The Raiz-opaedia of financial language (G to I)

13-07-2021

We’re here again for Raiz-opaedia! We group this by parts so that we can slowly understand each investment and financial term. In case you missed part 1 and part 2, please refer to the links below: 

Part 1: The Raiz-opaedia of Financial Language (A to C) 

Part 2: The Raiz-opaedia of Financial Language (D to F) 

Enough with the introduction and let’s get started with part 3!

 

Part 3 (G to I): 

Gross Domestic Product (GDP) 

The total value of everything generated within a country during a specific period of time. GDP growth rate is an important indicator of how a country’s economy is performing. 

Let’s say you buy RM3 nasi lemak from a stall. The RM3 is part of GDP. GDP measures the total value of goods and services within a country. 

GDP = Consumption + Investment + Government Spending + Net Exports 

Consumption: Consumer spending such as the money you spend on RM3 nasi lemak. 

Investment: Business investment is the total amount of spending by businesses on plant and equipment. 

Government Spending: Money spent on public goods and services like roads, healthcare and school. 

Net Exports: Export minus import. 

If the country’s economy is healthy, the GDP growth rate increases.

 

Inflation 

Put simply, inflation is a general rise in prices. If prices fall, this will result in negative inflation, or also known as deflation. 

Inflation can be caused by an increase in production and raw material cost. A rise in consumer demand and the government printing more money can also contribute to a rise in inflation. 

To beat inflation, you can grow your money through investment. 

 

Initial Public Offering (IPO)  

When a private company becomes public by selling its shares on a stock exchange.   

When a company goes from private to public, its share can be bought publicly from the stock market like Bursa Malaysia. So, when you buy the shares, you are partly the owner! 

Mr DIY (established since 2005) was a private company until it went public by issuing its IPO in December 2020. It sold 941.5 million shares on Bursa Malaysia at RM1.60 per share, raising about RM1.5 billion, making it the largest IPO in Bursa since 2017.

 


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