LEVEL 1 GLOSSARY
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Bonds
When you buy bonds, you're basically lending money to municipalities, states, and other government entities, which they use for construction projects and other fun stuff. They then pay you back with interest. These aren’t the biggest money makers, but bonds are fairly stable for those of you who think “risk” is a dirty word.
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NASDAQ
It's known as The National Association of Securities Dealers Automated Quotation System, but suffice to say this stock exchange is one of the biggies.
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Return
Gain (or loss) from an investment. Unless you're fiscally masochistic, you're going to cross your fingers for a gain.
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Revenue
The money generated from sales. If you own a lemonade stand and charge 25 cents per cup, add up all the sales for the day and—voila!—that's the revenue (just to keep you on your toes, sometimes people just refer to this as sales).
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Stock
This is your piece of the corporate pie, and it entitles the holder to a share of assets and earnings.
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Bull Market
Like a bull charging forward, a “bull market” is typically a market on the upswing. Olé!
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Debt
It's a bad word in personal finance, but it's pretty common in the corporate world. This is the money that a company owes to a lender.
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Dow Jones Industrial Average
The grandaddy of them all when it comes to indices only because it’s the oldest and most popular—not the largest or most representative. The Dow only represents the prices of 30 largest and most widely held companies in the U.S.
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IPO
Short for Initial Public Offering, this is a private company's way of saying, "Do you want a piece of this?" This is when a company offers shares to the public to get more dough to grow the business. Also known as "going public."
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NYSE
The New York Stock Exchange, a.k.a. Wall Street, is where stocks are bought and sold.
See full glossary
In Level 1 we'll introduce you to some of the basic concepts of investing. Each concept features a brief description and a case study, so you can see how each concept works in what financial analysts call "the real world." When you've mastered a concept, click the link at the bottom of the page to add it to your Report Card and move to the next one. Master all the concepts in each level, and then take the quiz to see just how smart you are.
- What is money?
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The uses of money
- Function of a bank
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What is a company?
- Is that company any good?
- How companies make money
- Brands
- Stocks vs. bonds
- What is a stock?
- Compounding interest
- What is the market?
- LEVEL 1 QUIZ
Fancy a Game of Polo?
That shirt you're wearing? Someone's got to tell you: It's not so nice looking. It's old, a little ratty, and the style looks like something Don Johnson might wear circa Miami Vice.
In other words, you need to go buy a new shirt.
You've narrowed it down to two choices: one is from the Gap (GPS), and the other one is from Polo Ralph Lauren (RL). The Gap shirt costs $20 and the Polo shirt costs $40.
They look pretty similar, they both feel solid, and they're both 100 percent cotton. But in the end, you go with Polo. Why?
Well, you aren't just paying for the material or the look when you buy a shirt. Sometimes, you're paying for something you can't see or touch. You're paying for the brand.
So when you pick that Polo shirt, you're also buying the idea of yachting on the Cape with your friends, who sport gorgeous loafers and perfect tans.
Meanwhile, the Gap shirt tells people you're a regular, down-to-earth, hang out type of guy.
You see what we're talking about? Brands like Polo are so powerful that they can get consumers to pay more because of the way the brand makes them feel.
It may sound crazy, but this kind of thing happens all the time. If you're walking into a party and you want to impress people, you'll probably feel more comfortable strolling in with your fancy Polo shirt than a Gap shirt.
It doesn't really matter what the shirt looks like — what matters is what the brand represents to you and everyone else.
So next time you're thinking of buying a stock, ask yourself if the company has a powerful brand. If they do, you might be willing to pay a little bit more for that magical "extra" that the brand possesses.
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