Investment Key Terms

Question 1

What are investments?

Answer 1

The commitment to funds to one or more assets that will be held over some future period; Putting money towards something to gain more back

Question 2

What is Liquidity?

Answer 2

How fast you can turn your assets into cash

Question 3

What is a Bear Market

Answer 3

A downward trend in the stock market greater than 20%

Question 4

What is a Bull Market

Answer 4

An upward trend in the stock market of greater than 20%

Question 5

What is an Initial Public Offering?

Answer 5

When common shares of a company are being sold for the first time to the public, usually the financial institution; Opening your company to the public by having a bank/insurance company reference your validity

Question 6

What is Common Stock

Answer 6

An equity security that represents the ownership of a company. Shares that have voting rights.

Question 7

What is Preferred Stock?

Answer 7

An equity security that represents the ownership of a company. Shares with no voting rights. Usually, they are more expensive than common shares and have dividends but are not guaranteed. Dividends are guaranteed if they are cumulative preferred stock.

Question 8

What are Dividends?

Answer 8

Cash payments are declared by a corporation to shareholders. It is a distribution of the profit of a company to shareholders.

Question 9

What is a Portfolio?

Answer 9

A collection of securities or investments held by an investor.

Question 10

What are Financial Statements?

Answer 10

Statements that show a company’s financial position over a fiscal year (balance sheet, income statement, cash flow statement)

Question 11

What are Generally Accepted Accounting Principles (GAAP)?

Answer 11

A set of rules and regulations that are used in accounting to prevent fraudulent or misleading information.

Question 12

What is Risk?

Answer 12

The chance that the actual return on an investment will be different than the expected return

Question 13

What is the Toronto Stock Exchange (TSX)?

Answer 13

A place where securities are listed and traded

Question 14

What are Corporate Bonds?

Answer 14

Debt securities issued by corporations to raise capital

Question 15

What are Bonds?

Answer 15

Debt instruments that allow companies or governments to raise funds by borrowing from investors

Question 16

What are Expiration Dates?

Answer 16

Specified date in the future when a contract, agreement, or option comes to an end, and its terms and conditions are no longer valid.

Question 17

What are Short Positions?

Answer 17

The practice of selling a financial asset, such as a stock or commodity, that the seller does not own, with the expectation of buying it back later at a lower price to profit from the price decline.

Question 18

What are Index Funds?

Answer 18

Investment funds that aim to replicate the performance of a specific market index by holding a diversified portfolio of the same or similar assets.

Question 19

What are Options?

Answer 19

financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date.

Question 20

What is Call?

Answer 20

A financial option that gives the holder the right, but not the obligation, to buy an underlying asset, such as a stock, at a specified price (strike price) within a predetermined time frame.

Question 21

What is Put?

Answer 21

A financial option that gives the holder the right, but not the obligation, to sell an underlying asset, such as a stock, at a specified price (strike price) within a predetermined time frame.

Question 22

What is the Secondary Market?

Answer 22

Normal investors can buy and
Sell shares

Question 23

What is capitalization?

Answer 23

A company’s worth is based on the market price