Personal Finance: Stocks and Investments Study Guide

Vocabulary flashcards covering core stock market terminology, investment strategies, trading concepts, and financial calculations from the Personal Finance Stocks Study Guide.

Stock

A percentage of a company that an investor owns.

Diversification

Spreading money across multiple investments to reduce financial risk.

Rule of 72

A method used to determine required returns; for an investment to double in $10$ years, an investor needs a yield of $7.2\%$.

Capital Gain

The profit earned on selling capital assets, such as stocks or bonds.

Capital Loss

The loss realized when selling an asset for less than the purchase price.

Common Stock

Corporate securities that represent regular ownership shares in a company.

Preferred Stock

A class of ownership that combines features of regular stock and bond stock.

Income Stock

Regular stock that offers steady and increasing dividend payments.

Growth Stock

A stock that is expected to grow significantly in sales, stock price, and overall size.

Blue Chip Stock

Stock issued by a large, well-known company.

Penny Stock (Speculative Stock)

Stock in a small company that trades at low prices under ""$5 per share.

Defensive Stock

Stock of a company that sells products or services people need rather than want.

Cyclical Stock

Stock whose earnings and share price rise and fall in sync with the broader market.

Stock Income Methods

The two primary ways to earn money from stock ownership: capital gains and dividends.

Market Value (Market Cap)

The current price that an asset or stock would sell for in the marketplace.

Stock Value Determinants

The key elements that determine a stock's price, including financial ratios, business factors, macroeconomic conditions, and market drivers.

Stock Marketplaces

Online brokerages and investing applications used by investors to buy and sell stocks.

Bull Market (Bullish)

A prolonged period of rising stock prices accompanied by a general feeling of investor optimism.

Bear Market (Bearish)

A prolonged period of falling stock prices accompanied by a general feeling of investor pessimism.

Day Trading

The practice of buying and selling stocks and closing all positions within the same trading day.

Buying on Margin

Borrowing money from a broker to purchase stocks.

Selling Short

A trading strategy based on betting that the price of a stock will fall.

Stock Index

A benchmark that measures the price performance of a selected group of companies.

Insider Trading

The illegal practice of using undisclosed corporate information to make stock trading decisions.

Stock Split

A corporate action that adjusts the per-share price of a stock while leaving the company's total underlying value unchanged.

Short-Term Investing Strategies

Low-duration investment approaches, such as money market funds and treasury bills.

Long-Term Investing Strategies

Extended-horizon investment approaches, such as buy and hold and dollar-cost averaging.

Return on Investment (ROI) Example

The net percentage return on an investment; for example, buying $200$ shares of Waste Management at ""$50, receiving dividends of ""$1.50 and ""$1.00 per share, selling at ""$52, and paying a ""$5 brokerage fee yields an ROI of $8.95\%$.