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Definition
Retirement planning
Supplement current income
Shelter current income from taxes
Achieve future goals |
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preferred stock
corporate bonds
steady dividend or interest payments |
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| an investor’s ability and willingness to tolerate, or accept, risk |
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| the costs associated with trading securities, which include the costs of time, effort, and phone calls, as well as brokerage commissions that are incurred |
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Definition
| a combination of investment instruments |
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| the proportion of funds invested in various categories of assets, such as money market instruments, long-term debt, stocks, and real estate |
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| Monitoring the investment positions |
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Definition
to make sure goals are met
to adjust to changing economic and legal conditions
to include new investment instruments |
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Term
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Definition
agent (middleman) who helps investors trade financial instruments such as stocks, bonds, and derivatives
investors directly provide funds to users of those funds |
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Term
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Definition
banks, credit unions, and S&Ls
manufacture financial products such as mortgages, automobile loans, NOW accounts, or pension funds
allow savers to indirectly provide funds to borrowers |
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Term
| full-service brokerage firm |
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Definition
| offers a variety of services to its clients, including research information, monthly publications that contain investment recommendations, advisory services, etc.. |
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Term
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Definition
offers clients only the basic services associated with trading securities
provides trade execution and related reporting requirements |
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| trades with shares that are not in multiples of 100 |
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Definition
| an order to execute a transaction at the best price available when the transaction reaches the market |
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Term
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Definition
| an order that specifies the price at which an order to buy or sell at the market price (a market order) is initiated |
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Definition
| an order to buy or sell a stock at no worse than a specified price |
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Definition
| instruction to cancel an order if the price conditions are not met by the end of the trading day |
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Term
| good ‘til cancelled (GTC) |
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Definition
| indicates an order is active until the price limitations are met or until the investor cancels it |
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Term
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Definition
| instructs the broker to cancel the order if it cannot be executed immediately |
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Term
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Definition
physical possession of shares registered in your name (stock certificate)
often the brokerage firm holds shares in street name (registered to the brokerage firm) |
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Term
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Definition
provided by most brokerage firms
SIPC limit of $500,000—insurance against theft
additional limits from private organizations |
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Term
Value Line Investment Survey
Moody’s Investment Services
Standard and Poor’s |
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Definition
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Term
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Definition
dollar return=income received + ending value-beginning value of investment
=inc + p1 - p0 |
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Term
| Holding period return (HPR) |
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Definition
| the return earned over the period of time an investment is held |
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Term
| holding rate of return equation |
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Definition
| rate of return / beginning value |
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Term
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Definition
the part of the total return associated with the dividends paid by the firm
= Dividend/(Stock price) |
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| Capital gain (loss) yield |
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Definition
percentage change in the market value of a security
= (P1 – P0)/ P0 |
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| Annualized rate of return |
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Definition
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| Simple arithmetic average return |
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Definition
computed by summing each return and then dividing by the number of returns
does not consider compounding |
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| simple arithmetic average return |
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Definition
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Term
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Definition
| holding period for year t |
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Term
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Definition
computed by taking the nth root of the growth multiple and subtracting 1.0
takes into account compounding |
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Term
Dow Jones Industrial Average (DJIA)
30 largest industrial firms in U. S.
Standard & Poor’s family of indexes
S&P 500, S&P 400, S&P Industrials
Exchange indexes
NYSE, AMEX, NASDAQ
Russell 3000
Wilshire 5000 |
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Definition
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Term
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Definition
include one share of stock in the index
could be biased by high-priced stock |
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based on market capitalization
the total market value of a firm’s stock
computed by multiplying the number of shares outstanding by the market price per share |
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| Strategy where investors purchase securities with the intent of holding them for a long period, perhaps a number of years |
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| type of trade that allows an investor to borrow from his or her broker some portion of the funds needed to purchase an investment |
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| the minimum percent of the total purchase price an investor must “put up” to buy stock (or other investments) on margin |
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Definition
| assigns securities as collateral for a margin loan |
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Definition
| the rate charged by brokers to borrow funds for margin trading |
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Definition
the percentage of investor’s equity
must meet the margin requirement when the stock is purchased |
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Term
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Definition
| a call from the broker to add more funds to a margined account |
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Definition
| the lowest actual margin the broker will permit margined investors to have at any time |
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Term
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Definition
| type of trade that allows an investor to borrow the stock of another investor and then sell it, but with a promise to replace the stock at a later date |
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