Investing Basics

stock

A share of ownership in a corporation.

stock options

rights to buy a certain number of shares of stock at a specified price

Securities and Exchange Commission

an independent agency of the government that regulates financial markets and investment companies

put option

the right to sell an asset at a specified exercise price on or before a specified expiration date

New York Stock Exchange

The largest stock exchange, located in New York City. Most of the companies on this exchange are larger companies with higher-priced stock.

futures contract

an agreement to buy or sell at a specific date in the future at a predetermined price

Commodities

a raw material or primary agricultural product that can be bought and sold, such as copper or coffee.

stock market

A system for buying and selling shares of companies

brokerage firm

a business that specializes in trading stocks

mutual fund

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

growth stock

a company stock that tends to increase in capital value rather than yield high income.

income stock

pays higher-than-average dividends compared to other stock issues

capital gain

the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller

capital loss

the sale of an investment for less than its purchase price

Treasury Bonds

Bonds issued by the federal government, sometimes referred to as government bonds.

par value

the amount that an investor pays to purchase a bond and that will be repaid to the investor at maturity

coupon rate

the interest rate that a bond issuer will pay to a bondholder

Corporate Bonds

bonds issued by corporations

dividend

The portion of corporate profits paid out to stockholders

Certificate of Deposit (CD)

An interest-earning deposit that requires the funds to remain deposited for a fixed term. Withdrawal of the funds before the term expires results in a financial penalty.

yield

the annual rate of return on a bond if the bond were held to maturity

ROI

return on investment

ESOP

Employee Stock Ownership Plan

Moody's and Standard & Poor's

The two biggest independent-rating agencies that rate bonds

large-cap stock

stock from a corporation that has $10 billion or more in market cap

junk bonds

High-risk, high-interest bonds

IRA

individual retirement account

Roth IRA

A personal savings plan; contributions are not tax-deductible; earnings are tax-free

Traditional IRA

An IRA for which you can deduct your contribution each year from your taxable income

No-load mutual funds

funds that sell directly to investors and do not charge a fee

401k

A qualified retirement plan sponsored by an employer

403b

Non-profit retirement fund both employee and employer contribute money, no taxes are taken until the money is with withdrawn

hedge fund

a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.

Index Fund

A mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index

board of directors

a group of persons elected by the stockholders to manage a corporation

common stockholders

are paid dividends only after preferred stockholders are paid their dividends

preferred stock

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

S&P 500 Index

an indicator of overall stock market performance based on the average stock prices of 500 top U.S. companies, compiled by Standard & Poor's

Dow Jones Industrial Average

a measure based on the prices of the stocks of 30 large companies, widely used as a barometer of the stock market's health

Wall Street

A street in New York City famous for being the location of the New York stock exchange

New York Stock Exchange (NYSE)

A New York City-based stock exchange, which is considered the largest equities-based exchange in the world based on total market capitalization

Bull Market

A period of increased stock trading and rising stock prices

bear market

A steady drop in the stock market over a period of time

NASDAQ

National Association of Securities Dealers Automated Quotations

Securities Investor Protection Corporation (SIPC)

Insurance fund covering investors' brokerage accounts with member firms.

stockbroker

a person who links buyers and sellers of stock

initial public offering

The first time a corporation issues stock to the public

Nasdaq-100 Index

An index composed of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange.

Currency pairs

The two currencies traded or quoted in a forex transaction.

FOREX

foreign exchange market

USD

US dollar

capital inflow

money entering a country

capital outflow

the amount of money leaving the country