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74 Cards in this Set
- Front
- Back
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securities market
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A place where you buy and sell securities and where stocks and bonds are bought and sold among investors.
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primary market
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A market in which new, as opposed to previously issued securities are traded.
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Initial Public Offering (IPO)
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The first time company's stock is traded publicly.
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secondary markets
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The markets in which previously issued securities are traded
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organized exchange
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a physical location where trading occurs. This is actually a building where stocks are trading.
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over-the-counter market
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transactions are conducted over the telephone or via a computer hookup. Stocks less frequently traded, along with many n ew and high-tech stocks, are relegated to over the counter markets.
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bid price
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The price at which an individual is willing to purchase a security.
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ask price
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The price at which an individual is willing to sell a security
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odd lot
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Sales of common stock shares in groups between 1 and 99. This is processed by "odd lot dealers," who buy and sell out of their inventory.
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round lot
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Sales of common stock shares in groups of 100 shares on the NYSE.
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market order
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An order to buy or sell a set number of securities immedately at the best price available.
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limit order
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An order that specifies a securities trade is to be made only at a certain price or better.
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stop or stop-loss order
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an order to sell a security if the price drops below a specified level or to buy if the price climbs above a specified level.
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short selling
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borrowing stock from your broker and selling it with an obligation to replace the stock later.
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margin account
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Securities trading accounts in which the traders borrow a portion of the purchase price from their broker.
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street name
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When buying securities, you can register them in the "street name" instead of your own name. This means that you own the security as normal, but there are no physical stock certificates. This is more convenient to sell because the stocks certificates or bonds don't have to be delivered to your broker.
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SIPC
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Securities Investor Protection Corporation.
-Provides up to $500,000 of insurance to cover investors' account balances in the event that their brokerage firm goes bankrupt. |
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Full service broker (account executive)
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A broker who gives advice and is paid on commission, where that commission is based on the sales volume generated.
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Discount (service) broker
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A "no frills" broker who executes trades without giving any advice and thus charges much lower commisssion than a full-service broker.
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Deep Discount Broker
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A very low cost, no-frills discount broker with prices that undercut traditional discount brokers.
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Proxy ballot
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A legal agreement a stockholder signs to allow someone else to vote for him or her at the corporation's annual meeting.
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earnings per share
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reflects the level of earning by common stockholders achieved for every share of stock.(after preferred stock dividends are paid).
NI - Preferred Stock Div. ____________________ number of shares of CS outstanding |
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price/earning ratio
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The price per share divided by the earnings per share. Also called the earnings multiple.
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Dow Jones ndustrial Average (DJIA), or Dow
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A commonly used stock index or indicator of how well stocks have done. This index is comprised of stock prices of 30 large industrial firms.
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Standard and Poors 500 Index
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Another commonly used stock index or indicator of how well stocks have done based on the movements of 500 stocks, primarily from the NYSE.
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Growth stock
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Common stocks issued by companies that have exhibited sales and earnings growth well above their industry average. Generally, these are smaller stocks, and many times they are newly formed.
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Income stocks
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Common stocks issued by mature firms that pay relatively high dividends, with little increase in earnings.
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Defensive stocks
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Common stocks issued by companies whose earnings tend not to be affected by swings in the economy andin some cases actually perform better during downturns. A stock's classification can change over time.
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Blue chip stocks
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Common stocks issued by large, nationally known companies with sound financial histories of solid dividen and growth records.
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Cyclical stocks
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common stocks issued by companies whose earnings tend to move with the economy. A stock's classification can change over time.
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Principle 1: The risk-return trade-off
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Investors demand additional return for taking on added risk.
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Risk tolerance
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How certain people act to risk. Some people freek out at the slightest risk and others are daredevils. This is important to know so you can invest accordingly.
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Stock splits
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Increasing the number of stock shares outstanding by replacing the existing shares of stock with a given number of shares. For example, in a two-for-one split for every share of existing stock you hold, you would recieve two shares of new stock.
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Open-end mutual fund
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A mutual fund that has the ability to issue as many shares as investors want. As investors buy more shares, the fund grows, and when they sell shares, the fund shrinks. The values of all the investments that the fund holds determines how much each share in the mutual fund is worth.
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closed end mutual fund
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A mutual fund that can't issue new shares. These funds raise money only once by issuing a fixed number of shares, and thereafter the shares can be traded between investors. The value of each share is determined both by the value of the investements the fund holds and investor demands for shares in the fund.
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Money market mutual fund
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Mutual funds that invest in treasury bills, certificates of deposit, commercial paper, and other short-term notes, generally within a maturity of less than 30 days.
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Life Cycle funds
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Mutual funds that try to tailor their holdings to the investor's individual characteristics, such as age and risk tolerance.
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Sector fund
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a specialized mutual fund that generally invests at least 65 percent of its assets in securities from a specific industry.
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Aggressive growth fund
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A fund that tried to maximize capital apprecition while ignoring income. In other words, these funds tend to go for stocks whos prices could rise dramatically, even though these stocks tend to pay very small dividends.
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asset allocation fund
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A mutual fund that invests in a mix of stocks, bonds, and money market securities. Asset allocation funds differ from balanced funds in that they aggressively move money between stocks and bonds in an attempt to outperform the market. That is, when the fund manager feels stocks are on the rise, a higher proportion of the fund's assets are allocated to stocks.
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bond fund
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mutual funds that invest primarily in bonds
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front load
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Where mutual fund loads or sales commission is charged when the funds are purchased
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back load
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a commission that's charged only when the investor liquidates his or her holdings
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no load
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when a mutual fund doesn't charge sales commission
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expense ratio
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the ratio of a mutual fund's expenses to its total assets.
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pension plan
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A plan where a person's employer provided benefits when they retire
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vesting
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to gain the right to the retirement contributions made by your employer in your name. In the case of a pension plan, employees become vested when they've worked for a specified period of time and, thus gained the right to pension benefits.
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Defined benefit plan
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a tradition pension plan in which you receive a promised or "defined" pension payout at retirement. The payout is based on a formula that takes into account your age at retirement, salary level, and years of service.
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Defined contribution plan
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A pension plan n which you and your employer or your employer alone contributes directly to a retirement account set aside specifically for you. In effect, a defined-contribution plan can be thought of as a savings account for retirement.
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Traditional IRA
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A retirement account to which an individual can contribute up to $3,000, annually in 2002 - 2004, $4000 annually in 2005 - 2007, and $5000 in 2008. This contribution may or may not be tax-deductible, depending on the individual's income level or whether he or she, or his or her spouse, is covered by a company retirement plan. Traditional IRA's are taxed when the money is distributed.
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Roth IRA
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An IRA in which contributions are not tax deductible. That is you'd make your contribution to this IRA out of after-tax income. But once the money is in there, it grows tax free and when it is withdrawn, the withdrawals are tax free.
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estate planning
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the process of planning for what happens to your accumulated wealth and your dependents after you die.
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Will
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a legal document that describes how you wan your property to be transferred to others after your death.
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estate tax
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This is a process of calculating how much taxes you have to pay of your estate. The first step is calculate the value of the gross estate. Next calculate your taxable estate by subtracting funeral, administrative, debt, liabilities, mortgages, and any deductions from the gross estate. Next calculate your gift adjusted taxable estate which means your cumulative lifetime gifts must be added to your estate taxes then the "estate-tax-free transfer threshold" is subtracted out. Then you multiply this number by the federal estate tax rate, which is somewhere around 45%. There could also be taxes imposed by the state.
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Marital deducion
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There are unlimited martial deductions under US tax code. An entire estate can be transfered to a spouse tax free regardless of the size.
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executer
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An individual who is responsible for carrying out the provisions of your will and managing your property until the estate is passed on to your heirs.
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guardian
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An individual who'll care for any children under the age of 18 and manage their property.
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probate
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A legal procedure that establishes the validity of a will and then distributes the estates assets.
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codicil
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an attachment to a will that alters or amends a portion of the will
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Living will
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a directive to a physician that allows you to state your wishes regarding medical treatment in the event of an illness r injury that renders you unable to make decisions regarding life support or other measures to extend your life.
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Durable POA
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(power of attorney)
A document that provides for someone to act in your place in the event that you become mentally incapacitated. |
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JTWROS
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Joint tenancy with the right of survivorship.
A type of ownership in which two or more individuals share the ownership of assets, usually in a joint account at a bank or a brokerage firm. When one joint owner dies, the ownership passes directly on to the surviving owners, bypassing the will. |
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tenancy in common
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A type of ownership in which two or more inviduals share ownership of assets. When one of the owners dies, that owner's share isn't passed on to the other owners. It becomes part of the deceased's estate and is distributed according to the deceased's will.
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tenancy by the entirety
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A type of ownership limited to married couples. Property held this way can be transferred only if both the husband and wife agree. In addition, upon the death of one, the property automatically passes directly to the survivor.
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testamentary trust
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A trust created by your will, which becomes active after you die.
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living trust
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a trust created during your life.
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letter of last instructions
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a letter, generally to your surviving spouse, that provides information and directions with respect to the execution of the will.
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financial risk
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a risk associated with a company's use of debt. As a firm takes on more debt, it also takes on interest and principal payments that must be made regardless of how well the firm does. If a company takes on too much debt and can't meet its obligations, investors risk the company defaulting or dropping in stock value.
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business risk
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The risk on fluctutations in security prices resulting from good or bad management decisions, or how well or poorly the firm's products are doing in the marketplace.
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market risk
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risk associated with overall market movements. There tends to be periods of bull markets, when all stocks seem to move upward, and times of bear markets, when all stocks tend to decline in price.
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dividend
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payment by a corportation to its shareholders
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interest
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income return from an investment such as bonds.
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return on investment
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When an investment goes up or down in value, this is a capital gain or loss. The second component to an investment return is in the income return or the payments you receivedirectly from the company or oganization in which you've invested. This is usually in the form of interest or dividends.
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retained earnings
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earnings not paid out as interest but instead reinvested in the core business or used to pay off debt.
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