Personal Finance (The Stock Market)
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
