Investing Dictionary
I created this investing dictionary to better help understand key word or phrases used in the investment world. This investing resource page will grow as I add more words and acronyms along with their meanings and explanations.
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Guide to Investing dictionary:
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| Term |
Description |
| Angel Invesotr |
A person or group of people who will help finance a small start-up business or entrepreneur. |
| Annual Meeting |
Companies hold a stockholders meeting each year usually the same time to elect the board of directors and to discuss all things related to the business. |
| Annual Report |
All publicly traded companies are required to file its report annually (10K) with the Securities Exchange Commission (SEC).
It includes information about the financial status of the company, where it stands today and what they expect tomorrow (next year).
The Annual Report includes, Earnings, Assets, Liabilities and other financial information. |
| Arbitrage |
The practice of buying and selling two separate but related securities to profit from the difference in their values. |
| Asset |
Cash, product, building, machinery, land, equipment and intellectual property are all considered Assets of a company. |
| Asset Class |
Is a type of investment such as Cash, stocks, bonds and real estate. |
| Average Down |
Buying additional shares of a company’s stock that you already own to minimize the overall cost of all shares owned. |
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| Term |
Description |
| Balance Sheet |
A financial statement showing the company’s assets (what they own) and its liabilities (what they owe, debt).
The difference is the net worth. |
| Bear Market |
The Market's downward trend in prices usually lasting more than a few months or years. |
| Beta |
A Beta is used to describe the volatility of a stock in relation to a stock market index. It’s used to measure the
risk of a particular stock. |
| Blue Chip |
A Blue Chip stock is a term used to describe a big company such as Microsoft, Intel or Exxon.
All 30 Dow components are considered Blue Chip Stocks. |
| Block |
In stock trading a block consists of 1,000 shares of stock and it’s used and a single unit when traded. |
| Board of Directors |
A group of executives elected yearly during the annual meeting. They make decisions about hiring top
executives such as the CEO, issuing more stocks and declaring dividends.Under the bimetallic standard, anyone could bring either metal to the mint for conversion into coins. |
| Bond |
An IOU normally sold to the public by a company or a government body usually extending over a year
to raise money. They have the obligation to pay your back at the end of the term of the Bond. |
| Bond Fund |
A Mutual Fund that invests in Municipal, Corporate or Governments Bonds all bundled into a package. |
| Book Value |
The equity value of an outstanding share of stock. Book value is determined by dividing the amount
of stockholders’ equity to which each share is entitled by the number of shares outstanding |
| Buy and Hold |
Buying a certain investment such as a stock and holding on to it for a long period of time. |
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| Term |
Description |
| Capital Gain |
A gain in your sale of stocks, property or similar assets. The current tax laws states to tax your gains at the rate of 15%, it
use to be 28%. Congress will vote on this type of laws. |
| Capital Loss |
A loss in your sale of stocks, property or similar assets. The loss is tax deductible up to $3000. |
| Capitalism |
An economic system where profit, ownership and competition is valued or accepted. |
| Capitalization |
Everything that is invested in the company, stocks, bonds, earnings and any other assets. |
| Cash Flow |
Same as Net Income plus depreciation. The term is used to identify what is available to issue
a dividend or to buy additional assets such as buying another company. |
| Closed End Fund |
An Investment company with limited number of shares available. If one wants to buy or sell they deal
with directly with the individual and not the investment company. |
| Conglomerate |
A large well diversified corporation that offers a large number of products and services that are
not related to one another. GE and Berkshire Hathaway are good examples of such conglomerates. |
| Counterfeit |
A fake monetary unit resembling genuine currency. A highly illegal practice. |
| Currency |
A form of money used as a means to purchase good and services. Includes coins and paper money. |
| Current Assets |
Assets that are expected to be converted to cash within twelve months. inventory that
has been sold and are expecting payment within twelve months, accounts receivable. |
| Current Liabilities |
Obligations that are expected to be paid within twelve months (accounts payable). |
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| Term |
Description |
| Debenture |
An unsecured (without collateral) bond on the good word and general credit of the borrower. |
| Deflation |
An economic condition of falling prices for goods and services. Deflation is the opposite of Inflation.
Refers to the increasing buying power of cash and a substantially reduced amount of currency in circulation. |
| Depreciation |
The estimated decrease in value of property due to use, deterioration or obsolescence over a period of time. |
Derivative |
A contract where the value is based on the performance of another underlying asset, index, or investment. Derivatives are used to hedge (counter) other investments. They are available based on assets, interest rates, currency exchange rates and various domestic and foreign indexes |
| Dividend |
A payment to stockholders usually in the form of a quarterly check. The dividend is declared by the board of
directors and is normally determined by the level of the company’s earnings. You may also elect to reinvest your dividends. |
| Dollar Cost Averaging |
An investment approach that involves consistently buying uniform dollar amounts of a security regardless
of the price. When prices are low, more shares are bought than when prices are high. |
| Dual Listing |
The same stock listed on more than one exchange. |
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| Term |
Description |
| Earnings |
The amount of profit a company realizes after all costs, expenses and taxes have been paid. |
| Earnings per Share |
The net earnings divided by the average shares outstanding. |
| Estate |
An Estate is everything you own in your own name. Your home, jewerly, car, land, stock, cash, bonds, etc. An estate isn't just a really a big house surrounded by a fence. |
| Expiration Date |
The date on which an option expires. The expiration date has been on a Saturday immediately
following the third Friday of the expiration month. |
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| Term |
Description |
| Federal Reserve Bank |
Known informally as "the Fed", the Federal Reserve Bank is the
central bank of the United States. It was created in 1913 and consists of
a network of twelve Federal Reserve Banks and a number of branches monitored by
a of the Board of Governors.
The Federal Reserve has four main responsibilities:
-- conduct the nation’s monetary policy by influencing the monetary and credit
conditions in the economy in pursuit of maximum employment, stable prices, and
moderate long-term interest rates.
-- regulate banks to ensure the soundness of the nation’s banking and financial
system and to protect credit consumers.
-- maintain the stability of the financial system and contain risks that may
arise in financial markets.
-- provide financial services to depository institutions, the U.S. government,
and foreign official institutions, including playing a major role in operating
the nation’s payments system and dispersing coin and paper money to financial
institutions throughout the country. |
| Financing |
Term used to finance a vehicle, house or any other item with the promise to pay it back over a set period of time. |
| Float |
The number of share currently available for trading. To calculate, deduct the shares outstanding, the number of
shares closely held by individuals or institutions not likely to sell immediately if the stock price rises. |
| Fiat Money |
Money that is not backed by precious metals and is legal tender by governmental decree. A Federal Reserve Note is an example of fiat
money. |
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| Term |
Description |
| GDP (Gross Domestic Product) |
GDP is a way of measuring the size of a country's economy. It is the total market value of all goods and services
produced within a period of time usually a year. |
| Going Public |
The term used to describe the initial sale of shares of a privately held company to the general public for
the first time. It is more commonly known as an IPO, Initial Public Offering. |
| Gross Profits |
Profits earned from the basic manufacturing or service operation before selling costs and other expenses
are deducted and before taxes are paid. |
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| Term |
Description |
| Hedge Fund |
A large unregulated pool of investment funds restriced to high net worth investors that aims to make money by identifying investments likely to rise and likely to fall and taking both long and short positions. |
| Hold |
a security analyst's recommendation to Hold on your decision to buy or sell a stock. |
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| Term |
Description |
| Income Statement |
A Financial statement that presents a company’s business results over a specific period of time, usually quarterly
or annually. It shows all revenues, costs and expenses, taxes and earnings. |
| Index |
The measure of a combined, representative value of a group of stocks, bonds, currencies, commodities or other
interests. An index is ordinarily expressed in relations to tit’s original base value. |
| Index Option |
A call or put option having an index as the underlying security. Index options are similar in
many ways to listed stock options except that exercising is settled with a cash payment rather than receiving or
delivering stock. |
| Inflation |
An economic condition of rising prices for goods and services. Inflation refers to a declining buying
power of cash and a substantially greater amount of currency in circulation. It is generally the result of excessive government
spending. |
| Insider |
An officer or director of a company who has corporate information not available to the public. |
| Insitutional Investor |
A Bank, mutual fund, pension fund, insurance company or other institution that invests in the stock market. |
| Interest |
The money a borrower pays a lender for the use of money borrowed such as a mortgage, car payment or credit
cards use. |
| International Monetary Fund (IMF) |
An agency setup by the UN in 1944 under the Bretton Woods System to help prevent unstable exchange rates and balance of payments. It also offers financial assistance to several countries. |
| Intrinsic Value |
The amount by which the current price of the underlying security is above the call option’s strike price
(or below the put option’s strike price). An option that has intrinsic value is said to be in the money. |
International Oil Companies (IOC) |
IOC's are companies that operate internationally. These companies are found all over the world, Exxon Mobile, BP and Shell to name a few. |
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| Term |
Description |
| Junk Bonds |
Bonds that have little value, collateral or liquidation value. Junk bonds offer higher interests
income, but with greater risks. |
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| Term |
Description |
| Leverage Buyout |
Acquiring control of a company, usually using debt. Typically, the stock is purchases by employees or a group
of investors with the help of an investment banker. |
| Liability |
Whatever a company owes, they can be bills unpaid, rent or even bonds that need to be re-paid. |
| Liquidate |
To sell stocks or assets to obtain cash. |
| Liquidity |
The ability of a stock to absorb a large amount of buying or selling without disturbing the price substantially. |
| Long Term Debt |
Liabilities that are expected to be re-paid after twelve months. |
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| Term |
Description |
| Margin Account |
An account, with a brokerage firm, that allows an investor to buy or sell stock on credit. (could be dangerous). |
| Market Breadth |
The extent or scope of change in stock prices. It’s measured by analyzing the number of stocks that advanced
or declined during the period of by counting the number of stocks hitting new highs or new lows./td> |
| Market Order |
An order to buy or sell at the best possible price as soon as it can be accomplished. |
| Mint |
A facility where coins are minted under governmental authority. |
| Municipal Bond |
A bond issued by a local government bodies, such as cities, counties, school districts or other
government subdivision. |
| Mutual Fund |
An open-end investment company. A mutual fund offers the investor the benefits of portfolio diversification.
For example you can own a basket of stock in one fund which provides better safety than owning just one stock. |
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| Term |
Description |
| NASDAQ |
The computerized National Association of Security Dealers Automated Quotation System.
It provides price quotes to brokers and dealers. |
| National Oil Companies (NOC) |
NOC's include Saudi Arabia's Aramco, Angola's Sonangol, Brazil's Petrobras, Venezuela's PDVSA and Russia's Gazprom. It is said that they control 95% of the world's oil and gas reserves. |
| Net Earnings |
The profit a company realizes after all costs, expenses, and taxes have been paid. |
| Net Profit Earnings |
The profitability of a company after taxes are paid. The net profit margin is
calculated by dividing net earnings by total revenues. |
| Net Worth |
See Shareholder Equity |
| Numismatics |
The study and collection of money and medals, including coins, tokens, paper currency and medals. |
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| Term |
Description |
| Odd Lot |
Number of shares purchased that are less than 100, any number between 1 and 99. Round lot is
in increments of 100. |
| OPEC |
The Organization of Petroleum Exporting Countries. OPEC is a international organization created at the Baghdad conference in 1960 by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela. These 5 were the original members, since then several others have joined the organization. OPEC countries rely on oil revenues for their economies. They also achieve stable oil prices and maintain balance for both producers and consumers. |
| Option |
A contract allowing an investor to purchase or sell 100 shares of stock at a predetermined price
anytime up to a predetermined expiration date. |
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| Term |
Description |
| Paper Profit
| A profit that has not been realized, not cashed in-in other words. |
| Par Value |
In a Bond, par value refers to the stated value of a bond, usually 1,000 or 100.
In stocks par value is an arbitrary value primarily used for bookkeeping purposes. |
| Payout Ratio |
The amount that a company earnings pays out to shareholders as a dividend. For example,
a company pays a $0.25 dividend out of every $1.00 of earnings has a payout ratio of 25%. |
| Pink Sheets |
A daily list of Over the Counter stock not traded on the NASDAQ. |
| Preferred Stock |
If a company is dissolved because of poor performance or any other reason the
Preferred Stockholders have first claims to dividends and/or assets prior to the common shareholders. |
| Price to Earnings Ration (P/E) |
The relations between the price of a stock and the earning per share. To calculate,
divide the stock price by the earning per share figure. A stock selling for $50 with earning of $5.00 has a
P/E ratio of 10. |
| Profit Margins |
The profitability of a company measured by relating profits to revenues. The three
most common are; operating profit margin, pretax profit margin and net profit margin. |
| Prospectus |
A document or booklet describing the company’s details and data on the corporation.
This way a potential buyer can make an inform decision if he chooses to purchase shares of the company. |
| Proxy |
A voting authorization by a stockholder allowing a representative or someone else to vote
for or against board of directors and certain proposals at the annual meeting. |
| Proxy Fight |
Two or more groups soliciting signed proxies from shareholders to gain a voting majority.
Usually to win control of the corporation and oust the incumbent management. |
| Put Option |
A contract giving the holder the right to sell 100 shares of a stock at a predetermined
price, called strike price anytime up to a predetermined expiration date. A put option is bought to profit
by a decline in the stock’s price. |
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| Term |
Description |
| Quote |
The last price a stock or security was traded or the most recent price that was agreed
upon by both the buyer and seller |
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| Term |
Description |
| Return on Equity |
The rate of investment return a company earns on shareholder equity. Return
on equity is calculated by dividing net earnings by average shareholder equity. |
| Revenue |
Term used to describe the income of a corporation. Total sales and other income before any
expenses are deducted. |
| Round Lot |
A standard unit of trading. Let’s say 100 shares of stock. |
| Rule of 72 |
Simply divide the interest you want to earn, (8%, 10%, 15%) or whatever number by 72. The answer is the amount of years it will take for you to double your money. |
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| Term |
Description |
| Sales |
The total dollar value of products sold by a company. |
| Security and Exchange Commission (SEC) |
The Securities and Exchange Commission, established to oversee the security markets
and other financial institutions. |
| Shares Outstanding |
The number of shares issued by a company during it’s IPO and trading in the market. |
| Short Sale |
A trading technique used when a stock is expected to go down in price. A short sale
involves selling borrowed stock anticipating that the same number of shares well be repurchased after at a lower
price. The repurchased shares are then returned to the owner from whom there were originally borrowed. |
| Spread |
The difference between the bid and ask price for a stock. |
| Stock Split |
A division of a company’s shares into a greater or lesser number. For example a
2 for 1 stock split. If the one stock is worth $10 then 2 stocks are now worth $5.00. |
| Stop Order / Stop Loss |
An order that becomes a market order once the stock sells at or through a specific price, called
the stop price. A stop order is used to protect your profits or limit the possibility of loss. |
| Straddle |
An investment strategy of simultaneously buying or writing both a call and put on the same
security with the options having identical exercise prices and expiration date. |
| Spot Price |
The current market price for immediate sale of a precious metal, or any other commodity. |
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| Term |
Description |
| Tender Offer |
An offer by a company or a special group to purchase stock of another company. |
| Treasury Bill |
An obligation of the US government with a maturity date less than one year from the date of issue.
A treasury bill bears no interest but is sold to the investor at a discount prior to maturity. |
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| Term |
Description |
| Up Tick |
A term used to describe a jump in price after the last transaction. Let’s say a stock was at $10.00 now it’s
at $10.20. |
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| Term |
Description |
| Volatility |
The amount of risk associated with changes in the value of an investment. Stocks tend to be more volatile than other types of investments, but have the greatest returns over time. |
| Volume |
The total number of shares traded of an individual stock or the entire market. You’ll hear the market
was up on increased volume. The total number of shares bought and sold on a give day or period of time. |
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| Term |
Description |
| Watch List |
A list of securities being monitored by a analyst and brokerages to spot any odd behavior. |
| Water Mark |
A design put into paper during the manufacturing process by pressing it while wet between rollers bearing the design. |
| Write Down |
Reducing the book value of an asset because it is overvalued compared to the market price. |
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| Term |
Description |
| Yield |
The annual return on an investment from dividends or interest expressed as a percentage of either cost
or current price. |
| Yield Curve |
The yield difference between short term Treasury notes and long term Treasury bonds. This economic indicator
is watched closely by economists and market players. |
| Yield to Maturity |
The yield of a bond also taking into account the premium or discount of the bond and the amount of time to
it’s maturity. |
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