1. GDP & GNP
Many are not clear with what Growth Domestic Product(GDP) stands for, but not exactly how it differs from Growth National Product(GNP). The contrast is fairly simple. GDP dictates the total value of a country’s production and services by both the locals and the foreigners within a boundary over a year, while GNP exhibits the value of products and services by the citizens of the country anywhere in the world (its land or foreign land) over the year.
2. Inflation
Grandparents are saying, “Do you know back in the old days, your grandpa only needed RM1 to survive a day out there, and here you are asking RM50 for your daily expenses?” This is inflation: a general increase in price level in the economy, reducing consumers’ purchasing power. You can come up with a response, something along the lines of, “Yes, grandpa, but RM1 now can only buy a maximum of two lollies; you need roughly RM8 to buy a decent meal."
3. Standardised Base Rate(SBR)
If you’ve ever taken out a loan, you’ve probably heard the term base rate. In the past, people used to call it BLR (Base Lending Rate), which was later changed to BR (Base Rate) in 2015. But since 1 August 2022, Bank Negara Malaysia (BNM) has introduced a new system called the SBR (Standardised Base Rate).
The difference is, SBR is more transparent and easier to compare because all banks use the same benchmark. Banks now directly follow the Overnight Policy Rate (OPR) set by BNM. So, when the OPR goes up or down, the base rate for all banks changes equally.
However, each bank still adds its own additional margin. That’s why even though the SBR is the same, loan rates may still differ between banks.
4. Broker
A broker is a licensed individual or firm acting as an agent for a customer to participate in buying and selling of products such as securities or properties. In exchange for their services, they are provided with a commission. For a broker in real estate, their main duties cover advertising properties, specifying the market values, displaying properties to buyers, and proposing the best outcome for the clients.
5. Options/ Warrants
These terms would be fairly new to most people, but if they’re not, good on you! Options are contractual agreements between two parties that give the holder the right, no obligation, to buy or sell stocks at a predetermined price and price.
There are two types of options: Call or put options. Call Options give you the right to buy stocks, while put options allow stocks to be sold.
Here’s the tricky math part: Stay with me! Say, there is a stock X trading at $4. A call option for this stock with a strike/exercise price of $5 expires in a month's time. Just before the option expires, if the underlying stock rises from $4to $6, you should exercise your call option and buy the stock at $5 instead of the current stock price, $6. You have profited $1 from this.
However, nothing comes free; a certain premium fee is paid to purchase this option. So, if your premium is less than $1, you have made a gain. To get a better understanding of the difference between call options and warrants, click here.
6. BURSA, different stock markets
Here’s a list of active stock exchanges that you should take note of. They offer trading in securities and futures contracts.
| Stocke Exchange | Country |
|---|---|
|
NASDAQ |
United States |
|
Euronext |
Netherland France Belgium Portugal |
|
Deutsche Bourse |
German |
|
Shanghai Stock Exchange |
China |
|
BURSA Malaysia |
Malaysia |
Now, you should be filled with confidence when someone asks you, “Have you heard of Deutsche Bourse Stock Exchange?
Yeah, I have!!
7. Futures & Forwards
A futures contract is simply known as ‘futures’. It’s a contractual agreement to buy or sell a particular financial instrument at a pre-determined price in the future. Sounds familiar to what you have read so far? No, it’s not the same as options/warrants. The key distinction is the fact that the future is an obligation, not a right. Even if the outcome goes against you financially, you’d still have to commit to what was pledged. The contract expresses the quantity and quality of the underlying asset, and they are usually standardized to facilitate trading on the futures exchange.
Wrapping it up!
There you go! It’s been a productive day for you! Now, go out there and put that knowledge to good use.
*The article above is intended to provide information only. Loanstreet is not responsible for any losses that may arise if there is you take any action with the information contained in the article.
