Glossary Archive - Black Enterprise

Glossary

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  • Yield » The percentage rate of return on the principal invested by the holder of the security.
  • Value Investment Style » An investment approach that looks for stocks whose market price appears to be less than the intrinsic value of the company.
  • Treasuries » Bonds, notes, and bills issued by the U.S. government and backed by its full faith and credit.
  • Stop Loss Order » A stop loss order helps limit your losses on a stock trade by specifying a price at which your broker has instructions to sell shares. For instance, if you purchased shares of Apple Inc. at $20, and the stock climbed all the way to $90 per share. If you then placed a stop loss order of $70 on the shares, as soon as the stock falls to $70, your broker will sell them for you. Used effectively they can help protect your profit, or at least help minimize losses on a plummeting stock.
  • Stock » Ownership of a corporation represented by shares that are a claim on the corporation’s earnings and assets. Common stock usually entitles the shareholder to vote in the election of directors and other matters taken up at shareholder meetings. Preferred stock generally does not give the shareholder voting rights, but it has a prior claim on assets and earnings.
  • Standard & Poor’s 500 Index » An index of 500 leading U.S. companies that’s maintained by the S&P Index Committee. Though the index focuses on large cap stocks, the S&P 500 is widely viewed as proxy for the performance of the total market.
  • Small Cap » Describes the market capitalization of smaller companies—generally regarded as being less than $1 billion.
  • Real Estate Investment Trust (REIT) » A publicly traded company that invests in a specific type of property, from shopping centers and office buildings, to apartment complexes and hotels. REITs typically provide high dividends because, by law, they are required to distribute 90% of their taxable income to shareholders.
  • Price/Earnings Ratio (P/E) » The P/E ratio is the price of a stock divided by its earnings per share. The P/E, also known as the multiple, gives investors an idea of how much they are paying for a company’s earning power. The higher the P/E, the more investors are paying, and therefore the more earnings growth and risk they are expecting. A low P/E ratio may indicate that a stock has fallen out of favor, or it may be a blue-chip stock with a long record of earnings stability and regular dividends. A trailing P/E ratio is calculated using earnings over the past 12 months, while a forward P/E is calculated using earnings estimates for the year ahead.
  • Portfolio Manager » The person, or group of people, who decide which securities the fund buys and sells in order to maximize returns.
  • Open-end Mutual Fund » A fund that has an unfixed number of shares available to its investors. The number of shares changes as investors buy and sell shares.
  • No-load Fund » A mutual fund offered by an open-end investment company that does not impose a sales charge or “load” on its shareholders.
  • Net Worth » The difference between an individual’s total assets and his or her liabilities. (See “BE Wealth Calculator,” page 8)
  • Net Asset Value (NAV) » The current value of one share in a mutual fund.
  • Nasdaq Composite Index » An index that tracks all of the stocks traded on the NASDAQ stock market. It’s widely followed as an indicator for the performance of technology companies.
  • NASDAQ » The National Association of Securities Dealers Automated Quotations system is the largest U.S. equities exchange. With a total of approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. electronic market. The NASDAQ is owned by The Nasdaq Stock Market Inc. (NDAQ).
  • Mutual Fund » A professionally managed fund that pools the money of its investors to buy a variety of securities.
  • Mid Cap » Describes the market capitalization of mid-size companies—generally regarded as being from $1 billion to $5 billion.
  • Maturity » The date on which a bond or other debt instrument becomes due and payable.
  • Market Order » A market order is an instruction to buy a certain number of shares at the best price available.

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