BACK-END FUND – A mutual fund that charges the investor a fee to sell (redeem) shares.

BASIS POINT – One one-hundredth of a percent (.0001).

BEAR MARKET – A period of time (usually months) during which measures of the stock market decline.

BID & ASK – A price quote on a security. A bid is the highest price anyone has offered to pay and the ask is the lowest price anyone is willing to sell for at a given time.

BLUE CHIP STOCKS – Stocks of the highest quality, with long records of earnings and dividends—well known, stable, mature companies.

BOND – Long-term debt instrument in which the issuer (debtor/borrower) promises to repay to the lender/investor the amount borrowed plus interest over some specified period of time.

BROKER – An intermediary who represents buyers or sellers in securities transactions for a commission.
(Agent)

BULL MARKET – A period of time (usually months) during which measures of the stock market rise.

CAPITAL APPRECIATION – The amount of increase in market value of a security from its purchase price.

CAPITAL GAIN – The amount by which the sale price of a security exceeds the purchase price.

CAPITAL MARKET – The market for long-term securities such as bonds and stocks.

CAPITAL LOSS – The amount by which the sale price of a security is less than its purchase price.

CLOSED-END FUND – A mutual fund whose offering of shares is closed. This means once the initial offering is made, the fund no longer buys or sells its shares. The value of the fund is then determined by supply and demand. No NAV is calculated.

COMMISSION – A broker’s fee for executing a trade.

COMMON STOCK – A share of ownership in a corporation.

DEALER – An individual (firm) who buys and sells securities for his or her own account.

DIVIDEND – The sharing of a portion of the corporation’s profits with it shareholders by the form of regular cash payments.

DIVIDEND REINVESTMENT PROGRAM (DRP) - An investor’s option of having his dividend used to purchase additional shares of the company’s stock. The purchases are sometimes made with no commission charge or at a discounted price.

DIVERSIFICATION – The construction of a portfolio to reduce risk by balancing defensively its funds among securities of different industries, different classes, and different company sizes.

DOW JONES INDUSTRIAL AVERAGE (DJIA) – The average price of 30 leading industrial blue chip stocks, used as a measure of stock market activity. It measures price only and was first published in 1884.

EMERGING MARKETS – The financial markets of developing economies.

EPS (EARNINGS PER SHARE) – Corporate earnings divided by total outstanding shares.

FIXED-INCOME SECURITIES – Securities with specified payment dates and amounts, primarily bonds and preferred stocks.

FRONT-END FUND – A mutual fund that charges its investors a fee to purchase (subscribe) shares.

INSTITUTIONAL INVESTORS – Pension funds, investment companies, bank trust departments, and so forth, all of which manage large portfolio of securities.

INTRINSIC VALUE – The economic value of an asset.

INVESTMENT – The commitment of funds to one or more assets that will be held over some future time period.

INVESTMENT BANKER – Firms specializing in the sale of new securities to the public, typically by underwriting the issue.

IPO (INITIAL PUBLIC OFFERING) – A corporation’s first offering of common stock to the public.

LIQUIDITY – The ease with which an asset can be bought or sold with relatively small price changes.

LOAD FUNDS – Open-end mutual funds that impose a sales charge on the purchase of shares in the fund.

MARKET VALUE – The market value of one share of stock is its current price.

MONEY MARKET – The market for short-term, highly liquid, low risk assets such as Treasury Bills and negotiable CDs.

MUTUAL FUND – An open- investment company that pools the money of its shareholders and invests in a diversified group of securities of other corporations.

NET ASSET VALUE (NAV) – The per share value of a mutual fund, based on its portfolio. It is equal to the market value of the portfolio divided by the number of its shares outstanding.

NO LOAD FUNDS – Open-end mutual funds that do not impose a sales charge (load fee) on the purchase of shares in the fund.

ODD LOT – Less than 100 shares of stock.

OVER THE COUNTER (OTC) MARKET – A network of securities dealers for the trading of securities on the exchanges.

P/E RATIO – The current market price of a stock divided by some measure of EPS.

PORTFOLIO – The group of securities held by an investor; a collection of investments.

PRIMARY MARKET – The market for new issues of securities, typically involving investment bankers.

PRIVATE PLACEMENT – The sale of an issue of securities to an institutional investor.

PROSPECTUS - A document distributed before a company’s initial public offering outlining the information investors need to determine whether or not to purchase the stock.

REALIZED GAIN – The profit that results when a security is sold at a higher price than it was bought.

REALIZED LOSS – The loss that results when a security is sold at a lower price than it was bought.

ROUND LOT – The usual minimum unit of trading. In the stock market, it is 100 shares. In the government bond market, it is 100,000 par value.

SECONDARY MARKET – The market where previously issued securities are traded, including both the organized exchanges and the OTC.

SECURITIES – Stocks and bonds.

SECURITIES AND EXCHANGE COMMISSION (SEC) – A federal government agency established by the Securities Exchange Act of 1934 to protect investors.

SETTLEMENT DATE – The date the transaction is to be completed. On this date, the buyer is to pay and the seller is to deliver.

S & P 500 – Standard & Poor’s Index of 500 market value weighted securities, which trade on the NYSE, AMEX, or NASDAQ. It is not the 500 largest stocks but includes the companies perceived to be industry leaders. The initial index of 233 companies was first introduced in 1923.

SYNDICATE – Several investment bankers involved an underwriting.

TRADE DATE – The date the trade is executed.

UNREALIZED GAIN – The difference between the purchase price and the current market price. When the current price is higher, there is an unrealized gain; when the current market price is lower, there is an unrealized loss.