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.
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.
Gain (or loss) from an investment. Unless you're fiscally masochistic, you're going to cross your fingers for a gain.
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).
This is your piece of the corporate pie, and it entitles the holder to a share of assets and earnings.
Like a bull charging forward, a “bull market” is typically a market on the upswing. Olé!
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.
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.
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."
The New York Stock Exchange, a.k.a. Wall Street, is where stocks are bought and sold.
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.
It's not easy to come up with analogies for the stock market, but here's one that might help you understand why "the market" is so important.
Let's pretend that every time you bought something, you had to keep it for the rest of your life. So if you bought a cell phone 10 years ago, you would have to keep it forever.
Remember the brick-sized cell phones from back in the day? Would you want to lug one of those things around now?
Of course not, but too bad. In this bizarro world, you'd have to hang on to it — you couldn't sell it to an antique shop, recycle it at Best Buy, or throw it away.
Can you imagine how much clutter you would accumulate? It would get so bad that you would probably stop buying things altogether. You wouldn't have any place to put them, and you wouldn't want to deal with the hassle of never getting rid of them.
Your electronics would be obsolete, and you don't even want to think about your wardrobe.
That's what it would be like if "the market" didn't exist.
Without a place for stocks to get transferred from one person to another, the economy would slow to a crawl and few people would bother to come up with great ideas anymore.
Stocks, bonds, and mutual funds would cease to be a viable alternative to piggy banks, as all of that analysis and mental energy would just be too much work for very little payoff.
The market allows investors to buy shares, knowing full well they can sell them again if they change their mind — someone will almost always be on the other end wanting to buy them back.
And now that the online world has made investing easier, people are more likely to buy and sell stocks as a way of building their nest eggs.
So you can gladly buy a new cell phone because you don't have to keep it around forever. And you can even carry it around in your pocket rather than using a wheelbarrow. You also don't need to hang on to the shares of that cell-phone company you don't love so much anymore.
Aren't you glad the market is around?