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These definitions accompany the Motley Fool, Digital Trading and the AMEX/NASDAQ merger. STOCK/SHARE: A share of stock is a little piece of paper that says you've bought a part of a company. (Yes, you are kind of "sharing" a company.) For instance, there are over 6,000,000 shares of Ben & Jerry's ice cream stock. If you own one stock, you own about one-six millionth of the company. BOND: A bond is like an IOU. It's a certificate that stands for a loan from you, the investor, to the government or the company that issued it. MUTUAL FUND: If you don't want to worry about what to invest in, a mutual fund manager will do it for you. Mutual fund companies are in the business of investing your money. They "pool" everyone's money together and concentrate on making good investment choices. In return, you have to pay a fee, which is sometimes called a "load." STOCK MARKET: A place where stocks and bonds are bought and sold. Also called a stock exchange. AMEX: The American Stock Exchange handles medium-sized and small-sized companies. NASDAQ: Pronounced "naz-dak," NASDAQ is a lot easier to remember than National Association of Securities Dealers Automated Quotations. This is the most modern, computerized stock exchange. NYSE: Referred to as the "Big Board," The New York Stock Exchange trades some of the biggest and most well-known stocks. STOCK BROKER: The go-between person who handles your order to buy and sell stocks. You can visit, telephone, or e-mail a stockbroker and tell her that you want $200 worth of GAP stock. She sends a message to someone working on the floor of the stock exchange your choice sits on. This person, called a floor broker, runs to the space where GAP is sold and buys it from the company. The floor broker then goes to one of the computers and reports his purchase. Only then can your stockbroker tell you that you have your stock at a certain price. TRADE FEE: When you tell your stock broker what kind of stock you want she'll say, well it's trading at $17 a share, and I charge $50 for my services, so I can get you 8 shares. Another fancy word for a fee is "commission." INTEREST: Say you have money in a bank savings account. It earns interest of about 3% a year. So if you invest $100 in January 1999, on December 31 you'll have $103. COMPOUNDED INTEREST: This the money you earn on the interest you earned before. Your money can be compounded yearly, monthly, daily or continuously. The more time you leave your money in a bank account, or a good stock, the more you'll have. COMPOUNDED GROWTH: Let's say you save $2,000 per year from age 22 to age 30. The chart shows how your investment will grow to $579,468 -- over half a million dollars by the time you retire. If you didn't start saving till you were 31, and then put away $2,000 a year for 35 years, you'd have $470,249.
ANNUAL REPORT: A financial document from a company that shows whether it made a profit or not and outlines its pluses and minuses. APPRECIATION: No not what you show when your teacher drops your lowest grade. This is when the value of your investment goes up. BEAR MARKET: When stock prices fall. Pessimism, and recession sometimes follow. BULL MARKET: Opposite of a bear market. It's when prices are rising and the outlook is sunny. BLUE CHIP STOCK: The stock of a leading company which is known for superior management. Blue chip stocks are listed on the Dow Jones Industrial Average.
DIVIDEND: The amount of a company's earnings paid to its stockholders. INTEREST: The amount a borrower pays a lender for the use of his or her money. INVESTOR: Buying a house is an investment, so is buying stock, bonds or anything that might make you more money in the future. When you make an investment, you become an investor. IRA: The government's way of encouraging people to save. Individual Retirement Accounts allow you to put off paying taxes on money you save. LIMIT ORDER: An order to buy or sell shares of a stock, but only if you can get it at the price you want or better. MARGIN: Different stock brokers offer options where you can borrow money from them with the idea that your stock will go up and you can pay it back. This is called buying on margin. You must sign an agreement that says that if the stock goes down, you will pay the broker back. PRICE HISTORY: A chart showing the price of a certain stock over time. This helps show whether a stock has a strong history or a weak one. PROSPECTUS: A document explaining the complete history of a particular company or stock. SEC: The Securities and Exchange Commission is an agency set up by Congress in 1933. It regulates companies and stocks to protect investors. SECURITY: Just another name for an investment or stock. Security, investment security and investment product mean basically the same thing. SPREAD: If you place an order with a stock broker, he might offer you a spread. That's the difference between the price at which your broker buys the stock and the price he quotes you. STOCK EXCHANGE: A place where stocks are bought and sold. It could be on the floor of the New York Stock Exchange, or the computers at the Chicago Stock Exchange. Countries as far away as Hong Kong, South Africa and Zimbabwe have stock exchanges. STOCK QUOTE: The highest bid to buy and the lowest offer to sell a stock.
STANDARD & POOR 500: Also known as the S&P's 500. It's an index that many consider to be the best measure of the stock market's movement. YIELD: The return of an investment as expressed as a percentage.
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The
Stock Market
DOW:
The Dow Jones Industrial Average, sometimes called the DJIA or Dow,
is the average closing prices of thirty