Owning Stock

Broker

An intermediary that acts as an agent for buyers or sellers to arrange a trade.

Risk Tolerance

An investor's capacity for risk exposure, based on the ability and willingness to assume risk.

Stop-Buy Order

An order to buy a security once its price has risen above a specified price.

Stop-Loss Order

An order to sell a security one its price has fallen below a specified price.

Market Order

An order to trade at the market price.

Stock Exchange

An organized market for the trading of corporate shares conducted by members of the exchange.

Blue Chip Stock

Stock of a corporation with a history of providing steady returns.

Dividends Per Share (DPS)

The dollar value of the dividend return to each share of stock.

Earnings Per Share (EPS)

The dollar value of the earnings per each share of common stock.

Primary Market

The market in which the initial issuance or initial public offering of a stock occurs.

Dividend Reinvestment

The practice of using dividends to automatically purchase additional shares.

Price-to-Earnings Ratio (P/E)

The ratio of a stock's market value per share to its earnings per share, or the market value of one dollar of the company's earnings.

Margin Call

The requirement that an investor invest more capital to maintain the margin requirement, or the investor's equity in the investment.

Penny Stock

The stock of a corporation with low market capitalization; the stock has a low price and high volatility.

Book Value

The valuation of assets, liabilities, and equity from the balance sheet; the corporation's original investment in its assets, liabilities, and equity.

Defensive Stock

A stock with very little volatility that is relatively insensitive to market moves.

Limit Order

A trading order to buy or sell a security at a specified price.

Speculative Stock

A stock promising excessive value that may already be overvalued.

Growth Stock

A stock that is expected to offer excessive rates of growth.

Churning

A broker practice of executing trades for a client's account solely to create commissions for the broker.

Margin Account

A brokerage accounting allowing the investor to purchase securities with funds borrowed from the broker.

Initial Public Offering (IPO)

A company's first issuance of stock for trade in the markets. Companies issue stock publicly to attract more investors and thus more capital for the company.

Secondary Market

A market in which outstanding shares are traded.

Dealer

A professional investor trading for its own account.

Direct Investment

A real estate investment in which you are the owner and manager of property.

Dividend

A share of corporate profit distributed to shareholders, usually as cash or corporate stock.

Day Trading

A short-term strategy for taking advantage of excessive volatility.

Common Stock

Equity shares representing the residual claim on the company's value.

Preferred Stock

Equity shares that represent a superior claim over common shares but typically do not confer voting rights.

Stock

Shares issued to account for ownership, as defined by owners' contributions to a corporation.