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Investment Vocabulary
AppreciationO An increase in the basic value of an
investment
DepreciationO A decrease in the basic value of an
investment
Bear MarketO A market characterized by generally
falling prices over a period of several months or years
Blue ChipO Common stock of a company known
nationally for the quality of it’s products and it’s profitability
BondO Certificate representing a loan of
money to a corporation or government for a specific period, in exchange for a promise to repay the bondholder the amount borrowed plus interest.
BrokerO A representative who handles
transactions related to investor’s order to buy and sell securities.
Bull MarketO A market characterized by generally
rising prices over a period of several months or years.
Capital GainO The gain obtained when a security is
sold for more than the purchase price.
Capital LossO The loss incurred when a security is
sold for less than it’s purchase price.
Caveat EmtporO Latin Phrase meaning, “Let the buyer
beware”
CFPO Certified Financial Planner
O An individual who has completed the education requirements of the International Board of Certified Financial Planners
CFTCO Commodity Futures Trading
Commission
O The federal regulatory agency that monitors the futures and options market
CommissionO A broker’s or adviser’s fee charged
for buying or selling securities for an investor.
Common StockO The most basic form of corporation
ownership. Owners of common stock have a claim on the assets of a company after those of preferred stockholders and bondholders.
Compound Interest O Interest earned on interest that is
added to the principal.
DiscountO Sale of a bond at a price less than
face value
DiversificationO Spreading investment funds among
different types of investments and industries
DividendO Payment received by stockholders
from the earnings of a corporation
DJIAO Dow Jones Industrial Average
O Price-weighted average of actively traded stocks
Face ValueO The amount the bond is worth when
it matures.
FDICO Federal Deposit Insurance
Corporation
O An agency of the federal government created to guarantee bank deposits
Financial PlannerO A person who advises others about
financial issues. This person may need to be registered as an investment adviser if he/she provides investment advice for a fee.
Futures ContractO A legal commitment to buy or sell a
commodity at a specific future date and price.
HedgingO The process of protecting an
investment against price increases.
Inflation RiskO The risk that the financial return on
an investment will lose purchasing power due to a general rise in prices of goods and services.
Insider TradingO The illegal use of investment
information not generally known to the public.
InterestO For the investor, interest is the
payment received from a financial institution for lending money to it.
IRAO Individual Retirement Account
O A tax-defrred savings account
LiquidityO The ease with which an investment
can be converted into cash.
Load FundO A mutual fund purchased directly by
the public that charges a sales commission when bought.
Market RiskO The risk that the price of stocks, real
estate, or other investments will go down due to business cycles or other causes.
Mutual FundO A company that invests the pooled
money of its shareholders in various types of investments.
NASAAO North American Securities
Administrators Association
O An organization of securities administrators charged with enforcing securities laws and protecting investors from fraudulent investments.
No Load FundO A mutual fund purchased directly by
the public and does not have a charge for buying.
Odd LotO A unit of less than 100 shares of
stock
P/E RatioO The price of a stock divided by per
share earnings for a 12 month period
Penny StocksO High risk stocks that generally sell
for less than $3 and are not listed and traded on any exchange or stock market.
O (Con Artists often deal in Penny Stock frauds)
Ponzi SchemeO An illegal investment scam named
for its inventor, Charles Ponzi.
PortfolioO The total investments held by an
individual
Preferred StockO Ownership in a corporation that has
a claim on assets and earnings of a company before those of common stockholders but after bondholders.
ROIO Return on Investment
O A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
RiskO In an investment, the uncertainty
that you will get an expected return.
O In insurance, the uncertainty whether a loss will occur.
Risk ToleranceO A person’s capacity to endure
market price swings in an investment.
O Risk tolerance is an important component in investing. An individual should have a realistic understanding of his or her ability and willingness to stomach large swings in the value of his or her investments.
Round LotO 100 Shares of one stock
SecuritiesO A broad range of investments
instruments, including stocks, bonds, and mutual funds.
SECO Securities and Exchange Commission
O A federal agency established to license brokerage firms and regulate the securities industry.
StockO An investment that represents
ownership of a company
Tax Exempt Investments
O Investments not subject to tax on income earned.
Time Value of MoneyO An increase in the amount of money
over time as a result of investment earnings.