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