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
You Can Take That to the Bank!
Your birthday just happened (sorry we missed it), and your grandma sent you $100. Awww, she's so sweet. So what should you do with your newfound bounty?
If you headed to your neighborhood bank and put it in a savings account, they'd pay you 0.75 percent in interest. That means if you checked on your precious money again in a year, you'd have $100.75.
That might not seem like a lot, but that's the trade-off you make here: The money is safe, and low risk gives you low return.
Now let's say years pass, and you took that money your grandma gave you and opened a bakery, but now you need some money to buy some sugar and butter. (We love your chocolate croissants, by the way.)
Where can you get this money?
Well, you're one bakery, so it's just you. You go down to your local bank and ask them for a loan.
They'll ask you some tough questions: What you want to do with the money, how you are going to pay them back, etc. Eventually, they decide to lend you $5,000, but they're going to charge you eight percent per year on the loan.
If you pay them back at the end of the year, you'll owe them $5,400 (because eight percent of $5,000 is $400, but surely you didn't need us to tell you that).
Then here's what the bank does with that $400: They give interest to people like you who put their $100 in the bank as savings, they pay their employees, they keep their lights on and their bushes manicured... and the rest is sweet profit.
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