Personal Finance (The Stock Market)

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Tax sheltered investments

A legal method of minimizing or decreasing an investor's taxable income and, therefore, his or her tax liability

Recession

A period of at least six consecutive months in which real GDP declines

Peak or Boom

A period of prosperity

Broker

A person who is licensed to buy and sell stock

Stock

A share of ownership in the assets and earnings of a company

Bond

A type of debt that a company issues to investors for a specified amount of time

Market price

Amount a willing buyer would pay a willing seller for the stock

Investment philosophy

An individual's general approach to investment risk

Counter cyclical

Beta 1.0 or below; companies that have consistent returns even when the company is suffering

Growth stocks

Beta 1.5 or higher, newer, relatively rapid growth and earnings

Speculative

Beta 2.0 or higher; potential for substantial earnings in the future

Cyclical

Beta generally 1.0; greatly influenced by changes in the economic business cycle

Income stocks

Beta less than 1 Pay higher than average dividends because the company chooses to retain only small portion of its profits

S&P 500

Covers market activity for 500 stocks

Bear market

Describes the state of the economy when the stock market is doing poorly

Bull market

Describes the state of the economy when the stock market is doing well

Dividends

Distributions of earnings a corporation pays to stockholders

Rule of 72

Dividing 72 by the interest rate, allows a person to easily calculate when the future value of an investment will double the principal amount

Contraction

Downward after a peak or boom

Expansion or recovery

Increase in economic activity that follows the trough

Earnings per share

Indicates how much income a company has available to pay in dividends and reinvest as retained earnings on per share basis After tax annual earning / total number of shares of common stock

NYSE

Largest exchange with the strictest company standards

Value stock

Low market price considering their historical earning records and value of current assets

Beta

Measures a stock volatility compared to changes in the overall stock market

The NASDAQ

Monitors smaller companies with a more speculative stock; monitors fast moving technology and financial service stocks

Blue chip

Nationally recognized companies which dominate the industry often having annual revenue of $1 billion or more

Book value

Net worth of a company; assets-liability

Dow Jones

Oldest indicator of the ups and downs of the stock market

P/E ratio

Price per share/ earnings of the stock The relationship between the price of one share of stock wand the annual earnings of the company

Portfolio diversification

Reduces risk by spreading investment money among a wide array of investment tools

Common stock

Refers to shares or units of ownership in a public corporation; can vote for company directors

Preferred stock

Shares that pay fixed dividends and have precedence over common stocks; less risk

Gross domestic products

The broadest measure of the economy's size

Maturity date

The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop

Net change

The difference between the closing price of the share from the prior and the current day

Capital gain/ loss

The difference between the higher selling price and the lower purchase price

YLD%

The dividend expressed as a percentage of the price of the share

Trough

The lowest point in the business cycle

Volume 100s

The number of transactions to the share on the reported day

Speculation

The practice of making high risk investments with borrowed money in hopes of getting a big return

AMEX

The second largest exchange; not as strict

YTD%

The stock price percent change from January 1st of the current year

Fluctuations

The ups and down in an economy

Regional stock exchanges

Trade stock to investors living in specific geographical area

Stock certificate

What you get when buying a stock

Depression

When a recession becomes really bad

bond

a form of lending to a company or the government

Stock market

a general term used to describe all transactions involving the buying and selling of stock shares issued by a company

index

a group of similar stocks amd bonds

index fund

a mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up and index

stock

a share of ownership in a company

Stock split

an issue of new shares in a company to existing shareholders in proportion to their current holdings.

mutual fund

created when a company combines the funds of many different investors and then invests that money in a diversified portfolio of stocks and bonds

speculative investments

has the potential for significant fluctions in return over a short period of time

financial risk pyramid

illustrates the trade offs between risk and return for a number of saving and investing tools

stockholder or shareholder

owner of stock

market price

the current price that a buyer is willing to pay for a stock

inflation risk

the danger that money wont be worth as much in the future as it is today

investment risk

the possibility that an investment will fail to pay the expected return or fail to pay a return at all.

investing

the purchase of assests with the goal of increasing future income.

inflation

the rise in the general level of prices

dividend

the share of profits ditributed in cash

maturity date

the specified time in the future when the principal amount of the bond is repaid tothe bondholder

rate of return

the total return on an investment expressed as a percentage of the amount of money invested

risk

the uncertainty regarding the outcome of a situation or event


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