Investment
Vocabulary
Appreciation
O An increase in the basic value of an
investment
Depreciation
O A decrease in the basic value of an
investment
Bear Market
O A market characterized by generally falling
prices over a period of several months or
years
Blue Chip
O Common stock of a company known
nationally for the quality of it’s products and
it’s profitability
Bond
O 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.
Broker
O A representative who handles transactions
related to investor’s order to buy and sell
securities.
Bull Market
O A market characterized by generally rising
prices over a period of several months or
years.
Capital Gain
O The gain obtained when a security is sold for
more than the purchase price.
Capital Loss
O The loss incurred when a security is sold for
less than it’s purchase price.
Caveat Emtpor
O Latin Phrase meaning, “Let the buyer
beware”
CFP
O Certified Financial Planner
O An individual who has completed the
education requirements of the International
Board of Certified Financial Planners
CFTC
O Commodity Futures Trading Commission
O The federal regulatory agency that monitors
the futures and options market
Commission
O A broker’s or adviser’s fee charged for
buying or selling securities for an investor.
Common Stock
O 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.
Discount
O Sale of a bond at a price less than face
value
Diversification
O Spreading investment funds among different
types of investments and industries
Dividend
O Payment received by stockholders from the
earnings of a corporation
DJIA
O Dow Jones Industrial Average
O Price-weighted average of actively traded
stocks
Face Value
O The amount the bond is worth when it
matures.
FDIC
O Federal Deposit Insurance Corporation
O An agency of the federal government
created to guarantee bank deposits
Financial Planner
O 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 Contract
O A legal commitment to buy or sell a
commodity at a specific future date and
price.
Hedging
O The process of protecting an investment
against price increases.
Inflation Risk
O 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 Trading
O The illegal use of investment information not
generally known to the public.
Interest
O For the investor, interest is the payment
received from a financial institution for
lending money to it.
IRA
O Individual Retirement Account
O A tax-defrred savings account
Liquidity
O The ease with which an investment can be
converted into cash.
Load Fund
O A mutual fund purchased directly by the
public that charges a sales commission
when bought.
Market Risk
O The risk that the price of stocks, real estate,
or other investments will go down due to
business cycles or other causes.
Mutual Fund
O A company that invests the pooled money of
its shareholders in various types of
investments.
NASAA
O North American Securities Administrators
Association
O An organization of securities administrators
charged with enforcing securities laws and
protecting investors from fraudulent
investments.
No Load Fund
O A mutual fund purchased directly by the
public and does not have a charge for
buying.
Odd Lot
O A unit of less than 100 shares of stock
P/E Ratio
O The price of a stock divided by per share
earnings for a 12 month period
Penny Stocks
O 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 Scheme
O An illegal investment scam named for its
inventor, Charles Ponzi.
Portfolio
O The total investments held by an individual
Preferred Stock
O Ownership in a corporation that has a claim
on assets and earnings of a company before
those of common stockholders but after
bondholders.
ROI
O 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.
Risk
O In an investment, the uncertainty that you
will get an expected return.
O In insurance, the uncertainty whether a loss
will occur.
Risk Tolerance
O 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 Lot
O 100 Shares of one stock
Securities
O A broad range of investments instruments,
including stocks, bonds, and mutual funds.
SEC
O Securities and Exchange Commission
O A federal agency established to license
brokerage firms and regulate the securities
industry.
Stock
O An investment that represents ownership of
a company
Tax Exempt Investments
O Investments not subject to tax on income
earned.
Time Value of Money
O An increase in the amount of money over
time as a result of investment earnings.