Finance & Stock Market Definitions To Know

Sion

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


Bond
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.

Sion

What Does 401(k) Plan Mean?
A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.

Pros: some have tax benefits, decent way to build wealth.
Cons: hmm believe it or not there are a lot of cons where this is concerned… there are better alternatives but I will save that for a future thread


What Does Convertible Bond Mean?
A bond that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder.

Convertibles are sometimes called "CVs".

Pros: Sometimes one can convert them into equities at gross discounts, they can be very profitable if executed properly
Cons: Can be callable by the co. & sometimes investors can be shorthanded (I will elaborate on this in a future thread or PM me)

What Does Treasury Bill - T-Bill Mean?
A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million and commonly have maturities of one month (four weeks), three months (13 weeks) or six months (26 weeks).

T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds, the appreciation of the bond provides the return to the holder.

Pros: Safety
Cons: can fluctuate


What Does Treasury Bond - T-Bond Mean?
A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest payments semi-annually and the income that holders receive is only taxed at the federal level.

Pros: Usually safer, some have terms where u can sell ur bonds back n get back ur principle even if the price of it drops well below ur purchase price
Cons: still pending lol


What Does Real Estate Investment Trust - REIT Mean?
A security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate.

Pros: high yield, some pay out monthly dividends
Cons: traditionally income trusts & the like usually aren’t good structures. Any business that has to pay out a substantial amount of profit in dividends to have tax advantages prolly isn’t a good idea (theres more I want to elaborate on but ill save it for later)


What Does Exchange-Traded Fund - ETF Mean?
A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

Pros: If ur more of a lax type of investor, these instruments can be good alternatives
Cons: They are designed to match the market’s performance n not to necessarily beat it

Sion

What Does Index Fund Mean?
A type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.

Pros: *see above*
Cons: *see comments about ETF* same principle here as well


What Does U.S. Savings Bonds Mean?
A U.S. government savings bond that offers a fixed rate of interest over a fixed period of time. Many people find these bonds attractive because they are not subject to state or local income taxes. These bonds cannot be easily transferred and are non-negotiable.

Pros: Some offer u the ability to collect back ur principle if they dip below ur purchase price should u sell. Generally U.S savings bonds are very safe n are great assets to have over time.
Cons: also may have very low interest rates


Ok theres more I will add but for the meantime im goin to post this up so that ppl will have the basic understanding of these instruments. This way wen I go in-depth about certain topics no one gets too confused. I will next post a thread on stock analysis n great buys that u might want to check out. Most ppl who want to invest don’t know where to start or what to buy soo my next thread will be about that & i will have it up very soon.

southern_mr.337

Don't forget to post IRA and IRA ROTH, CDS with the options. I might do it if I got time after I finish my homework.
Good knowledge dropping btw

killap

GOAT thread!

Ace Boon

Hedge fund:

Hedge funds are investment vehicles that explicitly pursue absolute returns on their underlying investments. The appellation "Absolute Return Fund" would be more accurate, not least as not all hedge funds maintain an explicit hedge on their portfolio of investments. However the "Hedge Fund" definition has come to incorporate any absolute return fund investing within the financial markets (stocks, bonds, commodities, currencies, derivatives, etc) and/or applying non-traditional portfolio management techniques including, but not restricted to, shorting, leveraging, arbitrage, swaps, etc. Hedge funds can invest in any number of strategies and they are perhaps most readily identifiable by their structure, which is typically a limited partnership (the manager acting as the general partner and investors acting as the limited partners) with performance related fees, high minimum investment requirements and restrictions on types of investor, entry and exit periods.

freshb651

thank you for the info *props*

coco_butterfly08

Yes I want to know more about CDs IRAs....I'm think about investing my money will soon

penny-man

What Does Penny Stocks Mean?

Penny stocks just refer to trading in shares that range from a fraction of a penny to $5. Penny stocks have a tremendous reward potential but can prove to be quite risky. The main reason why they are seen as risky is because many penny stocks have risen from just 25 cents to 20 dollars while there are others which have become quite worthless. Penny stocks prove risky as the firms did not provide detailed information on the penny stocks and also information about the firms themselves

stock-market

There is no official and yet concrete definition for that. Some say - any stock under $2 others claim it is under $5. There’s a consensus that a penny stock, in fact, any stock that trades under one dollar. A sub-penny stock is a stock that trades under a penny and (.001-.01) a sub-sub penny stock or super sub are those trading in the .0001-.0009 range or at hundredth of a penny. There are manymarkets that penny stocks trade on like the OTC Bulletin (OTC-BB), over the counter (OTC) and pink sheets markets in the US. In Canada, there is TSE and TSE Venture Exchanges and NASDAQ small Cap Market, the shares on this exchange are a dollar and up so they are not penny stocks.