Investing Basics and The Stock Market Game: Key Financial Terms

Comprehensive vocabulary flashcards covering stock market fundamentals, quotes, mutual funds, bonds, and asset allocation concepts from the lecture packet.

Stock

A share of ownership in a business where a share of a company's profit (or loss) belongs to each owner.

Stockholders

People who purchase stock (also called shareholders) to earn dividends and with the hope of selling the stock at a higher price than they originally paid.

Dividend

A cash payment from profits announced by a company's board of directors and distributed among stockholders.

Portfolio

The group of assets—such as stocks, bonds, and mutual funds—held by an investor.

Risk

The likelihood of losing money; higher risk means a greater opportunity for high return and a higher potential for loss.

Diversification

A risk management technique that mixes a wide variety of investments within a portfolio, designed to minimize risk by combining investments whose prices are not likely to move in step with one another.

Mutual Fund

A company owned by investors who pool their savings to invest in a variety of stocks or bonds managed by a professional.

NASDAQ

An electronic exchange where stocks are traded through an automated network of computers instead of a trading floor; stands for National Association of Securities Dealers Automated Quotations System.

New York Stock Exchange (NYSE)

The oldest and largest equities-based exchange in the United States, founded in $1792$ and located on Wall Street in New York City.

Public Company

A company with publicly traded shares that anyone can buy in the stock market.

Private Company

A company that does not sell shares to the public and whose shares cannot be bought in the stock market.

Dow Jones Industrial Average (DOW)

The best-known measure of stock prices, consisting of $30$ large, well-known companies in major sectors of the U.S. economy.

S&P 500 (Standard & Poor's 500)

A popular measure of stock prices consisting of $500$ large companies representing major sectors of the U.S. economy, commonly used as a benchmark for the overall stock market.

Market Capitalization (Market Cap)

The total current market value of all outstanding shares of a company, calculated by multiplying a stock's current price by the total number of outstanding shares.

Small Cap Stocks

Stocks of a company whose market capitalization is small, usually under $\text{\$}500\text{ million}$, tending to grow faster but also being more volatile.

Mid Cap Stocks

Short for "middle cap," refers to stocks of companies with a market capitalization between $\text{\$}2\text{ billion}$ and $\text{\$}10\text{ billion}$.

Large Cap Stocks

Shortened version of "large market capitalization," referring to a company with a market capitalization value of more than $\text{\$}10\text{ billion}$.

Beta

A measure of the volatility of a security or portfolio relative to the market as a whole, where a value of $1$ moves with the market, less than $1$ indicates less volatility, and greater than $1$ indicates more volatility.

P/E Ratio

A valuation ratio measuring a company's current share price relative to its per-share earnings, indicating the dollar amount an investor pays to receive $\text{\$}1.00$ of company earnings.

Initial Public Offering (IPO)

The initial issuance of stock by a company to the public, underwritten by a financial services firm, in order to raise money to expand and build operations.

Secondary Market

The public financial market where shares of stock are bought and sold among investors after the initial public offering.

Limited Liability

A legal condition where stockholders can lose only the money they invested to purchase stock, but are not responsible for the company's financial debts if it fails.

Common Stock

Shares that represent ownership in a corporation, giving holders the right to vote for the board of directors and share in financial success.

Preferred Stock

Shares that pay a fixed dividend on a regular schedule and are less volatile than common stock, but do not entitle owners to voting rights.

Previous Close

The closing price of a stock on the previous trading day.

Open

The price of the first trade of a stock on a given trading day.

Bid

An offer made to buy a stock.

Ask

The price at which a seller wants to sell a company's stock.

Day's Range

The highest price and lowest price of a stock reached during the current trading day.

52-Week Range

The highest price and lowest price reached by a stock over a $52\text{-week}$ period.

Volume

The total number of shares traded so far during the current day.

Avg Vol (3M)

The average of the total number of shares traded over the past three months.

1 y Target Est

The median target price for a stock as predicted by analysts covering it.

Earnings Per Share (EPS)

A company's profit or earnings divided equally among all outstanding shares owned by investors.

Yield

The amount of cash that returns to stockholders from an investment, often reported alongside dividends.

Open-End Fund

A mutual fund structure that sells as many shares as investors want to buy and buys shares back directly when investors want to sell.

Net Asset Value (NAV)

The per-share value of a mutual fund calculated once a day after market close ($4\text{ pm ET}$) by taking the fund's investment value, subtracting expenses, and dividing by total shares.

Expense Ratio

How much it costs to operate and maintain a mutual fund (such as management, recordkeeping, and accounting fees) in proportion to its total value.

Holdings Turnover

The rate at which a mutual fund replaces its underlying portfolio assets annually.

Bond

A debt security issued by a corporation, government, or agency that functions as a loan, promising repayment on a set date along with interest.

Issuer

The organization or entity selling a bond and borrowing funds from investors.

Interest

Money paid by the borrower to the lender in addition to the principal amount borrowed for the privilege of using that money.

Face Value

The stated amount paid back to the bondholder by the issuer upon the bond's maturity date.

Default

The failure of a bond issuer to pay scheduled interest or repay the principal face value of a loan.

Investment Grade Bonds

Low-risk bonds issued by financially trustworthy corporations or governments that are deemed highly likely to repay principal and interest on schedule.

Asset-Backed Bonds

Corporate bonds backed by specific collateral or assets belonging to the corporation, such as property or equipment.

General Obligation Bonds

Municipal bonds issued by state and local governments backed by the full faith and credit of the issuer.

Revenue Bonds

Municipal bonds backed specifically by the income generated from the project being financed.

Treasury Notes

Intermediate-term debt obligations of the U.S. Treasury having a maturity period of $1$ to $10\text{ years}$ and paying interest semiannually.

Treasury Bills

Short-term debt obligations of the U.S. Treasury having a maturity period of $1\text{ year}$ or less, sold at a discount from face value.

Index Funds & ETFs

Pooled investment funds tracking a market index (e.g., S&P 500) offering built-in diversification across hundreds of companies with low expense ratios.

REITs (Real Estate Investment Trusts)

Companies that own or finance income-generating real estate, allowing investors to access real estate returns without buying physical properties.

HYSA & CDs

FDIC-insured banking products that guarantee principal safety and pay modest interest, where High-Yield Savings Accounts offer full liquidity and Certificates of Deposit lock funds for a set term.

Roth IRA

A tax-advantaged retirement account funded with after-tax dollars, allowing invested money to compound and be withdrawn completely tax-free in retirement.