Basic Investing Words You Need to Know

A glossary of more than 450 useful words is included in the back of this book. STOCK: A paper certificate that represents a part ownership of a company. Stocks are also called "equities". PUBLIC COMPANY: A company that you can buy a piece of by purchasing shares of their stock. This is what you do when you invest in the stock market.

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.