Financial+Terms

**Basic Financial Terms**

 * Annuities**

These are investments you make now to provide a steady income later. Investments are made in a lump sum or over a period of years. At a specified date, the annuity begins to pay out the accumulated assets of your investment providing income for life or for a set period of years. Bear Market

When stocks start to fall and lose value, it is called a bear market. Like the slang insinuates, stocks seem to go into hibernation and slow down to almost barely breathing.
 * Blue Chips**

Blue Chips are well-known, huge companies that usually have business in many different corners of the world. These are also known as Large Cap stocks. These are considered to be safer investments than smaller companies but are slower growing in returns. Some examples of Blue Chip companies are: Gillette, GE, General Motors, & Ford Motor Co.
 * Broker**

Since we can't all be in New York when the market bell rings each morning, we must rely on those who can or at least those who are directly connected to the market. That's where a broker comes in. You tell them your selling/buying price and they find a buyer/seller for it. Not too unlike a real estate agent. Just as there are different real estate agents there are different stock brokers. Full service brokers do it ALL. They can be hired to pick your stocks, trade your stocks, the whole nine yards. They require very little input from you: just your money! But just like full service real estate agents, they are paid for their services...some quite well. Some charge flat fees per transaction. Some charge a commission percentage. Discount brokers on the other hand are more like the "Help U Sell" agents of real estate. You know what you want and what you'll pay/sell for. They are there just to advertise and do the paperwork. If you're a well informed, do-it-myself kind of woman (which is what we strive for here) a discount broker is the way to go. These brokerage houses charge per transaction, which generally runs about $8 - $12. Ameritrade and E-trade are examples of discount brokerages.
 * Bull Market**

This is a slang term, used to describe the stock market when stocks are booming and gaining value. A strong and "raging" bull market means aggressive growth in stocks.
 * Common stock**

[|Securities] that represent [|equity] ownership in a [|company]. [|Common shares] let an [|investor] vote on such matters as the election of directors. They also give the holder a share in a company's [|profits] via [|dividend] payments or the [|capital appreciation] of the [|security].


 * Day Trading**

This term is used for those folks who try to beat the market through quick trades for profit. Not only is this risky, it is also time consuming. Holding a profitable stock for less than 18 months also increases your capital gains tax. Be smart: buy and hold.
 * Dividends**

Dividends are cash payments paid to shareholders by the company. A company doesn't usually pay out dividends until it is quite profitable and financially secure. Blue Chip companies are the most likely to pay out dividends to its shareholders.
 * Index Funds** (see also "Stock Indexes")

An Index Fund is a mutual fund that buys and holds the same stocks that are in a particular index. The most common is the S&P 500 Index Fund, which buys into all five hundred stocks used in the S&P 500 index. The benefit of an index fund is that it mirrors the performance of the index itself and is easy to track.
 * IPO**

"Initial Public Offering". When a company needs to raise money it will hire an investment banker to take them "public". The banker assesses the company's debts, assets and potential then calculates how many shares to offer and at what price. On opening day the shares enter the market as an IPO. The banker will pay the company for all the shares and then resells them to the public.  Current [|stock] price divided by trailing [|annual] [|earnings per share] //or// expected annual earnings per share. Assume XYZ Co. sells for $25.50 per [|share] and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock sells for ten times [|earnings].


 * Portfolio**

A collection of investments. That's it. No black leather attache case required. The moment you buy a stock or open a mutual fund, you've got yourself a portfolio. As your investments increase so does your portfolio. The term is so general and vague, it can be used to categorize in many broad or specific ways. For example, you could say your "investment portfolio" consists of 50% stocks, 30% bonds and 20% real estate. Even more specific, you could say your "stock portfolio" consists of 60% Blue Chip companies, 20% high tech, and 20% pharmaceutical. Make sense now? Plain and simple, a portfolio just means "a collection of". 

A [|security] that shows ownership in a corporation and gives the [|holder] a claim, prior to the claim of [|common] [|stockholders], on [|earnings] and also generally on [|assets] in the event of [|liquidation]. Most preferred stock pays a fixed[| dividend] that is paid prior to the[| common stock] dividend, [|stated] in a dollar amount or as a percentage of [|par value]. This stock does not usually carry [|voting rights]. Preferred stock has characteristics of both common stock and [|debt].


 * Stock Indexes**

Back in 1896, a man named Charles Dow created a way to gauge how well stocks were performing on a day-to-day basis. He used the 12 largest companies as a benchmark to serve as a measuring stick. Today it still exists as; you guessed it, __The Dow Jones Industrial Average (DJIA)__. This is still the most influential stock market index in the world today, only now it tracks 30 of the largest Blue Chip companies. Over the years other "indexes" have formed and are used just as frequently: __Nasdaq Composite Index__

Originally the National Association of Securities Dealers Automated Quotation, this index was formulated in 1971 and includes over 5,000 companies. Because it is so broad-based, it is the most widely followed and quoted market index. It tracks all the stocks traded on the NASDAQ exchange, which is mostly composed of the high-tech companies. __S&P 500__

The Standard and Poor's 500 Index is used to track the performance of U.S. equities. It consists of 500 companies from a diverse range of industries. It is 500 of the most widely held US based common stocks.
 * Stock Market**

There are actually 3 major markets that American stocks trade on: New York Stock Exchange (NYSE), Nasdaq Stock Market, and the American Stock Exchange. Each differs in the minimum requirements that are imposed on the companies they will list.