Beginning Investor - Investment Terms

Over the past two months, readers have brought to my attention that there is a steep learning curve for investment terminology. Therefore, the focus of Beginning Investor column this month will be investment terminology. The financial world can be complex. This article does not intend to present a comprehensive set of definitions, but rather as a general guide to help you understand the most frequently
used financial terms. There is no way we could cover everything - and I'm sure we will not - but it needs some things clear for those who are new to investing. This month, we will look at stock-related words in particular.

Stock 

Let's start with the absolute basics. The
common type of investment is in the form of
stock. Stock has its own security - that is,
When you buy shares, you are buying a
piece of that company. You are co-owner,
and so to help you select the right people
that the business runs from day to day.
Money is made of stocks, either through dividends,
or capital gains.

Annual Report / 10-K 

The annual report can come in two forms,
the glossy annual report, which looks nice,
and is relatively easy to read and understand,
and 10-K, which is an official SEC
submit required for listed companies.
The 10-K is a legal document, and is therefore
much more difficult to read, but
can provide much more information.

Gains 

The sale price minus the purchase price of
stocks are referred to as capital gains.

Dividend 

A dividend is a payment that a per share
company has the option to explain.
Essentially, dividends are a way for a company
to share with the owners, their profits
shareholders. Public companies are not
required to declare dividends.

EPS 

The term EPS earnings expectations of a company
per share for the year.

Equity 

Equity is simply a term used to indicate that a specific
type of security gives you partial ownership
of a company.

Liabilities 

Liabilities are debts of any kind of a business. 

Market capitalization 

Market capitalization, or market cap, is
the total number of shares outstanding (held
by investors) multiplied by the share price at
a given day.

Mutual Fund 

A Mutual Fund is an investment
whose only business is to buy shares in
other companies, and turn a profit for their
own customers. When you buy a share of a
mutual fund, you are essentially buying in
any business that specific
fund holds. Mutual funds can be a good
investment for those who are new to investing.

Quick Net Assets 

A company Quick Net Assets, or NQA are
the sum of the debts of a company deducted
the sum of the assets of a company.

P / E 

The P / E ratio of their share of a company
price for their earnings for a specific tax
year. This can be used as a good indicator of
financial health of a company and buy
prospects. A good P / E value varies by sector.

Par Value 

Par Value is determined by a random number
a company in the issuance of a particular
type stock (i.e., it varies from class to
class). Essentially, nominal value carries no real
significance.

Share Price 

Share Price is the price at which a share of
shares of a company is selling.

Short 

A short is a method to earn money even
when the price of a share decreases. The way in which a short
works is that a person will get shares of a
stock on margin (loan shares from stock
broker). This person will then sell these
shares, and wait until the price drops before
reimbursement of his broker. If then, you buy 100
shares of the company at x $ 10 per share, and
sell them for that price, you will be $ 1,000.
If the price of the stock drops to $ 5, you
still have to pay for that 100 your broker
shares, but the price will be only $ 5. So
you pay your broker $ 500 for those shares,
and pocket the difference.

Divide 

When a stock split is declared, a ratio
picked up by the company. Total company
shares are multiplied by this ratio, while the
share price divided by this ratio. Thus, a
02:01 split in 20 shares of a $ 10 stock
would result in 40 shares of a $ 5 stock.

Stock Classes 

Companies can issue several classes of
stock, each with its own voting stock
price and nominal value. Typically, special classes
are available for certain individuals, while only
ordinary shares are traded on public exchanges.

SEC 

The SEC or Securities and Exchange
Commission, is a United States government
agency that focuses on the regulation of public
companies and the stock market.
Companies are required to follow. SEC guidelines

Securities 

The word safety is just the technical term
for an asset such as a stock or bond. Use it often,
because it will make people think you are
really smart.

Well, that about does. If you
hear about the SEC cracking down on a company
for not accurately their 10-K, or
when someone talks about shorting an equity
security with a terrible P / E, you know exactly
what they are talking about.