Stock
Ownership in a corporation
Securities
All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded.
Common Stock
the most basic form of ownership, including voting rights on major issues, in a company
Preferred Stock
A special hybrid type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.
Book value
Difference between assets and liabilities divided by the number of circulating shares
Market value
The price at which a stock is selling on the stock market
Intrinsic value
Perceived value of the stock with qualitative/quantitative worth implemented
Price/Earnings (P/E) Ratio
The ratio of the price per share to earnings per share; shows the dollar amount investors will pay for $1 of current earnings.
Stock Split
Splitting stock into multiple shares
Bonds
Certificates of debt that carry a promise to buy back the bonds at a higher price
Face value (par value)
The amount of money the bond buyer is lending to the bond issuer
Maturity date
The date on which an investment becomes due for payment.
Bond yield
The return an investor would receive on a bond if it were purchased and held to maturity
Treasury bills
Short-term U.S. government bonds that are repaid in less than one year.
Treasury notes
Intermediate-term U.S. government bonds with maturities of 1 to 10 years
Treasury bonds
Long-term debt securities issued by the U.S. Treasury
Portfolio Diversification
Reduces risk by spreading money among a wide array of investments
Mutual Funds
A pool of money used by a company to purchase a variety of stocks, bonds or money market instruments. Provides diversification and professional management for investors.
Expense Ratio
The annual cost of owning a mutual fund, expressed as a percentage
Load
Commission a mutual fund charges
No-load funds
Mutual funds that do not charge loads
Index fund
Mutual funds that mirror the composition of a particular index
Exchange-traded funds
Offshoots of mutual funds that allow investors to trade index portfolios
Derivatives
Any financial asset whose value is derived from the value of some other "underlying" asset
Option
The purchased right�but not the obligation�to buy or sell a specified number of shares of a stock or other security at a predetermined price during a specified period.
Call option
the option to buy shares of stock at a specified time in the future
Put option
the option to sell shares of stock at a specified time in the future
Financial Futures
Legally binding contracts to buy or sell a financial instrument
Commodities Futures
Contracts to buy or sell specific amounts of commodities for a set price at a future date
Currency Futures
Contracts to buy or sell amounts of specified currency at some future date
Credit Derivatives
Used to reduce a lender's exposure to credit risk
Stock exchange
A market for buying and selling stock
The Bond Market
The collective buying and selling of bonds; most bond trading is done over the counter, rather than in organized exchanges
The Money Market
Over-the-counter marketplace for short-term debt instruments such as Treasury bills and commercial paper. Its purpose is to help corporations and government agencies meet short-term liquidity needs.
The Derivatives Market
Futures and some options are traded on organized exchanges with time-tested financial controls and government regulation
Investment Portfolio
assortment of individual investment instruments
Asset allocation
Managing a portfolio to balance potential returns with an acceptable level of risk
Broker
An expert who has passed a series of formal examinations and is legally registered to buy and sell securities on behalf of individual and institutional investors
Market Order
A request to buy or sell a stock at the current market value
Limit Order
Highest price you are willing to pay and the lowest price you are willing to sell
Stop Order
Broker should sell if price drops to certain level
Short Selling
Selling stock borrowed from a broker that must be replaced at a later time
bear market
a market situation in which most stocks are decreasing in value
bull market
a market situation in which most stocks are increasing in value
capital gains
increases in the value of a stock or other asset
index
a statistical indicator of the rise and fall of a representative group of securities
margin trading
borrowing money from brokers to buy stock, paying interest on the borrowed money, and leaving the stock with the broker as collateral
municipal bonds
bonds issued by states, cities, and various government agencies to fund public projects
Net Asset Value (NAV)
a mutual fund's assets minus its liabilities; usually expressed as NAV per share
rate of return
the gain(or loss) of an investment over time, expressed as a percentage
Treasury Inflation-Protected Securities (TIPS)
Treasury issues in which the principal amount is tied to the Consumer Price Index to protect the buyer against the effects of inflation