The DOW: A group of 30 large companies
representing major industries whose adjusted average
price is watched by investors as an indicator of the
health and direction of the stock market.
NASDAQ: National Association of Securities
Dealers Automated Quotations. Pronounced “nazzdak”, the
largest stock exchange in the world.
MUTUAL FUND: An investment company that combines
the money from a large group of investors to buy stocks
and other investments.
SECURITIES: Stocks, bonds, and bank deposits.
VOLUME: The number of shares of stock traded in a
day.
BUBBLE: When the price of stocks rise to a level
way far beyond any reasonable value, and speculators are
buying at crazy prices and actually finding other fools
to pay even more than they did. When the market then
crashes, the bubble is said to have burst.
BULL MARKET: When most stock prices are going up
over several months.
BEAR MARKET: When most stock prices are going
down over several months.
INCOME / REVENUE / SALES: What a company is paid,
for the goods they produce, or the services they
provide. This is not the same as profit.
EARNINGS / PROFIT: What a company has left over
after all costs, overhead and (as reported by public
corporations) after taxes. This is called the Bottom
Line. When a company is making money, they are said to
be "in the black". When a company is losing money, they
are "in the red".
ASSETS: What a company owns such as plants,
equipment, inventory, cash, patents, and anything else
that a value can be placed upon.
BOOK VALUE / NET WORTH / EQUITY: A company's
assets minus what it owes. What a company owes is called
its liabilities.
FISCAL YEAR: A 12 month period selected by a
company for reporting to the IRS.
RISK: The chance that you may lose money.
INFLATION: When things cost more than they used
to cost.
I offer my definitions in a way that I hope makes sense
to the average person. If I try to be too exact, I would
have to, for example, define INFLATION as "a monetary
phenomenon generated by an over expansion of credit
which tends to drive up prices of assets while
diminishing the worth of paper currency". Say what?
By ignoring the textbook definitions, I am risking the
ridicule and criticism of the "experts". That's okay
with me. This book isn't for those who already know
everything.
Other "Why Invest Money?" Topics:
- Investing Introduction for Adults
- Special Investing Introduction for Children & Young Adults
- Introduction to the Investing Concept of the Golden Piggy Bank
- Compounding Interest - The Magic and Power
- Basic Investing Words You Need to Know
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