Diverstification/exchange
Blue chip Stock
Common stock in large, well regarded US companies
Rules for diversification
Invest in at least three different industries Buy different financial products Ex: stocks, bonds, mutual funds, etc. Diversify holdings even with an industry Ex: Disney (large, established company) and a small, start up company in entertainment.
Brokers
Financial professionals that act for buyers and sellers according to exchange rules
Diversification
An investment strategy in which you spread your investment dollars among industry sectors You want a diversified portfolio of investments
Risk tolerance
An investors "ability" to accept loss of some or all the money they have invested. It is biased on factors such as age, income, financial stability, etc
Portfolio
A collection of investments owned by an individual or organization
Industry
A group of companies that make the same products Ex: Glaxo and mereck are part of the pharmaceutical industry
Sector
A group of related industries The performance of any single stock can be measured the entire group
Why Diversify?
It can be difficult to predict how any ONE company will perform over time. Diversification helps to protect your portfolio by reducing risk. How? If you put money in different types of investments, you should not be wiped out/if one investment fails.
Index
Reports changes in a specific financial market Ex: DJIA, S &P 500, etc
Sample Diversification
SMG Portfolio Account holdings
Auction market trading
Sometimes known as open outcry,it is the way the major exchanges have traditionally handled buying and selling
Risk
The chance of losing all part of an investment
Bid price
The price a broker offers to pay for a security
Listing Requirements
The standards a corporation must meet to have its stocks or bonds traded on a particular exchange Exchanges set their own initial and continuing listing requirements Criteria include earnings, market value, and existing shares.
Mid cap Stock
Total value between 42 and $10 billion Often bought for potential growth
Small Cap Stock
Total value of less than $2.3 billion Issued by young, potentially fast-growing companies.
Large cap Stock
Total value of more than $10 billion Stock is less volatile that smaller companies due to cash reserves
Stock Exchange
Where brokers gather to buy and sell stocks and other securities It includes electronic trading that takes place over computer and telephone lines.
Market Capitalization
he market value of a company's stock
