probably

like investing more in, like, bonds or very safe stocks, like electricity stocks because

the government kind of backs it, or you might want to invest in stocks like an apple or

a car stock because they don't move up very much, but they're very, very safe and they've

been around a long time.

Okay?

Okay?

If you are older, conservative stocks are the way to go, especially if you're retired

because you really don't want to lose your money because you're not working.

Now, if you're relatively young, between 30 and 60 - yes, I said 60 is young - okay, you

might want to go into...

You might be called a "moderate investor", and that means you like a little bit of risk.

Imagine going to an Indian restaurant and they say, "Would you like it spicy or not?"

You're going to say, "A little bit of spice to make it nice."

You don't want it without taste; you want a little kick, but not too much kick.

Okay?

In other words, you don't want to be on the toilet all night, just keeping it real.

You're a moderate investor.

You're going to do what I said about bonds and maybe some real estate, but you might

buy some stock in different companies.

You may go from an apple stock and maybe try a Tesla or maybe something new, but nothing

too risky because you want to get your money back, and although you're young...

You're not young-young, so you're 30, and you want to make sure there's lots of growth,

but you won't lose your money.

And you are still working, so if you make a mistake, you can fix it.

Right?

Okay.

Now, I like this word because it's "aggressive".

It's "aggressive".

It's really Scottish.

Aggressive investors, they will take more risks.

They will invest in new companies, hoping for a lot of returns very quickly, but there

could be a lot of losses, a lot of losses, or we call it "downside", a lot of losses,

so they are really risking it.

Okay?

They're the ones who don't want to go for butter chicken when they go to the restaurant.

They want the tikka masala with the seasoning, the hot, you know, psst, yeah, crazy.

Right?

Or the spicy hot wings and burn their mouth.

But they believe that being aggressive now will get them further ahead because they make

way more money, but they can also lose a lot, lot of money.

You'll tend to find people in their 20s to mid-30s doing this one because they have time.

If they make a mistake, they can always try again.

Now, although I was talking about ages, this could just be your personality.

You're a conservative person, you like to be safe, you like taking risks, you're aggressive,

or you're moderate.

You want to try a little bit of risk, but you want to be safe.

So it's not always about age.

It's how you think and feel, basically.

So the first thing you want to discover is what is my risk tolerance?

How do I sleep at night when I know my money is in conservative investments, moderate investments,

or aggressive investments?

Choose your style and then go with it.

Try not to choose something that's too aggressive or too much risk for you because in the long

run, it won't be worth it.

You'll be worrying too much and you'll make too many mistakes trying to fix the mistakes

you've made.

Okay, so let's look at assets and liabilities.

I know I put it as one word, but they basically go hand in hand.

So what do I mean?

When you talk about an asset, it's something you have that has significant value.

For example, a car.

So if you buy a car, that's an asset because it has value.

It can be resold, right?

Now let's talk about what is a liability.

So we're going to put "a" for asset over here, "l" for liability, and it's something you

owe.

Like a loan.

And we can go back to the same car example because as I own a car, it is an asset.

So if I have a financial statement that will say, "List your assets", the car would be

there as something that's mine.

On that same paper, I could have the car as a liability because I took out a loan to get

the car and that loan has not been paid back.

That loan must be paid back or I don't really own the car, so it is a liability, right?

At some future date, I will pay it off.

So you have to take a list of your assets and liabilities, right?

What do you have of significant value for an asset and what do you have that you still

owe on that would be a liability, okay?

Once we talk about assets and liabilities, if we're talking, I mentioned about stocks

and bonds and whatnot, real estate, we want to talk about diversification.

And you know, like diverse means different, right?

It means diverse means different.

And we want to talk about not owning just one thing.

A lot of successful investors, they will have bonds, they will have shares, we were talking

about with stocks, they will have real estate because the market, and the market is where

things are traded, things fluctuate, things aren't all the same.

And you know what I mean because when you go to the grocery store, eggs are high one

day, low another.

The same happens with real estates and shares for stocks as well as bonds.

They fluctuate as the economy changes, right?

So we want to be diverse, so if one is up, usually the other is down.

It's a bit of a balancing act that goes on.

So diversification, I'm going to put this, I hope you don't laugh when I put this.

Okay, so the old saying, don't put all your eggs in one basket.

If you imagine having eggs and how fragile they are, they're easy to break, yes?

If you put them in a basket and you're walking down the road and you slip, if they're all

in one basket, they're all gone.

So if you put all of your money into real estate and something goes wrong in that market,

you lose all your money.

Just as if the stock market goes down all of a sudden and all of your money in stocks,

you lose it all.

And the bond market can also go up and down because countries and companies do funny things

and sometimes those bonds can be worth not that much, right?

It is a loan after all, and if they can't pay it back, it means nothing to you when

we're talking about bonds.

So with the diversification, we want to get different types of investments, and I mentioned

it with the conservative investor, we probably want safe stocks and they would probably want

more bonds, right?

The aggressive investor might have more in the stock market than anything else.

It's your choice, but you want to make sure you're diversified.

Liquidity.

Well, if you look here, I'm going to just put my fingers here, it says "liquid".

When we talk about liquidity, we talk about how quickly an asset can be turned into money,

right?

Currency.

Think of currency, like current for water, and it moves.

So when we talk about liquidity, it is how fast an asset can become cash, okay?

So if you have real estate, it's the least liquid because you have a house, you can't

just go out and say "house money".

You have to get it ready, fix it up, get people to come in and check it out, and then some

people say "yeah", some people...

That can be months, so it might take months to get out of it.

With shares or stock, and we talked about over here, you can go to the stock market

and then say "I want to sell these shares".

It's much faster than real estate, but it's not as liquid as cash.

So you want to make sure you have some liquidity in your savings because you never know when

you need the money.

If it's all in real estate, and remember I said if the market went badly, then you can't

get your money out, so you're in a troubled situation.

So liquidity is important.

How fast can I transfer this asset, right, this thing of significant value into cash

if I need to?

Because if you have to leave the country or you have to retire, that becomes very, very

important, right?

So understand how much liquidity you have.

Dividends.

This is what a company decides they're going to pay you.

Now, funny enough, the company might not actually be making money that year, but they can still

give a dividend, and some companies can be sitting on a hell of a ton of cash and give

you nothing.

Apple, anyone?

Anyway, so...

So, let's...

When we look at dividends, how does that work?

Well, if they do decide to give you money, depending on...

We talked about shares.

What amount of shares you own, that's the amount of money you're allowed to get or going

to be given to you.

So if you own 10%, you'll get 10% of that money.

If you own 1%, you'll get 1%.

So a "dividend" is shared money-right?-among the investors, so they're not just giving

it to anyone.

So don't walk outside Apple and go, "Yo, got a dividend!"

No.

So, shared money for the investors from the company.

Okay?

Now, you're going to ask me what this drip thing is, here, and I want you to think of

a "tap".

Okay?

So, just listen and follow me for a second or two, and we'll go back.

You know when you have a tap at home, or, you know, the sink and the water drips?

It's annoying.

Right?

It just drips, drips, drips.

And you know that if the sink is plugged, there's something in the sink, and it drips,

that over a while, that water can come and flow all over the place.

Right?

And it's terrible.

That's terrible in your house, but in dividends, it's a good thing.

What is a "drip"?

Well, remember we talked about the dividends, that divided money?

Well, that's per share.

Okay?

Now, for companies that have drips, what they say is...

Let's say you have a dividend for $1, but it's $1 and...

Sorry, $1.10, let's say, and the share is $1.

Well, you can buy one more, but now you have this 10 cents left over.

Right?

So, what are you going to do?

Well, generally, you either take the dividend or not, but the companies that offer drips,

they say...

Okay, that $1.10, you can get one share plus a tenth of a share.

What?

Yeah, you can get one-tenth, so you can keep adding them up to get a new share.

So depending on how many shares you have, you can get extra shares if you're in a drip

program.

A lot of companies offer them.

It's great for the company because it's regular income for them because you don't take the

you get the opportunity to buy more shares without necessarily investing more money.

And the best part is it doesn't matter if the share is going up or down, over time it

averages out because you're buying with your drip.

Cool?

All right.

Yeah, sounds good.

So, go make some coffee and watch that drip, drip, drip, and smile your face off if you

got some...

Right?

Some drips because you're making extra money.

So, that's drips.

And I'm just going to put a little drip here.

So, you remember, this drip one day is going to make itself a whole big share for you.

Patience and intelligence.

Told you you're going to learn some stuff here.

Okay, too excited.

Now, ROI, run, Oliver, run.

No, that's not what it means.

ROI means your return on investment.

Now, return on investment is usually...

We talk about the percentage.

So, if you put in $1,000 on an investment and you make $100, so you get $1,100 at the

end of the year, you got a 10% return.

So, what's the return on your investment?

10%.

You invested $1,000, you got $100, it's 10%.

That's easy enough.

We like to calculate that because inflation runs...

Inflation?

Oh, I'll...

Oh, wait.

We'll come back to that because that makes a big difference on what you make.

Because many people think I made this much money, yay, I have a good return on investment.

Look at my profit.

And they don't know about this secret shark, dun-dun, dun-dun, dun-dun, waiting to get

them.

But how we can figure out...

Because you might want to know, okay, I made 10% this year.

Okay?

On $1,000.

Well, how long is it going to take me to make my $1,000 back, to double my money?

This has to do with the rule of 72.

What?

That's a funky number.

I don't know where they caught it from, but just listen, wait.

Okay.

When you take this percentage of your return on investment and you divide it into 72, it

will tell you how long it will take you to double your money.

Go on, I'm listening.

Okay.

So, for example, if you were to make 6% on your return on investment, it would take...

Hold on.

One, two, three, four, five, six, seven, eight, nine, 10, 11, 12, 13, 14, 15, 16, 17, 18,

19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40,

No, no, no, no.

Shh, don't look.

Where's my calculator?

I can't figure this stuff out.

I was never good at math.

It will take 12 years.

Whew.

12 years.

So, if you make 6% return on your investment, it will take 12 years from your $1,000 to

go all the way to $2,000.

And you can take any other number that's a percentage, put it into 72, and it will tell

you how long it will take you to double it.

Anyway, so we look at return on investment, but we also want to look at the rule of 72

to talk about how long it will take us to double that money, and to double it again

and again to know that we have a significant amount of money.

Right?

That's kind of cool.

Simple little things that some people don't know about that you now know.

Remember that shark?

I talked about a shark for a reason.

There's a little shark fin, here's the water, bigger sharks, here's his big teeth.

Oh, sorry.

It's a terrible shark.

Here's a shark.

That's my shark.

Don't laugh.

Here's his teeth.

Okay.

Inflation.

Inflation is...

Right.

It eats away at the value of your money.

Things get more expensive over time, so when we look at inflation, it's the rising cost

of things over time that lessens the value of your money.

Right now, inflation's running about 2.39%.

Whatever that means, it just means everything that costs...

If it cost $1...

Sorry, $100 last year, it now costs $102.39.

And inflation keeps happening every year.

So if something cost $100 before, or sorry, if you made $100 before and you got that money,

the next year that money isn't really $100, it's going to be $97.11 in real money value.

And inflation keeps happening.

Sometimes it's higher, and sometimes it's lower.

And why is it on this thing, here?

Because a lot of people, when they talk about their return on investment and how much money

they're making, they sometimes forget to think about inflation and how that shark

is eating away at their money.

Right?

It's taking bites out of their money.

So that money is not always a whole dollar anymore.

So you want to make sure that your return of investment is beating inflation.

Some people have investments in the bank, they keep money in their bank account, and

the bank account's paying, you know, 2%.

But inflation's at 4%, it means every year you're actually losing more and more money

if you keep it there.

So when we look at our return on investment, we want to look at the inflation rate to make

sure we're moving our money to get a return on investment that beats inflation.

Okay?

One of the ways I've discussed you could do that is not only get dividends, get trips

to help make your money grow faster.

Right?

Figure out, you know, what kind of diversification you can afford and you want - real estate,

bonds, or stocks.

Right?

Make sure you keep assets, try and keep your liabilities low.

Right?

And most of all, figure out what kind of investor you're going to be so that you can sleep at

night.

Now...

Now I've done that, you know, we have to have a little bit of a quiz.

Right?

And you learn something, but you want to make sure you don't just know it, but you understand

it so you can maximize your use.

Right?

And you put a smile on your face like I got one now, knowing all that money coming into

your bank.

Dollar, dollar bill, y'all.

All right, so, let's do the quiz, and I have a little bit of a surprise for you, and you'll

see what that is shortly.

Okay, so, let's make sure we got the, as I said, understanding.

Understanding.

Knowledge is nice, understanding is better, because with understanding you can actually

use it.

Cool?

All right.

First one we have is the rise in the price of goods and services over time is called...

What would that be?

That's right, inflation.

You can think of it like a balloon that gets bigger and bigger over time, never getting

smaller.

Right?

Now, Virgie has all her money in real estate, so she doesn't have a lot of...

What would that be?

Diversification.

Do you remember I said we have a bit of a surprise?

I have to be honest, because some of you, I'm sure, right now put this down, and you

could be right.

Right?

You don't have a lot of diversification because all of her money is in real estate.

That's not very diverse.

That's the answer I was looking for, but if I'm honest, I can also say not a lot of liquidity,

because I also said to you, if you have real estate, it takes a lot to sell the real estate.

You can't just get money right away.

So to be honest, either one could be correct here, and that was my surprise, because I

really wanted to see if you could figure it out.

So if you've got liquidity, put your...

Give yourself a tap on the shoulder, because you listened to what I said, and you realize

that real estate is not liquid.

Right?

Poor Virgie, she has to wait to get her money.

But you can also put "diversification", because if you're all one thing, there's no diversification.

So good on you if you got that as well.

All right?

Let's go to number three.

"My something on the sale of my shares was 17%."

So, what was this?

At 17%, I gave you enough time, you should know.

It's your return on investment.

Okay?

Her return on investment was 17% for the sale of her shares, or his shares, whatever.

Next.

"Mr. E is a something investor.

He doesn't like too much risk."

That's right, "conservative".

He's a conservative investor.

All right?

He doesn't like risk.

So you might not like risk, either, because you like sleeping well at night, so you want

to make sure your investments are safe.

Not too risky.

Not too spicy.

Okay, so, this is...

Once again, it's another joke of mine, so go...

Ha-ha-ha, funny guy, get on with the lesson.

"I have only one something.

It is me.

I worked very hard to make myself very valuable.

What would that be?"

"Asset".

That's right, ladies, I'm a valuable asset.

Yeah, no, no, not really, not at all.

But yeah.

And so are you, because if you're actually here studying English and trying to learn

finance from an English site, you are a very rare individual that makes you very valuable,

and you are an asset.

To you.

Okay?

What about number six?

Apple pays regular something to its investors.

What does Apple pay?

Oh, I'm sorry, there's also Apple Pay, where you pay...

But that's not part of this lesson.

Okay.

"Dividends".

Remember we talked about the money a company can decide to give to its investors?

Dividends.

So it pays regular dividends.

Right?

As an incentive to buy more Apple stock.

An incentive means a reason to do something.

And finally, "Elena likes something, so she keeps money instead of investments".

What does Elena like that she keeps money instead of investments?

What could that be?

Well, she likes to be able to use her money whenever she wants, so it's probably "liquidity".

Remember we talked about that?

Liquidity is the ability to change an investment into money as fast as you can do that.

So my friends, I'm sure you got seven out of seven, and then when next we meet you will

be millionaires, you will invite me to your houses, buy me fine dinners, and we will talk

and laugh.

[Laughs]

That's a good life you've created from this particular lesson.

Just this lesson.

Nothing more.

You need no more.

I'm joking.

But anyway, before I go, I want you to...

And here's the test for this time of your homework.

Try and see how you can use these words in your actual life.

"What do you mean, James?"

It's really easy.

Just think of investments you have, if you have any.

Are they conservative?

Are they moderate?

Are they aggressive?

Are...

So you're looking at your risk tolerance.

Let's talk about dividends.

Are you getting any?

Do you have any dividends?

Do you have any drips?

You're going to start going, "Whoa, hold on a second.

I need to talk to my financial advisor."

Maybe you do, and I will see you soon.

On TV is a rich person saying, "And I learned it all from EngVid."

[Laughs]

Anyway, listen, I would like you to either go on the bottom, here...

Oh yeah, please do this, here.

Try and make at least...

As I said, your homework is to make...

Check your own life.

You see if you can use these words, because that's called financial literacy, because

then you can actually have more control over your finances, which is great.

But just for the fun of it, try and make up a sentence like I did, and use the words correctly.

And people underneath, you're going to give them...

I always say points, but let's say millions of dollars, let's say $1,000 for every good

sentence they make.

So if they can make seven sentences, they can make $7,000.

That's a great ROI.

Right?

Anyway, use this video, yeah, and I will see you soon.

All right?

Take care.

Bye.