Definitions Page 1

These definitions will help you to understand the rest of this website, and get more from the books and links we reference

  • NYSE – Stands for New York Stock Exchange.
  • NASDAQ - Stands for National Association of Securities Dealers Automated Quotations.
  • S&P 500 - The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock market exchanges; the NYSE and the NASDAQ.
  • Stocks - Ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types of stock: common and preferred.
  • Common Stock - 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.
  • Preferred Stock - 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.
  • Class of Shares - 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. With mutual funds, there are three share classes, Class A, Class B and Class C, which carry different sales charge, 12b-1 fees and operating expense structures.
  • Dividend - A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Most secure and stable companies offer dividends to their stockholders. Their share prices might not move much, but the dividend attempts to make up for this.
  • Large Cap - A term used by the investment community to refer to companies with a market capitalization value of more than $10 billion. Large cap is an abbreviation of the term "large market capitalization".
  • Mid Cap - A company with a market capitalization between $2 and $10 billion, which is calculated by multiplying the number of a company's shares outstanding by its stock price. Mid cap is an abbreviation for the term "middle capitalization".
  • Small Cap - Refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion.
  • Mutual Funds - A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objective
  • Bonds – A bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals.
  • Municipal Bond - A debt security issued by a state, municipality or county to finance its capital expenditures. Municipal bonds are exempt from federal taxes and from most state and local taxes, especially if you live in the state in which the bond is issued. Municipal bonds may be used to fund expenditures such as the construction of highways, bridges or schools.
  • Junk Bond- A bond that is rated below investment grade at the time of purchase. These bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds in order to make them attractive to investors.
  • Subject-To - Buying real estate "Subject To" is a technique that can allow you to acquire a property with virtually no cash by leaving the seller's existing mortgage in place. This means that you do not have to get a loan to buy the property because you have purchased the property "subject to" the existing loan or loans. Practically, this means that the owner deeds the property to you and you both agree that you will make the payments on his mortgage.
  • Lease Option - This basically means you are leasing or renting a property with an option to buy it at a future date. The future price of the property should be fixed at the time the lease-option is signed. Usually there is an up-front payment of some amount to purchase the option. The amount can vary. Sometimes the monthly payment is larger than normal and the excess is used to purchase the option. In some cases, the option money can be applied toward the down payment for the later purchase of the home.
  • Tax Lien Certificate - Is nothing more than a lien on a property for not paying taxes. Essentially, each and every year owners of real estate have a tax lien (aka financial obligation to pay taxes) placed on their real estate. If the property taxes are paid on time the tax lien is removed. If they are not paid, in due time the county government will allow investors to pay on behalf of the real estate owner.
  • Fixed Mortgage - Is a mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float."
  • ARM - An Adjustable Rate Mortgage is a mortgage with an interest rate that is linked to an economic index. The interest rate, and your payments, are periodically adjusted up or down as the index changes.
  • HELOC - A Home Equity Line Of Credit (pronounced HEE-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house.

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