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
What is money?
What we'll learn:
1) What happened before money was around?
2) What does money represent?
Welcome! We're glad you're here and ready to start taking control of your financial life. Well, you can't do that until you get cozy with one concept: money.
You know what money is — it's the stuff in your pockets or purse that lets you buy things. But let's go back a little further to a time when money didn't exist. There was no money. Hard to imagine, we know — how did people buy their Xboxes?
Instead of cash or credit cards, people used cows and crops to buy things. In a farm society, one guy was growing grapes and another guy was growing strawberries.
So they were figuring out how to interact with each other, and they decided five grapes equals one strawberry. So they traded. The guy who had grapes could get some strawberries and the guy who had strawberries could get some grapes.
Then the baker came over with a loaf of bread, and he asked, "What can I get for this?" And he traded a loaf for, let's say, 20 strawberries. Then farmers had bread and bakers had fruit. Everyone was happy — all they needed was the peanut butter guy and they had sandwiches for life.
The problem came when Tommy came out of the Wild West with his cow. "What would you give me for this cow?" he asks.
Hmmm, quite a predicament — the farmers want to get a cow because they're tired of living on just sandwiches. The baker says, "Well I can't give you 1,000 loaves of bread." And the farmer says, "And I can't give you 20,000 strawberries." So the only solution was an objective measure everyone could work with: money.
And so coins and basic money were created as a way to facilitate trading. Money is an easy way to communicate value in terms of what goods are worth. Well, the idea stuck, all the way up to the money you used to buy your Xbox.
Three Facts to Wow Your Friends at a Party
1) The average $10 bill has a lifespan of only one and a half years, according to the Fed. The average $100 bill, however, lasts more than seven years.
2) Money isn't actually made of paper — it's 75 percent cotton and 25 percent linen.
3) Between two money-printing centers — in Fort Worth, Texas, and Washington, D.C. — the Bureau of Engraving and Printing goes through 18 tons of ink per day.
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