Investing Basics Knowledge

Comprehensive vocabulary flashcards covering stock market exchanges, asset classes, investment risks, portfolio diversification, market capitalization tiers, financial advisor designations, and robo-advisors.

Stock

A unit of ownership in a company that can be sold publicly on a stock exchange if the company goes public.

New York Stock Exchange

The largest stock exchange in the United States.

NASDAQ

The second largest stock exchange in the United States.

Toronto Stock Exchange (TSX)

The largest stock exchange in Canada.

London Stock Exchange

The largest stock exchange in Europe.

Tokyo Stock Exchange

The largest stock exchange in Asia.

Investor Sentiment

How investors feel about companies and the stock market, which directly determines how they choose to buy or sell stocks.

Time Value of Money

The principle that money available now is worth more than the same amount in the future because it can be invested to grow.

Dividend

A regular payment distributed by a company to shareholders out of its profits, based on the number of shares owned.

Saving

A low-risk financial method handled through a bank or credit union where funds are federally insured and accessible anytime.

Investing

The deployment of funds into financial markets where one can gain or lose money and must sell assets to access cash.

Bonds

A low-risk fixed income investment where an investor loans money to a government or company in return for interest paid on a regular schedule.

Cash Equivalents

Short-term, liquid investments that investors can exchange for money quickly without experiencing a major change in value.

Real Estate

An asset class consisting of lands, houses, or buildings that can be bought or sold.

Commodities

Raw materials or agricultural goods that can be bought or sold, including items such as gold, oil, wheat, or coffee.

Market Risk

The risk that the value of an investment will decline due to broad market-wide occurrences, such as economic or political events.

Industry Risk

The risk that investment values change due to specific factors uniquely impacting an entire industry, such as gas prices rising and hurting airline profits.

Business Risk

The risk that bad or wrong internal decisions made by a company reduce its sales and performance.

Liquidity Risk

The danger of being unable to sell an investment quickly for cash when needed.

Diversification

The strategy of mixing various asset classes—such as stocks, bonds, cash equivalents, real estate, and commodities—to spread risk based on investor goals.

Market Capitalization (Market Cap)

A measure of how big a company is and how much it is worth to investors, calculated from the value of its total stock.

Micro-Cap

A company with a market cap between $50\text{ million}$ and $300\text{ million}$, usually newer and less established, with high risk and higher growth potential.

Small-Cap

A company with a market cap between $300\text{ million}$ and $2\text{ billion}$, typically newer and less established, carrying high risk and higher growth potential.

Mid-Cap

A well-known and established company with a market cap between $2\text{ billion}$ and $10\text{ billion}$, characterized by lower risk and steadier growth potential.

Large-Cap

A well-known and established company with a market cap exceeding $10\text{ billion}$, offering lower risk and steadier growth potential.

Risk Tolerance

An investor's capacity to handle price swings; higher tolerance favors stocks for greater growth potential and volatility, while lower tolerance favors bonds and cash for less risk.

Time Horizon

The length of time an investor expects to hold an investment; short horizons apply to upcoming retirements or major purchases, while long horizons mean money is not needed for several years.

Certified Financial Planner (CFP)

A professional designation differentiator for financial advisors who specialize in comprehensive financial planning.

Chartered Financial Analyst (CFA)

A professional credential awarded to investment analysis and portfolio management professionals.

Chartered Financial Consultant (ChFC)

A professional designation for advisors providing financial consulting services.

Robo-Advisor

An automated investment platform featuring low fees, easy opening, and automatic investments, but limited by impersonal advice, inflexible strategies, and an absence of human contact.