Definitions

	Market risk - The entire stock market may decline and the strong companies will go down with the weak companies.
	Seasoned companies are established and have track records of growth and profits.
	Diversification as related to the stock market means to spread risk among a group of companies.
	Volatility refers to price movement. Second board company shares, warrants, share margin financing, options and futures can have periods of extreme price movements or volatility. On the other hand, bond funds and property trusts tend to have low volatility.
	Gearing means how much does a warrant, option, future or share under margin financing move compared to the underlying instrument. For example, KLSE stock index futures are geared at approximately 10 to one. If the KLSE 100 share index moves 1 point, profit or loss in the futures contract is 10 points.
	Warrants are derivatives of a share. They give the owner the right to purchase the share should it reach a price set by the underwriter. This price is usually a long distance from the current price. The price paid for the warrant is known as the premium. Premiums are usually set at high levels. A buyer of a warrant is buying hope that the share will rise. The underwriter is selling hope. Hope is usually a poor paymaster. It is possible for the share to rise and the warrant to expire worthless because warrants always have an expiry date.
	Options are similar to warrants. They are derivatives of an underlying instrument such as the KLSE index futures contract. Expiry is every month while warrants in many cases take years to expire. Gearing is high and it has been proven that 90% of options contracts expire worthless. Sellers of options have a huge advantage. However, risk to the seller is unlimited.
	Share margin financing means to pledge your shares with a bank to buy more shares. You are charged interest but you collect dividends. The risk is market correction. Even a normal market correction can wipe out all your capital.
	Futures trading means to take a position anticipating that the market will go up or down. Unlike shares you can sell first and buy later. You can also buy first and sell later. Risks and gains are unlimited
	Index-linked funds attempt to match the performance of the KLSE. Computer generated orders are executed to mirror the fluctuations of the index. Fees are usually lower as management of the fund is passive unlike a unit trust where management is active.
	Small capitalisation funds invest in newly emerging growth companies. You are protected by diversification in the event one of the companies goes bankrupt. If some of the companies experience hyper growth you will participate in the gains.