investment vocabulary. appreciation o an increase in the basic value of an investment
TRANSCRIPT
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Investment Vocabulary
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AppreciationO An increase in the basic value of an
investment
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DepreciationO A decrease in the basic value of an
investment
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Bear MarketO A market characterized by generally
falling prices over a period of several months or years
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Blue ChipO Common stock of a company known
nationally for the quality of it’s products and it’s profitability
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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.
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BrokerO A representative who handles
transactions related to investor’s order to buy and sell securities.
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Bull MarketO A market characterized by generally
rising prices over a period of several months or years.
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Capital GainO The gain obtained when a security is
sold for more than the purchase price.
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Capital LossO The loss incurred when a security is
sold for less than it’s purchase price.
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Caveat EmtporO Latin Phrase meaning, “Let the buyer
beware”
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CFPO Certified Financial Planner
O An individual who has completed the education requirements of the International Board of Certified Financial Planners
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CFTCO Commodity Futures Trading
Commission
O The federal regulatory agency that monitors the futures and options market
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CommissionO A broker’s or adviser’s fee charged
for buying or selling securities for an investor.
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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.
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Compound Interest O Interest earned on interest that is
added to the principal.
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DiscountO Sale of a bond at a price less than
face value
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DiversificationO Spreading investment funds among
different types of investments and industries
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DividendO Payment received by stockholders
from the earnings of a corporation
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DJIAO Dow Jones Industrial Average
O Price-weighted average of actively traded stocks
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Face ValueO The amount the bond is worth when
it matures.
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FDICO Federal Deposit Insurance
Corporation
O An agency of the federal government created to guarantee bank deposits
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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.
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Futures ContractO A legal commitment to buy or sell a
commodity at a specific future date and price.
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HedgingO The process of protecting an
investment against price increases.
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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.
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Insider TradingO The illegal use of investment
information not generally known to the public.
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InterestO For the investor, interest is the
payment received from a financial institution for lending money to it.
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IRAO Individual Retirement Account
O A tax-defrred savings account
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LiquidityO The ease with which an investment
can be converted into cash.
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Load FundO A mutual fund purchased directly by
the public that charges a sales commission when bought.
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Market RiskO The risk that the price of stocks, real
estate, or other investments will go down due to business cycles or other causes.
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Mutual FundO A company that invests the pooled
money of its shareholders in various types of investments.
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NASAAO North American Securities
Administrators Association
O An organization of securities administrators charged with enforcing securities laws and protecting investors from fraudulent investments.
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No Load FundO A mutual fund purchased directly by
the public and does not have a charge for buying.
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Odd LotO A unit of less than 100 shares of
stock
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P/E RatioO The price of a stock divided by per
share earnings for a 12 month period
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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)
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Ponzi SchemeO An illegal investment scam named
for its inventor, Charles Ponzi.
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PortfolioO The total investments held by an
individual
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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.
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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.
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RiskO In an investment, the uncertainty
that you will get an expected return.
O In insurance, the uncertainty whether a loss will occur.
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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.
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Round LotO 100 Shares of one stock
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SecuritiesO A broad range of investments
instruments, including stocks, bonds, and mutual funds.
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SECO Securities and Exchange Commission
O A federal agency established to license brokerage firms and regulate the securities industry.
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StockO An investment that represents
ownership of a company
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Tax Exempt Investments
O Investments not subject to tax on income earned.
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Time Value of MoneyO An increase in the amount of money
over time as a result of investment earnings.