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Investing - It's a whole new language. by James Femling http://www.femstock.com =========================================== Many of us are involved in the stock market, sometimes indirectly. If you participate in a 401k or mutual fund, you are investing in stocks through a corporation. We all have heard both horror stories of losing money on the stock market, and promising stories of making hundreds of thousands of dollars. Sometimes it's difficult for us to understand the terminology behind the stock market. We have trouble deciphering what an analyst is saying. The key to gaining an understanding of the stock market starts with understanding some of the terminology: STOCK - Stocks are small portions of companies. SHARES are pieces of stock and are traded, usually in amounts of 100, 1000, etc. If you own a share, you are a SHAREHOLDER. DIVIDEND - ~The 'payout' of your stock. It's a percentage of what the corporation earns that is given to you as a shareholder. COMMON STOCK - This is the type of stock that is traded on the popular stock exchanges. It may gain dividends and gives an owner the right to vote in corporate matters. PREFERRED STOCK - is the kind that is given to investors in the company so it cannot be purchased on the open market. It does not carry voting rights but it is guaranteed dividends if there are dividends to be distributed to shareholders that year. OPTIONS - These are agreements that you have an OPTION to buy a stock at a given price for a limited time. These have value and are traded. MUTUAL FUNDS - This is an investment service that invests your money along with other investors together and manages the stocks, bonds, and securities ~you purchase for a small fee. In this way, you don't have to keep up on the hundreds or thousands of stocks rising and falling. The fund managers have experts to do that for you and they benefit when you make money so it's a good partnership. BONDS - Money lent to a corporation for a specific purpose such as a bond lent to a city to build schools, etc. The rate of return is preset and guaranteed so a bond is a secure, low risk but low return investment. FUTURES - A contract, similar to an option, to invest in something at a later date at a specific price and quantity. COMMODITIES - A material used in commerce or industry. You often hear of commodity reports on sugar, corn or soy. Commodities can be invested in, and return dividends. These are just some of the most commonly used stock market terms. There is much to learn but if you are just starting your journey into the stock market, getting a firm grasp on these fundamental terms is a good start. |