54 terms in plain English. Each one comes with a tip to help you avoid hype traps.
54 terms
The P/E ratio shows how much you pay for every $1 (or R1) of real yearly profit a company makes. A P/E of 20 means you pay $20 for $1 of profit.
Why it matters
A sky-high P/E means the price is betting on a perfect future. If the story slips, the price can fall hard even when the business is fine.
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Earnings are the money a company keeps after paying all its costs, interest and taxes.
Why it matters
Real earnings are the fuel for long-term share prices. Exciting stories without earnings are hopes, not businesses.
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Revenue is all the money a company brings in from selling things, before any costs are taken off.
Why it matters
Fast-growing revenue can hide big losses. Always check whether sales actually turn into profit.
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Market cap is the total price of all a company's shares added together. It is what the market says the whole company is worth today.
Why it matters
A tiny company with a huge market cap is priced for miracles. Size of price is not the same as size of business.
Operating cash flow is the real cash that comes in from running the business day to day.
Why it matters
Profits on paper can be massaged. Cash in the bank is much harder to fake, so it is a strong honesty check.
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Dividend yield is the yearly cash a company pays you, shown as a percentage of the share price.
Why it matters
A very high yield can be a warning, not a gift. It often means the price crashed because investors fear the payment will be cut.
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Solvency means a company owns more than it owes and can keep paying its long-term debts.
Why it matters
A company can look busy and popular yet still go bust if its debts are bigger than its assets. Solvency is the floor under your investment.
This compares how much a company borrowed to how much the owners put in. A high number means it runs mostly on borrowed money.
Why it matters
Heavy debt makes good years look great and bad years deadly. Banks are a special case because borrowing and lending is their business.
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A company is liquid when it has enough cash or quick-to-sell items to pay the bills due this year.
Why it matters
Even profitable companies can collapse if they run out of cash at the wrong moment.
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A default happens when a borrower misses a payment it promised to make on a loan or bond.
Why it matters
When a company defaults, shareholders are usually paid last, which often means nothing at all.
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Exit liquidity is the crowd of late buyers that early insiders need so they can sell their shares at a high price. If you buy at the top of the hype, you may be the one they sell to.
Why it matters
Every hyped share has a seller on the other side. Ask who is selling to you and why. If you cannot tell, you may be the exit.
Short sellers bet a price will fall. If the price shoots up instead, they panic and must buy shares back, which pushes the price even higher, very fast. This is a short squeeze.
Why it matters
Squeezes, like the GameStop meme rally, are short and wild. Prices driven by panic buying usually fall back once the panic ends.
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Volatility is how much and how fast a price jumps up and down.
Why it matters
High volatility tempts you to trade on emotion. Big swings are a risk to manage, not a sign of opportunity.
The spread is the gap between the highest price a buyer offers and the lowest price a seller accepts.
Why it matters
A wide spread is a hidden cost each time you trade. Tiny, hyped shares often have the widest spreads.
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A market order buys or sells right now at whatever price is available. A limit order only trades at the price you choose or better.
Why it matters
In a fast, hyped market a market order can fill at a far worse price than you expected.
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A fail-to-deliver happens when shares that were sold are not handed over on time after a trade.
Why it matters
Online forums often hype FTD numbers as a secret signal. They are a plumbing statistic, not a promise the price will rise.
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A REIT is a company that owns buildings like malls, offices or warehouses and collects rent. It must pay most of that rental income out to its owners as regular distributions.
Why it matters
REITs often carry debt, so judge them by rental income and borrowings, not by normal company profit rules.
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An ETF is one share that holds a basket of many companies, so you own a small piece of all of them at once.
Why it matters
Low-cost, broad ETFs spread your risk. One company failing barely dents the basket.
An index is a list that tracks a group of shares, such as the top 40 companies on the JSE or the S&P 500 in the US.
Why it matters
Most professional fund managers fail to beat their index over long periods after fees.
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A bond is a loan you give to a government or company. They pay you interest and return your money at the end.
Why it matters
Bonds usually swing less than shares and can steady a portfolio, but they are not risk-free.
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TER is the yearly fee a fund charges, shown as a percentage of your money.
Why it matters
A 1% fee sounds small, but over 30 years it can eat a big slice of your growth. Fees are one of the few things you control.
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A crypto token is a digital asset recorded on a blockchain. Many have no business, profits or cash flow behind them.
Why it matters
Without cash flow, a token's price depends only on someone paying more later. That makes it a prime tool for pump-and-dump schemes.
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FOMO is the fear of missing out. It is the urge to buy because everyone else seems to be getting rich.
Why it matters
FOMO pushes you to buy after the price already jumped. Promoters use it on purpose.
A pump and dump is a scheme where promoters hype a cheap asset to push the price up, then secretly sell everything, crashing the price.
Why it matters
If strangers online are urgently telling you to buy now, treat it as a warning sign, not a tip.
A bagholder is someone left holding shares that crashed, hoping they will come back.
Why it matters
A 90% fall needs a 900% rise just to break even. Avoiding the bag is far easier than escaping it.
Dollar-cost (or rand-cost) averaging means investing the same amount on a regular schedule, no matter what the price is.
Why it matters
It removes the stress of guessing the perfect moment and stops headlines from steering your money.
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Diversification means spreading your money across many investments instead of putting it all in one.
Why it matters
It is the closest thing to a free safety net in investing. One disaster cannot wipe you out.
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Compounding is when your growth earns its own growth, so your money snowballs over time.
Why it matters
Time does the heavy lifting. Interrupting compounding to chase hype is one of the costliest mistakes.
SENS is the official JSE loudspeaker. Listed companies are legally required to publish price-sensitive news and financial results there straight away.
Why it matters
Check SENS before trusting a rumour. If the news is not on SENS, treat social media claims with caution.
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A TFSA is a special account approved by SARS under Section 12T. All interest, dividends and capital gains inside it grow 100% tax-free for life, within the yearly and lifetime limits.
Why it matters
Going over the contribution limits costs a 40% penalty, and withdrawals cannot be put back. Use it for long-term, low-cost funds.
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The JSE is South Africa's main stock exchange, where local companies and ETFs are bought and sold.
Why it matters
Many JSE giants earn most of their money overseas, so a 'local' share can still give you global exposure.
The FSCA is the South African regulator that licenses and watches over financial service providers.
Why it matters
Before handing anyone money, search the FSCA register. Unlicensed 'advisers' on social media are a common scam route.
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The FAIS Act sets the rules for people who give financial advice in South Africa. Advisers must be licensed as an FSP.
Why it matters
Real advice comes with legal duties. Anyone promising returns without a licence is not protected by those rules, and neither are you.
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South Africa takes 20% tax off most dividends before they reach you, unless they are inside a TFSA.
Why it matters
This is one reason the TFSA wrapper is so valuable for income-paying funds over many years.
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A retirement annuity is a personal savings account for retirement. You put money in while you work, and SARS lets you take those payments off your taxable income, so you pay less tax now.
Why it matters
The tax saving is a real head start, but the money is mostly locked away until age 55. Only use money you won't need before then.
A living annuity is what many South Africans move their retirement savings into when they stop working. The money stays invested and you choose to draw between 2.5% and 17.5% of it each year as your income.
Why it matters
Draw too much, or hit a bad market early on, and the money can run out while you still need it. A lower draw makes it last longer.
A tax deduction is an amount SARS lets you subtract from your income before working out your tax. Less taxable income means less tax.
Why it matters
A R10,000 deduction does not save you R10,000. It saves the tax you would have paid on that R10,000, which depends on your tax bracket.
Inflation is prices slowly rising over time. If inflation is 5%, something that costs R100 today costs about R105 a year from now.
Why it matters
Money that grows slower than inflation is quietly losing buying power. That's why we show retirement amounts in today's money too.
Escalation means raising how much you save each year, for example by 5% every time you get a raise. R2,000 a month becomes R2,100 the next year.
Why it matters
Small yearly increases keep your savings in step with inflation and your income, and they add up to a much bigger pot over decades.
A company whose share price rockets almost entirely due to social media buzz, online forums, and collective internet hype, completely disconnected from its underlying business profits.
Why it matters
Meme stocks are high-velocity rollercoasters. The people buying at the top become the exit liquidity for early promoters.
A financial bet between you and a broker on whether a share price will go up or down, without you actually owning the underlying asset. Many use heavy borrowed money (leverage).
Why it matters
CFDs are trading, not investing. They amplify losses just as fast as gains, and the vast majority of Everyday Investors who trade them lose money.
A rallying cry used online to claim a stock or token is about to skyrocket upward forever.
Why it matters
When a crowd starts chanting about the moon, they are usually standing near the peak. Emotional momentum is not cash flow. If a business isn't growing its cash flow, gravity always wins.
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The promise that a secret trade, bot, crypto token or forex strategy will replace your salary almost overnight.
Why it matters
Real investing is a slow, compounding marathon. Anyone packaging instant freedom is almost always selling a course or a signal group, or hunting for exit liquidity.
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Framing you as a visionary pioneer getting ground-floor access to a once-in-a-lifetime opportunity.
Why it matters
If you are reading an 'early' tip on a public social feed or group chat, you aren't early. You're the crowd being lined up to buy the founders' shares.
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The claim that an investment or trading bot produces steady, fixed profits with no chance of loss.
Why it matters
Risk and return are permanently glued together. In South Africa and globally, promising guaranteed market returns is the signature badge of a scam.
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An unverified claim that hedge funds, billionaires or big institutions are secretly loading up on an obscure penny stock.
Why it matters
Real institutions must file public disclosures, like SENS announcements or regulatory reports. If a WhatsApp tip says 'whales are loading' but filings show nothing, it's invented hype.
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Urging Everyday Investors to pour more money into a collapsing asset simply because the price is lower than before.
Why it matters
A dip is only a chance if the business has a durable balance sheet. A 90% fall needs a 900% rise just to break even, so buying the dip on a dying hype asset is throwing good money after bad.
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A command urging you to ignore red flags, losses and bad data, and blindly hold on to a crashing position.
Why it matters
Cult loyalty has no place in investing. When the facts change, disciplined investors reassess instead of letting pride wipe out their capital.
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How you split your money across different buckets—like equities, bonds, property (REITs), and cash.
Why it matters
Asset allocation dictates over 90% of a portfolio's long-term returns and volatility. It matters far more than picking any single stock.
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The danger of hitting a severe market crash right at the time you plan to start withdrawing your money.
Why it matters
If your portfolio drops 40% in your first year of retirement or withdrawal, it can permanently cripple your capital—which is why defensive cash buffers and index foundations matter.
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Selling a portion of what has grown heavily and buying what has lagged to bring your portfolio back to your original target percentages.
Why it matters
Rebalancing forces you to do the opposite of emotion: it makes you sell high and buy low automatically.
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How easily and quickly you can buy or sell an asset without drastically changing its price.
Why it matters
Large, established companies have high liquidity. Obscure, hyped micro-caps can have terrible liquidity, meaning you can buy in easily but get trapped when you try to sell.
When a company creates and sells brand-new shares to raise money, dividing the existing pie into smaller pieces.
Why it matters
If a company dilutes its shares constantly without growing profits at the same rate, your percentage ownership of the business shrinks in value.
The psychological truth that the pain of losing R1,000 hurts twice as much as the joy of making R1,000.
Why it matters
Loss aversion drives panic selling at the bottom. Recognizing it stops you from turning a temporary market dip into a permanent financial wound.
