New Investor Flashcards
Asset
Anything of REAL value that a person owns such as stocks, real estate, or cash. (Opposite of labilities: clothes, shoes, cars, most jewelry)
Bond
-An IOU (I owe You). Money lent to a corporation or government in exchange for interest payments and repayment of the principal at maturity.
-Investing in a bond makes you the lender. The borrower pays you back interest like you might do with a mortgage loan or credit card company.
Capital Gain
The money made from selling an asset for more than you paid for it.
Dividend
-A portion of a company’s earnings given to shareholders (per share)
-Typically paid on a quarterly basis.
Equity
-Ownership in a company, typically represented by stock.
Shareholder
-Owner of a stock.
Mutual Fund
-A managed portfolio that allows investors to pool money to buy stocks. (Active Strategy)
Index Fund
A fund designed to replicate the performance of a particular market index. (Ex: S&P 500 Index)
An index fund can be a Mutual fund or ETF.
Portfolio
A collection of investments held by an individual or institution.
(Ex: Stock Portfolio or Real Estate portfolio)
Risk
The potential of losing some or all of an investment.
Stock
A share in ownership of a company.
Volatility
The degree of change in the price of an asset over time.
Yield
The income return on an investment, typically shown as a percentage.
Ex: 10% Yield
Bull Market
Stock market prices are going up.
Bear Market
Stock market prices are going down.
Compound Interest
Interest earns its own interest.
Diversification
Spreading assets to reduce risk.
Example: Investing in stocks and real estate.
Dollar Cost Averaging
Investing a small amount of money on a scheduled basis regardless of prices in the stock market.
Exchange Traded Fund (ETF)
Baskets of stocks sold as one transaction and traded throughout the day in the stock market.
Liabilities
Things that take money out of your pocket: cars, clothes or shoes. (Opposite of Assets: stocks and real estate)
Passive Income
Income earned from little to no effort.
Ex: Dividends or interest
Ticker Symbol
Alpha-Numeric Symbol used to represent stock/fund name. Example: AAPL
(Apple) AMZN (Amazon), Facebook (META)
Invest
Holding asset for LONG-TERM in anticipation of profit.
Individual Retirement Account
(IRA)
. Accounts designed to help you invest for retirement on your own.
Return on Investment
(ROI)
Money earned on an initial investment. Typically expressed as a percentage.
Example: $10 earned on $100 would be a 10% ROI.
Entry Point
The price that you buy an asset.
Exit Point
The price that you sell an asset.
Equity
The value owned in an asset. In a company, it is typically represented by stock shares.
Inflation
The process of the value of your money decreasing while prices increase.
Example: Spending $100 one month in the grocery store, then spending $100 the next month and only getting half as much food.
Liquidity
The ease that an asset can be converted to cash without affecting its value.
-Example: Stocks are liquid because they can easily be sold for cash.
Real Estate is NOT liquid because it takes more work and time to convert it to cash.
Spread
The difference between the bid price and the ask price of a stock.
Nasdaq
A major stock exchange focused on technology companies.
Dow Jones Industrial Average
(DJIA)
: 30 established companies with solid returns; considered leaders in industry. (Apple, Coca-Cola, John Deer)
S&P 500
The top 500 companies by market cap. (Home Depot, Tesla, Google)
Initial Public Offering
(IPO)
Also referred to as “Going Public”
When a private company sells shares to the public for the first time.
Maturity
The date your final payment is due such as in a bond or loan.
Expense Ratio
The annual fee charged by a fund, expressed as a percentage of its assets.
(Ex:0.20% is $2.00 per 1,000)
Capital
-The TOTAL amount of money, assets, or investments used or available to earn income or profit.
Principal
The ORIGINAL amount of money invested OR borrowed before any earnings, interest, or returns are added.
Market-Capitalization
(Market-Cap)
Total value of all of company’s shares of stock.
Market Cap= SharePrice ×All company shares.
Blue Chip
-Well-established, financially stable, and known companies with a history of reliable performance, typically a leader in its industry.
(Example: Walmart, AMEX)
Brokerage
An institution that serves as the middleman between buyers and sellers for stocks, bonds, and mutual funds.
Stock Market
-A collection of markets where investors buy and sell shares of publicly traded companies.
-It helps companies raise capital and investors earn profits by trading stocks. (Think of the stock market as a mall.)
Holdings
Companies in an ETF or mutual fund
52-Week Range
An asset’s price including the lowest price in 52 weeks and the highest price.
Bid Price
The highest price a buyer will pay for a stock.
Ask Price
The lowest price a seller will sell a stock.
Profit
Financial gain after the expenses required to sustain an activity are subtracted from income earned.
Stock Exchange
A specific marketplace where investors buy and sell stocks, bonds, and other financial instruments.
(Think of the stock exchange as a store IN the mall (Stock market)
Ex: NYSE, London
Trading
Holding asset for SHORT-TERM in anticipation of profit.
