Stock Market Terms Flashcards
Yield
Also called “return.” Yield on a stock is calculated by dividing the number of dividends paid in the previous 12 months by the current market price of the stock.
Ticker Tape
The paper ribbon on which a telegraphic printer prints stock prices.
Tax-Exempt Bonds
Securities issued by public agencies such as cities or states, on which the interest is not taxed by the federal government.
Stock (preferred)
A type of security that ranks ahead of common stock in claims on earnings but does not give voting rights to its holder.
Stock (common)
Securities that represent part ownership, or equity, in a corporation. Each share of stock is a claim on a proportionate amount of the corporation’s assets and profits, some of which may be paid out as dividends.
Speculative
A term used to describe a highly risky investment with a potentially high return.
Share
One of the parts into which the ownership of a corporation or a mutual fund in divided.
Selling Short
A contract to sell stocks that are not in the seller’s possession for delivery at some future date. The seller hopes that the market will decline by the stated delivery date, at which time the seller will actually buy the stocks needed at the low price but sell them for higher contracted sales price.
Securities and Exchange Commission (SEC)
The federal agency that regulates stock transactions.
Risk
The chance or probability an investment will decrease in value. Risk can be reduced by diversification.
Rally
The recovery of prices after a decline.
Prospectus
A legal document providing pertinent information about stocks or mutual fund shares for sale to the public.
Principle
The amount of your own money you put into an investment.
Portfolio
The stocks and other investments owned by an individual or institution.
Paper Profit
Profit that is created when the price rises but before stock has actually been sold. If a stock climbs from 70 to 74, the four-point gain is a “paper profit” until the shares are actually sold at 74.
Oversold
The opposite of overbought - the opinion that too active selling has forced a stock or the whole market too low.
Overbought
The opinion that too active buying has boosted a stock or the market too high.
Option
The right to buy or sell something within a specified time at a specified price.
Odd Lot
A number that shares of stock fewer than the usual trading unit of 100 shares.
New York Stock Exchange (NYSE)
The world’s largest and leading marketplace for securities. It lists the stock of the oldest, largest, and best-known companies. Only stock in major corporations that have met NYSE’s requirements for financial stability is listed on the NYSE.
Net Asset Value (NAV)
The “per share value” of a mutual fund, defined as the market value of a mutual fund’s total assets, less its liabilities, divided by the number of shares outstanding.
NASDAQ
An online marketplace for securities that lists smaller, younger companies.
Mutual Fund
An open-ended investment that pools money from individuals and uses it to buy securities such as stocks, bonds, and money market investments.
Money Market Instruments
Short-term (usually 90 days or less), interest-bearing IOUs issued by governments, corporations, banks, or other financial institutions.
Load (as opposed to “no-load”)
A sales commission paid either when shares of a mutual fund are purchased (“front-end load”) or when shares are sold (“back-end load”). Mutual funds with no sales commissions are called “no-load” funds.
Index Fund
A mutual fund that seeks to match the performance of a predetermined benchmark, or index.
Index
A statistical benchmark, designed to reflect changes in financial markets or the economy. Well-known indexes include the Dow Jones Industrial Average and Standards and Poor’s 500 Composite Stock Price Index.
Holding Company
A corporation created to hold assets of another company.
Equity
Ownership of preferred or common stock in a company.
Dow Jones Industrial Average
An indicator of stock prices based on 30 major industrial companies.
Compounding
Reinvesting investment gains and income on earnings as well as the investment principle.
Commission
A fee paid to a broker for buying or selling securities.
Commodities
Grains, natural resources, and other bulk items that are traded by investors at various special exchanges.
Dividend
A payment to the stockholders of a corporation from the company’s earnings.
Corner
Ownership of a sufficient number of shares to influence the price of a particular stock - to “corner” the market.
Capital Gain/Loss
The differences between the sales price of a capital asset, such as stocks, bonds, or mutual funds, and the costs or basis of the assets. If the sales price is higher than the cost, there is a capital gain. If the sales price is lower than the costs, there is a capital loss.
Federal Reserve Bank
Any of twelve regional banks that comprise the Federal Reserve System, which regulates U.S. monetary policy.
Capital
Wealth in any form that is used or capable of being used to produce more wealth.
Diversification
Reducing investment risk by spreading your money among different classes of investments and among the securities of many issuers.
Conglomerate
A corporation, often formed by the merger of many firms, that has many different divisions producing entirely different products.
