Download Penny Stocks: Low-priced stocks that typically sell

IDC4U Introductory Unit GLOSSARY
(also see Additional, p.3)
Appreciation: an increase in value
Assets: What a company or an individual owns or controls. Examples: buildings,
equipment, property, a car or cash. Can also include intangible assets, such as patents
and trademarks.
Blue Chip Stocks: Refers to stocks of leading companies with a solid record of healthy
dividend payments, good management, superior products/services and other strong
investment qualities.
Corporation: A legal entity that is separate and distinct from its owners. A corporation
is allowed to own assets, incur liabilities, and sell securities, among other things
Debt: Borrowed money that must be repaid with interest by a set date.
Derivatives: A special kind of financial instrument. Its value is based on the
characteristics and value of some other asset, including commodities, bonds, equities or
currency. Examples: futures, options. Usually for advanced investors only due to the
high level of risk.
Diversification: A risk management technique that mixes a wide variety of
investments within a portfolio. It is thought that a portfolio of different kinds of
investments will, on average, yield higher returns and pose a lower risk than any
individual investment found within the portfolio.
Dividend: Part of a company's profits paid to its shareholders. Set by the company's
Board of Directors. Usually paid in cash and taxable. For common shares, amount
varies with the company. It may be skipped if business is poor or the directors choose to
invest in things like new equipment or buildings.
Equity: Another word for stocks. Represent a share in the ownership of a company.
Gives you a claim to a share in the company's assets and profits.
Estate: Assets and Liabilities at death
Future Value: The amount of cash at a specified date in the future that is equivalent in
value to a specified sum today.
GDP: The market value of final goods and services produced over time ( usually one
year) including the income of foreign corporations and foreign residents working in the
country
Hedge Fund: A lightly regulated fund that pools investors’ money and whose manager
has considerable flexibility to achieve the fund’s objectives.
Index: Statistical composite that measures changes in the economy or in financial
markets, often expressed in percentage changes from a base year or from the previous
month. Indexes measure the ups and downs of stock, bond, and some commodities
markets, in terms of market prices and weighting of companies in the index.
Index: A statistical measure of change in a securities market or an economy.
Inflation: An increase in the cost of goods and services over a period of time.
Decreases the purchasing power of the dollar. Usually measured by the Consumer
Price Index.
IPO (Initial Public Offering): The first time a company offers its shares on a stock
market for sale to the public. This provides cash for the firm to use.
Investment: An asset bought with the hope of appreciation
Leverage: A means of making a larger investment by paying a portion of one’s own
money and borrowing the rest. The more you invest, the greater the potential returns.
However, leveraging can also result in increased losses.
Liability: A debt that must be paid off. Examples: loans, mortgages, long-term debts,
accounts payable.
Margin (buying on): Where you borrow money to invest. Usually done using a margin
account at a registered investment dealer. Subject to strict regulation due to the level of
risk involved.
Market Capitalization: The total dollar value of all outstanding shares. Computed as
shares times current market price. Capitalization is a measure of corporate size.
Maturity Date: The date that a bond, loan term or investment expires and is repaid.
Mutual Fund: An investment that pools money from many individuals and invests it in a
mix of securities including stocks, bonds and other securities that meet the fund's
investment objectives. Managed by a professional money manager. Shares or units can
be redeemed on demand.
Net Worth: Assets minus Liabilities
OTC: A decentralized market (as opposed to an exchange market) where
geographically dispersed dealers are linked by telephones and computer screens. The
market is for securities not listed on a stock or bond exchange. The NASDAQ market is
an OTC market for US stocks. Antithesis of listed.
Penny Stocks: Low-priced stocks that typically sell for less than one dollar per share.
Usually offered by companies with good growth prospects but limited assets and a short
operating history.
Phishing: The act of sending an e-mail to a user falsely claiming to be an
established legitimate enterprise in an attempt to scam the user into surrendering
private information that will be used for identity theft.
Portfolio: All the investments an individual or organization holds. Includes stocks,
bonds, mutual funds.
Present Value: Value today of money you will receive in the future. Calculated by
reducing the future amount at an appropriate compound interest rate.
Prime rate: The interest rate at which banks lend to their best (prime) customers. More
often than not, a banks most creditworthy customers borrow below prime.
Privatizing or “Going Private”: A formerly Public company has all its shares
purchased by owners who no longer wish to trade the shares on the market. The firm is
de-listed and shares don’t trade, and therefore the firm may do everything
confidentially from outsiders and competitors, without revealing results.
Profit: Revenue minus all costs. For an entire firm’s business, a trade of shares or any
other transaction.
Public Corporation: A corporation which trades on a public stock market. Shares can
be bought and sold without referring to other shareholders.
Quarterly: Occurring every three months.
Securities: Paper certificates or electronic records (book-entry securities) evidencing
ownership of equity (stocks) or debt obligations (bonds).
Shares: Certificates or book entries representing ownership in a corporation.
Speculation: Purchasing risky investments that present the possibility of large profits,
but also pose a higher-than-average possibility of loss.
Stockbroker: an individual licensed to sell stocks and bonds for others
Tulipmania: events in Holland around 1640 which are thought of as the first big
speculative bubble
See Additional Terms ( next page) =================
Additional Terms
Intro Glossary 2013-14
(continued, not alphabetical)
Primary Distribution: The first time shares of a corporation are offered on the stock
market ( see also IPO)
Initial Public Offering (IPO): The first time any shares of a corporation are offered on
the stock market
Primary Market: When the shares of the corporation are first sold ( from the
corporation to investors). This only occurs once with each share. The corporation
receives cash, the investor receives the shares. If the investor ever sells the shares, this
is known as the secondary market.
Secondary Market: When investors sell shares to each other. The corporation is not
involved and does not receive cash or any other proceeds. The investors merely
exchange cash for shares. The corporation, through the transfer agent, merely notes
the change of ownership.
Bid: A price an investor is willing to pay for a share.
Ask: A price an investor is willing to accept for a share.
Broker: An intermediary, who works for a “participating organization”, who is trained
and qualified to execute trades.
Day Order: a buy or sell order that expires at the end of the day if it is not completed
(filled)
At-the Market Order: an order to sell or buy at the prevailing market price (guaranteed
to be filled, but may be rather high price to pay or a low price to receive if you are
selling)
Limit Order: specifies a maximum price to pay or a minimum price to accept when
selling.
Settlement Process: You must provide full payment( if buying) or all the shares (if
selling) within 3 days. The cash payment goes through your brokerage account, or the
shares you are selling go through an electronic shares clearing house. Your broker
deals with all of this.
Transfer Agent: The company hired to keep track of who owns the shares and how to
contact the owner. This is needed for dividends, annual meeting announcements etc.
Board Lot: 100 shares
Bull Market: a long period of generally increasing share pricesear Market: a long
period of generally decreasing share prices.