Chapter 3

Front 1

Charting

Back 1

A technique that plots the performance of securities over a specified time period, from months to decades or beyond.

Front 2

Descriptive Information

Back 2

Presents factual data on the past behavior of the economy, the market, the industry, the company, or a given investment.

Front 3

Analytical Information

Back 3

Presents projections and recommendations about potential investments based on available current data

Front 4

Types of Information

Back 4

1. Economy and current information
2. Industry and company information
3. Information on alternative investment vehicles
4. Price information
5. Information on personal investment strategies

Front 5

The fair disclosure rule
(Regulation FD)

Back 5

A rule requiring senior executives to disclose material information such as earnings forecasts and news mergers and new products simultaneously to investment professionals and the public. via press releases and SEC filings

Front 6

Stockholder's report
(annual report)

Back 6

Reports that contain a wide range of information, including financial statements for the most recent period of operation, along with summarized statements for several prior years. They are free and may be obtained from the companies themselves, from brokers or downloaded from the companies website

Front 7

Form 10-K

Back 7

A statement that firms with securities listed on securities exchange or traded in the OTC market must file annually with the SEC

Front 8

Investment letters

Back 8

Newsletters that provide, on a subscription basis, the analyses, conclusions, and recommendations of experts in securities investment.

Front 9

Quotations

Back 9

Include current price data and statistics on recent price behavior

Front 10

Financial portals

Back 10

Supersites that bring together a wide range of investing features, such as real-time quotes, stocks and mutual fund screens, portfolio trackers, news, research, and transaction capabilities, along with other personal finance features

Front 11

Averages

Back 11

Reflect the arithmetic average price behavior of a representative group of stocks ata given point in time

Front 12

Indexes

Back 12

Measure the current price behavior of a representative group of stocks in relation to a base value set at an earlier point in time

Front 13

Dow Jones Industrial Average

Back 13

Made up of 30 stocks selected for total market value and broad public ownership. The group consists of high- quality stocks whose behaviors are believed to reflect overall market activity

Front 14

DJIA equation

Back 14

DJIA=(closing share price of stock 1+clsoing share price of stock 2+⋯+closing share price of stock 30)/(DJIA divisor)

Front 15

Standard and Poor's Index

Back 15

Calculated each business day by substituting the closing market value of each stock (closing price * number of shares outstanding) into the S&P Index equation

Front 16

Amex composite index

Back 16

Reflects the price of all shares traded on the NYSE Amex exchange, relative to a base of 550 set at December 29, 1995

Front 17

Nasdaq Stock Market indexes

Back 17

Reflects Nasdaq Stock Market activity. They include the composite index, and the biotech and computer indexes

Front 18

Bond Yield

Back 18

The return an investor would receive on a bond if it were purchased and held to maturity.

Front 19

The Dow Jones Corporate Bond Index

Back 19

Includes 96 bonds-32 industrial, 32 financial and 32 utility/telecom bonds. It reflects the simple mathematical average of the closing prices for the bonds. It is based on a value of 100 set at December 31, 1996. It is published daily in the WSJ and summarized weekly in Barron's.

Front 20

Stockbrokers

Back 20

Act as intermediaries between buyers and sellers of securities. They typically charge a commission to facilitate these securities transactions. They must be licensed by both the SEC and the securities exchanges on which they place orders and must follow the ethical guidelines of those bodies.

Front 21

Premium discount brokers

Back 21

Brokers that focus primarily on making transactions for customers. They charge low commissions and provide limited free research information and investment advice. The investor visits the broker's office, calls a toll-free number, or accesses the brokers web site to initiate a transaction. The broker then confirms the transaction

Front 22

Basic discount brokers
(online brokers or e brokers)

Back 22

Deep-discount brokers through which investors can execute trades electronically online via a commercial service, on the internet, or by phone.

Front 23

Custodial Account

Back 23

A minor's account in which a parent or guardian must be involved in all transactions.

Front 24

Cash Account

Back 24

The customer can only make cash transactions. Customers can initiate transactions and have 3 days to transmit the cash to the brokerage firm.

Front 25

Margin Account

Back 25

The brokerage firm extends borrowing privileges to a credit worthy customer

Front 26

Wrap account
(Managed account)

Back 26

Allows brokerage customers with large portfolios to shift stock selection decisions conveniently to a professional money manager, either in house or independent. The brokerage firms helps the investor select a money manager, pays the managers fees and executes the money manager's trades in return for a 1%-3% of the portfolio's total asset value

Front 27

Odd-lot orders

Back 27

Orders less than 100 (or not a multiple of 100)

Front 28

Round-lot orders

Back 28

Orders for a 100 share unit, or a multiple thereof

Front 29

Market Orders

Back 29

Order to buy or sell stock at best price available when the order is placed. It is the fastest way to place orders

Front 30

Limit Orders

Back 30

Order to but at or below a specified price or to sell at or above a specific price

Front 31

Fill or Kill Orders

Back 31

Limit order not filled immediately is cancelled

Front 32

Day Orders

Back 32

Limit order that expires at the end of the day if not filled

Front 33

Good-'til-cancelled Orders

Back 33

Limit orders that remains in effect for 6 months unless filled, cancelled or renewed

Front 34

Stop-loss Order

Back 34

Used to protect investors from stock price declines. A "suspended" order is placed to sell stock if price reaches or falls below a specified level. Orders can be day of or GTC orders. Once activated it becomes a market order Can also be used to stop orders to buy stocks, such as to limit risk on short sales.

Front 35

Stop Limit Orders

Back 35

Orders to sell stock at or better than specified price. It prevents sale at an undesirable price. No sale may occur if price continues to decline.

Front 36

Day traders

Back 36

Buy and sell stocks quickly throughout the day. They make quick profits and believe that long term stocks lead to large losses.

Front 37

Fixed commission schedules

Back 37

An established commission price for each transaction

Front 38

Negotiated commission

Back 38

A commission to which both parties agree

Front 39

Securities Investor Protection Corporation

Back 39

A non-profit membership corporation that protects customer accounts against the consequences of financial failure of the brokerage firm. They insure up to $500,000

Front 40

Mediation

Back 40

An informal, voluntary approach in which you and the broker agree to a mediator, who facilitates negotiations between the two of you to resolve the case.

Front 41

Arbitration

Back 41

A formal process whereby you and your broker present the two sides of the argument before an arbitration panel. The panel then decides the case.