Stock Market PF Chapter 12
Dividends
Money paid to stockholders from the corporation's earnings (profits).
Securities Exchange/Stock Market
A marketplace where brokers who are representing investors meet to buy and sell securities. The stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies take place. While both terms - stock market and stock exchange - are used interchangeably, the latter term is generally a subset of the former. If one says that she trades in the stock market, it means that she buys and sells shares/equities on one (or more) of the stock exchange(s) that are part of the overall stock market. The largest organized exchange in the U.S. is the New York Stock Exchange. The leading stock exchanges in the U.S. include the New York Stock Exchange (NYSE), Nasdaq, and the Chicago Board Options Exchange (CBOE).
Bear Market
A prolonged period of falling stock prices and a general feeling of investor pessimism. It develops when investors become negative about the overall economy and start to sell stocks.
Bull Market:
A prolonged period of rising stock prices and a general feeling of investor optimism. Confidence in the country's economy also serves to drive up stock prices.
Defensive Stocks
A stock that is one that remains stable and pays dividends during an economic decline. Generally, companies in this category have a history of stable earnings.
Cyclical Stocks
A stock that performs well when the economy is stable or growing but often does poorly during recessions, when the economy slows down.
Direct Investment:
Buying stock directly from a corporation. By buying directly, you avoid brokerage and other purchasing fees and may allow you to obtain shares at lower prices that on open exchanges.
Stock Index:
A benchmark that investors use to judge the performance of their investments. Commonly used indexes include the Dow Jones Industrial Average, the Standard & Poor's 500 (S&P 500) and the NASDAQ Composite Index.
Stockbroker
A stockbroker is a professional trader who buys and sells shares on behalf of clients. Most stockbrokers work for a brokerage firm and handle transactions for a number of individual and institutional customers. Stockbrokers are often paid on a commission basis although compensation methods vary by employer.
Return on Investment:
Current profit on stock divided by the total cost of the investment.
Capital Gains
An increase in the value of the stock over time. Another way for stockholders to profit.
Stock Holders
People who own shares of stock. Also known as Shareholders of the corporation.
Prefered Stock
Represents a type of stock that pays a fixed dividend but has not voting rights.
Common Stock
Represents a type of stock that pays a variable dividend and gives the holder voting rights.
Brokerage firms
Sometimes referred to as stockbrokers. This includes both full-service brokers and discount brokers, who execute trades but do not offer individualized investing advice. Most online brokers are discount brokers, at least at their basic levels of service, in which trades are executed for free or for a small set-price commission. Many online brokers now offer premium-level services with higher fees.
Emerging Stocks
Stocks in young, often small corporations that have higher overall risk than stocks of companies that have been successful for many years.
Blue Chip Stocks
Stocks of large, well-established corporations with a solid record of profitability. They are well known companies that have been around for decades.
Income Stock
Stocks that have a consistent history of paying high dividends.
Market Value:
The price for which the stock is bought and sold in the marketplace. This reflects the price investors are willing to pay for the stock. How a company currently is performing, its track record, and how well it is expected to perform in the future determine market value.
Dividend Reinvestment:
Using dividends previously earned on the stock to buy more shares.
