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
A Good Apple
Almost anyone can start a company — all you need is an idea and a little cash. (Well, maybe a lot of cash, but let's not split hairs.)
Aye, but here's the rub: Not everyone can start a good company. As we talked about in the lesson, there are a few things that make a good company, so let's take a look at how they play out in the real world.
For many years, Apple (AAPL) was just a computer company. Sure, Apple made good computers that were user friendly and prettier than your basic beige box CPU. But all in all, the company wasn't reinventing the wheel.
Lo, while some computer companies were just tweaking a basic idea, Apple was continuing to innovate and think about the next, coolest product.
And soon, what appeared on the shelves? The iPod. There may have been other portable music players out there, but this one blew them all away. Soon the iPod was as ubiquitous as oxygen, and you saw the telltale white earphones hanging out of people's ears everywhere you looked.
The days of lugging around a case full of CDs were gone forever.
Typical of a good company, Apple didn't rest on its laurels. The iPod continually improved: Black and white screens gave way to color, then came more memory, then video capability, and so on.
Then came the iPhone, which — like the iPod — pretty much altered the playing field. This put the company on people's minds, and so Apple sold more computers, too.
But what about quality? Well, you hear horror stories about people's iPods crashing, and all of those Hootie and the Blowfish songs are gone forever. Sure, that happens. But overall, Apple's quality has been pretty high, and in the end, quality wins out: Apple's stock went from $9 in 2001 to $181 in 2008.
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