Vocabulary

• Stocks – These are shares in the ownership of a company, representing a claim on part of the company's assets and earnings.
• Dividends – These are a portion of a company's earnings that is paid to shareholders, or people that own that company's stock, on a quarterly or annual basis.
• Capital Gain – This is the rise in value of a capital asset (like shares) that gives it a higher value than the purchase price.
• Mutual Funds – These are investment vehicles made up of a pool of funds collected from many investors for the purpose of investing in securities like stocks, bonds, money market instruments and similar assets.
• Bond – This is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a fixed interest rate.
• Portfolio – This is a collection of investments owned by an individual or an institution (like a mutual fund) that can include stocks, bonds, and other assets.
• Index Fund – This is a type of mutual fund with a portfolio constructed to match or track the components of a market index.
• Blue-Chip Stocks – These are shares in large, well-known companies with a history of reliable performance.
• Market Order – This is a request by an investor to buy or sell a stock at the best available price.
• Limit Order – This is a request by an investor to buy or sell a stock at a specific price.
• IPO (Initial Public Offering) – This is the first sale of stock by a company to the public.
• Bull Market – This is a market condition in which stock prices are expected to rise.
• Bear Market – This is a market condition in which stock prices are expected to fall.
• Day Trading – This is the practice of buying and selling within the same trading day, before the close of the markets on that day.
• Short Selling – This is an investment strategy that speculates on the decline in a stock's price.
• Diversification – This is a risk management strategy that mixes a wide variety of investments within a portfolio.
• Risk Tolerance – This is the degree of variability in investment returns that an investor is willing to withstand.
• Asset Allocation – This is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.
• Penny Stocks – These are small company's stocks that typically trade for less than $5 per share.
• Stock Exchange – This is a market where securities are bought and sold.
• Broker – This is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
• Financial Advisor – This is a professional who helps individuals make investment decisions.
• Securities – These are tradable financial assets such as stocks, bonds, and options.
• ETF (Exchange Traded Fund) – This is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index.
• Earnings Per Share (EPS) – This is the portion of a company's profit allocated to each outstanding share of common stock.
• P/E Ratio (Price to Earnings Ratio) – This is a valuation ratio of a company's current share price compared to its per-share earnings.
• Dividend Yield – This is a financial ratio that indicates how much a company pays out in dividends each year relative to its share price.
• Revenue – This is the income that a business has from its normal business activities, usually from the sale of goods and services to customers.
• Profit – This is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity.
• Balance Sheet – This is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time.
• Profit Margin – This is a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue.
• Gross Profit – This is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
• Net Profit – This is a company's total earnings (or profit). Net profit is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses.
• Income Statement – This is a financial statement that measures a company's financial performance over a specific accounting period.
• Cash Flow – This is the net amount of cash and cash-equivalents being transferred into and out of a business.
• Financial Plan – This is a comprehensive evaluation of an investor's current and future financial state.
• Return on Investment (ROI) – This is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments.
• Capital Loss – This is the loss incurred when the capital asset, like an investment or real estate, decreases in value.
• Liquidity – This is the degree to which an asset or security can be bought or sold in the market without affecting the asset's price.
• Leverage – This is the investment strategy of using borrowed money: specifically, the use of various financial instruments or borrowed capital to increase the potential return of an investment.
• Volatility – This is a statistical measure of the dispersion of returns for a given security or market index.
• Market Capitalization – This is the total dollar market value of a company's outstanding shares of stock.
• Insider Trading – This is the buying or selling of a security by someone who has access to material, nonpublic information about the security.
• Futures Contract – This is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.
• Option – This is a financial derivatives that represents a contract sold by one party (the option writer) to another party (the option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date).
• Stock Split – This is a corporate action that increases the number of shares in a company and reduces the price without affecting the market capitalization of the company.
• Dividend Reinvestment Plan (DRIP) – This is a plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date.
• Capital Stock – This is the common and preferred stock a company is authorized to issue according to its corporate charter.
• Treasury Stock – These are the shares a company keeps in their own treasury. Treasury stock can be from a repurchase or buyback from shareholders; or it can be from when the issuing company is unable to sell all the shares it issued.
• Stock Market Bubble – This is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation.