Selecting Your Investments Personal Finance

An investment strategy in which you spread your investment dollars among different markets, sectors, industries, and securities. The goal of the strategy is to protect the value of your overall portfolio in case a single security or market sector takes a serious downturn and drops in price.

Diversification

A group of companies producing similar products or services.

Industry

A collection of investments owned by one individual or organization.

Portfolio

An individual investor's ability to accept the loss of some or all of the money they have invested.

Risk Tolerance 

A group of stocks, often in one industry.

Sector

How quickly in percentage terms a company is growing their EARNINGS from year to year.

Earnings Growth Rate 

Stock from a company that has a consistent record of relatively rapid growth and earnings in all economic conditions.

Growth Stock 

a STOCK which pays higher than average dividends because the company chooses to retain only a small portion of the profits

Fixed income stock 

The relationship between the market value per share and earnings per share of a stock

Price Earnings Ratio 

A calculation that helps measure the level of risk in investing in a stock.

Beta Number

Fixed income and preferred stocks are considered conservative (Low Risk).

Conservative Risk 

Include growth stocks - particularly young companies with great potential. (Between Low and High Risk).

Moderate risk 

stocks that are highly unpredictable

Speculative Risk

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

Speculative Stock

stocks of large, well-established corporations with a solid record of profitability and present a low risk.

Blue Chip Stocks 

market index of U.S. equities based on the performance of 500 large-cap stocks representing various sectors of the overall equities market

S&P 500 

a statistic that tracks how the prices of a specific set of stocks have changed such as the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite.

Stock index

What is the formula to find S&P 500 increase/ decrease?

It would be Cost Per Share times S&P 500 YTD% Change

What is the formula to find Beta increase/ decrease?

It would be (S&P 500 YTD% Change times Beta Number) Times Cost Per Share