Here’s a quick summary of terms & instruments to know of about finance & the stock market. I brought up the most typical terms. Plz note that all of them were copied & pasted from Investopedia so I do not take credit for the definitions. The only thing I added were the pros n cons of each just to add on. I figured this way was faster & a lot easier to comprehend.
What Does Common Stock Mean?
A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders have been paid in full
Pros: voting rights , real ownership of an asset/co. , control over a business if substantial
Cons: susceptible to declines in worth if business underperforms or if investors drive the price up
A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.
Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents..
Pros: Bonds are actually where its at, they can be just as lucrative as common stocks some are even much more safer than them. Bonds are for big money types of individuals w/ deep pockets.
Cons: Certain types of bonds can bring forth great risk, lower interest rates/yields.
What Does Preferred Stock Mean?
A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.
The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as "preferred shares".
Pros: Its possible to negotiate w/ co.s for favorable terms, some can be super profitable. b/c they rarely rise in price or decline in price they can be good income alternatives if terms behind them are good
Cons: can be terrible investments
What Does Certificate Of Deposit - CD Mean?
A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC. The term of a CD generally ranges from one month to five years
Pros: For the smaller businessmen, they can be used to for future leveraging. They’re also great for building wealth if ur disciplined enuff not to touch them & only deposit cash into them.
Cons: cant think of any
What Does Mutual Fund Mean?
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money mangers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Pros: For the lax or defensive investor… so long as u can find the rite fund it may be better for u to go this route rather than doing it on ur own if u don’t have the time.
Cons: U pay fees & understand that fund managers may change n ur future returns may be deeply effected, some don’t allow u to pull ur money back out n will charge penalties if u do.
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