Savings and investing

compound interest

interest earned on both the principal amount and any interest already earned

Dividend

The portion of corporate profits paid out to stockholders

simple interest

interest paid on the principal alone

bond

a formal contract to repay borrowed money with interest at fixed intervals

Diversification

Spreading out investments to reduce risk

Stocks

shares of ownership in a company

savings account

a bank account that earns interest

certificate of deposit

an account which you place money in an account for a specified length of time. Typically earns a higher interest rate compared to a savings account.

Common stock

Corporation's basic ownership share which gives owners the right to possible dividends and voting rights at shareholder meetings.

Stock Broker

a broker who buys and sells securities on a stock exchange on behalf of clients.

Shareholder

A person who invests in a corporation by buying stock and is a partial owner

mutual fund

fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets

Blue Chip Stock

the stock of a large, well-established and financially sound company that has operated for many years

growth stock

A stock from a company which has a consistent record of relatively rapid growth and earnings in all economic conditions.

speculative stock

A very high risk stock from a company with potential for substantial earnings in the future.

capital gain

a profit from the sale of property or of an investment.

Individual Retirement Account (IRA)

a retirement savings plan that has special tax benefits but is not employer-sponsored

401k

A retirement account offered through an employer, where an employee can contribute money from his or her

paycheck before or after taxes.

preferred stock

A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits (Dividends) before other stockholders do.

stock exchange

a market for buying and selling stock

capital loss

the sale of an investment for less than its purchase price

buying on margin

the purchasing of stocks by paying only a small percentage of the price and borrowing the rest

money market account

a savings option that typically pays more interest and usually requires a minimum balance but money can be withdrawn at any time.

NYSE

New York Stock Exchange

NASDAQ

A nationwide electronic system that links dealers across the nation so that they can buy and sell securities electronically.

debt financing

funds raised through various forms of borrowing that must be repaid

equity financing

money raised from within the firm, from operations or through the sale of ownership in the firm (typically stock)

Liquidity

the ease with which an asset can be converted into cash