Understanding Stocks, Bonds, and Mutual Funds

Common Stocks

Attract young investors with growth potential.

Preferred Stocks

Offer stability and income for conservative investors.

Investment Theories

Best performance correlates with stock price increase.

Primary Market

New securities created and sold to initial investors.

Secondary Market

Securities traded among investors post-initial sale.

Market Order

Buy or sell stocks at current market price.

Limit Order

Buy or sell stocks at a specified price.

Stop Order

Triggers a market order when a price is reached.

Stop-Limit Order

Combines stop and limit orders for price control.

Short-Term Investing Drawbacks

Higher costs and increased market volatility risks.

Investment-Grade Bonds

Low-risk bonds suitable for conservative investors.

High-Yield Bonds

Higher risk bonds with potential for greater returns.

Bond Yield Determination

Based on federal interest rates and bond risk.

Bond Price Quotation

Price expressed as a percentage of face value.

Bond Ratings

Categorized from AAA (best) to D (worst).

Mutual Fund

Diversified investment managed by professionals.

Mutual Fund Categories

Includes stock, bond, and mixed mutual funds.

Capital Gain

Profit made from selling an asset.

Capital Gains Distribution

Total capital gains from all held stocks.

Taxation of Mutual Fund Earnings

Taxed like regular income on tax returns.

Reliable Mutual Fund Information Sources

Prospectuses, annual reports, and reputable websites.

Examples of Mutual Funds

Include stock funds, bond funds, and variety funds.