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
When Money Grew on Trees
The Mayans didn't have $100 bills to throw around like our stars do today, but they also wanted to buy and sell things. So instead of using Benjamins, the Mayans used cacao beans as their standard form of currency.
That's right: chocolate. Talk about a sweet return on your investment.
It just goes to show how important money has been to civilization — we've always needed a way to obtain the things we want. And trading one product for another just gets too complicated if one person is trying to swap livestock while another is using flour.
But can you imagine if we used cacao beans for money today? Everyone would grow them in their backyards and we'd all be set.
Well, not quite. You see, there's a reason the government is in charge of printing the money that's in our wallets and purses. If there's too much of it out there, it starts to lose its value. And that's when you get inflation.
So the government makes all of our money, which sounds like a great idea. They standardize it and they regulate how much will be in circulation, and it's all good, right? Except the Feds have made some pretty strange decisions when it comes to actually creating money.
Take the two-dollar bill, for example. The government doesn't make a lot of them, and that's led some people to believe they actually don't exist.
Surprise! They do, and they're being printed as we speak. And yet some people haven't been allowed to pay for their groceries with a two-dollar bill because the clerk didn't think it was real.
Then you have the whole "dollar coin" fiasco. Figuring that one-dollar bills were a thing of the past, the government decided to issue coins worth 100 cents. Très European, no?
Anyway, first came 1979's ill-fated Susan B. Anthony coin, which people dubbed the "Susan B. Edsel." Ouch. Then came 2000's brass-coated Sacagawea dollar — unfortunately, the brass coating started to rub off pretty easily. Who wants a coin that gets all smudged and raggedy looking (and could almost be mistaken for a quarter)?
At least give the Feds credit for trying. Besides, they have bigger problems to deal with: The new $20 bill is already starting to get rejected by certain places because it "looks fake."
Oh, to go back to the days of the cacao beans...
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