Ch 9 Vocab

Ch. 9 Vocab

Vocab

Investing-buying a financial product or asset in an effort to increase your wealth over time.

Security-a document that shows evidence of ownership or debt.

Stock-refers to a share of ownership in a company. Everyone who buys shares of stock is an owner of the company.

Common stock-earns dividends when companies declare them.

Preferred stock-have first claim on assets if the company fails, but they have no voting privileges.

Dividend-a share of the company’s profit is received by stockholders.

Stock Market-also called a stock exchange. Companies may sell stock as a way to raise capital (money) for the operation or expansion of the company.

Fluctuations-or the ups and downs in the stock market.

Recession-occurs when stock prices fall and unemployment rises. Traditionally, the market has always recovered

Expansions-(the upward trends in the stock market) have lasted a lot longer than recessions.

Bull Market-means stock prices are rising.

Vocab

Bear Market-means that stock prices are falling or staying at a low level.

Diversification-simply means spreading out your risk by having several investments.

Growth-the increase in the value of the stock. Suppose you pay $50 for a share of stock today.
Stock Split-is an increase in the number of shares without changing the total value of the shares.

Mutual Funds-are professionally managed investments. They offer diversification and liquidity.

Bond-is essentially a loan for a set period of time.

Coupon Rate-There are three major bond categories: corporate, municipal, and U.S. government bonds.
Corporate bonds-are issued by a business to raise money for operating expenses or expansion.

Municipal bonds-are issued by state, county, or city governments. Interest earned from municipal bonds is exempt from federal income tax.

U.S Savings bonds-are issued by the U.S. Treasury Department. They are the safest bonds available since they are backed by the U.SInvestment Portfolio-Many experts suggest that when you are young, you should own more stocks than bonds.

Dollar-Cost Averaging-is investing a fixed dollar amount at regular intervals, usually monthly, without regard to the price at the time.