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Stock Investing For Dummies > The Essentials Of Stock Investing > Flashcards

The Essentials Of Stock Investing Flashcards

0
Q

What is a stock?

A

A type of security that indicates ownership in a corporation

It represents a claim on the part of the corporations assets and earnings.

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1
Q

What is a bear market?

A

A prolonged period of falling prices - in this case stock prices

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2
Q

What is a security?

A

An instrument of investment in the form of a document (as a stock certificate or bond)

It provides evidence of its ownership.

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3
Q

What are the 2 primary types of stock?

A

Common stock
and
Preferred stock

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4
Q

What is common stock?

A

A type of stock that entitles the owner to vote at shareholders meetings

They also receive any dividends that the company issues

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5
Q

What is preferred stock?

A

A type of stock that does not usually confer voting rights but it does include some rights that exceed those of common stock.

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6
Q

Some times in the event that a company is going bankrupt ____ ____ receives dividends before _____ _____

A

Preferred stockholders

Common stockholders

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7
Q

What are the two times that you should gather information on your stock picks?

A

Before and After you invest

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8
Q

When you are ready to invest what kind of account do you need?

A

Brokerage account

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9
Q

What is the most basic way you can determine a company’s market value?

A

Look at the market capitalization ( market cap).

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10
Q

What is market capitalization?

A

The value get when you multiply all the outstanding shares of a stock by the price of one single share.

1 share x # of outstanding shares= Market cap

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11
Q

What is the value of a microcap?

A

Under $250 million

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12
Q

What is the value of a small cap?

A

$250 million-$1 billion

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13
Q

What is the value of a large cap?

A

$10 billion to $50 billion

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14
Q

What is the value of an ultra cap (mega caps)?

A

Over $50 billion

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15
Q

What market cap has the least risk?

A

Ultra Caps (Mega caps)

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16
Q

Which market cap has steady appreciation with great safety?

A

Large caps

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17
Q

What are the stocks in the large caps frequently referred to as?

A

Blue chips

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18
Q

Which market caps are a good compromise between high-risk and low-risk stocks?

A

Mid caps

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19
Q

Which market caps are risky but not the riskiest with gaining potential.

A

Small caps

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20
Q

The smallest and riskiest market caps available.

A

Micro caps

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21
Q

You are investing for appreciation that is called investing for_____

A

Capital gains

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22
Q

If you are investing for income that is called investing for _____

A

Dividends

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23
Q

In the short-term stock investing is considered_____

A

Irrational

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24
Q

A disciplined investor has money in several places like…

BAMA

A

Investment grade bonds
Bank accounts
precious metals
other assets for growth or income

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25
Q

What is a balance sheet?

A

A list of your assets and liabilities.

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26
Q

What is a net worth

A

Total assets minus total liabilities

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27
Q

What is the opposite of income

A

Outgo

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28
Q

What is liquidity?

A

How quickly you can convert an asset into cash.

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29
Q

What is an asset?

A

Something one owns that has value.

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30
Q

What is illiquidity

A

No access to immediate cash to meet a pressing need

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31
Q

What are long term assets?

A

An asset that has value but has little liquidity.

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32
Q

What is the one question one can ask to determine an asset’s liquidity?

A

How quickly can I turn this asset into cash?

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33
Q

What is a liability

A

A bill that someone is obligated to pay.

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34
Q

What does unsecured mean as in unsecured debt?

A

That a debt is not backed by an asset for collateral.

It usually results in higher interest rates.

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35
Q

What does secured mean, as in secured debt.

A

That a debt backed by an asset for collateral.

It usually results in lower interest rates.

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36
Q

Your brokerage account can be used as _______ to secure a debt.

A

Collateral

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37
Q

What is variable (floating) interest debt?

A

An interest rate that fluctuates at the creditors will.

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38
Q

What is fixed interest debt?

A

Interest rate on a debt that is fixed and predictable.

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39
Q

What variable (floating) interest debt should be replaced with?

A

Fixed interest debt.

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40
Q

What does Murphy’s Law say about stocks?

A

That a stockholder will sell his stocks at the worst possible moment.

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41
Q

What was one of the reasons that the US appeared to be doing so well going to late 1990s stock-market boom

A

The fact that individuals and organizations went on an unprecedented spending binge financed mostly by excessive debt

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42
Q

What is the definition of a Net Worth (Net Assets/Net Equity)?

A

The value of all assets minus the total number of liabilities

Assets - Liabilities = Net Worth (Net Assets/Net Equity)

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43
Q

What are the other names for a Net Worth

A

Net Assets

Net Equity

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44
Q

What is it called when the value of your assets exceed the value of your liabilities?

A

Positive net worth.

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45
Q

What is the safest type of account in the US?

A

A treasury money market fund

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46
Q

Your emergency fund money should be…

A

In an ultra-safe account earning the highest interest available.

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47
Q

You should do your best to replace depreciating assets with…

A

Appreciating assets

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48
Q

What is the definition of a depreciating asset?

A

An item that keeps shrinking and value

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49
Q

What is an appreciating asset?

A

An item that grows in value when invested.

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50
Q

What happens if you withdraw funds from a CD before it matures?

A

You may risk losing money such as some interest.

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51
Q

You should try to pay off any high interest debt with…

A

Funds from low interest assets

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52
Q

If the interest on an investment is higher than the interest on a debt that you owe you should,

A

Use the interest from your investment to pay off the interest of your debt.

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53
Q

What is the definition of reallocating?

A

Selling some investments or other assets and reinvesting that money into something else such as stocks.

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54
Q

What is a cash flow?

A

What money is coming in (income) and what money is being spent (outgo).

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55
Q

What is an income statement?

A

An income statement is basically a cash flow statement that takes more technical things into consideration like depreciation or amortization.

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56
Q

What is amortization

A

Paid money that is owed for something by making regular payments over a long period of time.

Mortgage

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57
Q

What does IRA Stand for?

A

Individual retirement account

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58
Q

What is a Roth IRA?

A

Roth Individual retirement account

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59
Q

A tax strategy to consider is doing your stock investing in a…

A

IRA
or
Roth IRA

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60
Q

Long-term goals refer to projects or financial goals that need funding…

A

5 + years from now

61
Q

Intermediate-term goals refer to financial goals that need funding…

A

2-5 years from now.

62
Q

Short-term goals need funding…

A

Less than 2 years from now.

63
Q

If an investor is “bullish”he is…

A

Optimistic that stock prices will rise

64
Q

If an investor is “bearish” he is…

A

Pessimistic about the market’s growth

65
Q

What is investing?

A

Putting your current funds into securities or tangible assets for the purpose of gaining future appreciation, income, or both

66
Q

What is saving?

A

The safe accumulation of funds for a future use

67
Q

What is speculating?

A

The financial world’s equivalent of gambling.

68
Q

What is the stock market is also called?

A

Equity markets.

69
Q

Most successful investors invest in the stock market for greater more than

A

1 year

70
Q

As an investor it is important to know ____ you want to reach my financial

A

When

71
Q

What kind of investor am I?

Long-term (over five years)

Large-cap stocks - mid-cap stocks

A

Conservative investor

72
Q

What kind of investor am I?

Long-term (over five years

Small cap stocks- mid cap stocks.

A

Aggressive investor

73
Q

What kind of investor am I?

Intermediate term (2-5 years)

Large cap stocks- mid cap stocks.

A

Conservative investor

74
Q

What kind of investor am I?

Intermediate-term (2 to 5 years)

Small-cap stocks - mid-cap stocks

A

Aggressive investor

75
Q

Payments made to a stock owner

A

Dividends

76
Q

Payment made to a creditor

A

Interest

77
Q

If you plan to invest in the stock market for intermediate-term goals, consider________ or _________ companies
In industries that provide _______.

A

Established

Dividend paying

Necessities

78
Q

Appreciation is also known as…

A

Capital gain

79
Q

To increase in value…

A

Appreciate

80
Q

To decrease in value

A

Depreciate

81
Q

Limit risky investments to know more then of your____ % of your investable funds.

A

10

82
Q

Who are dividends paid to?

A

Shareholders

83
Q

How often are dividends typically.

A

Quarterly

84
Q

When you put money in a bank or when you buy bonds you are basically…

A

Loaning your money

86
Q

What do you call an investment’s pay out expressed as a percentage of the investment amount?

A

Yield

87
Q

What is the formula for yield?

A

Yield = Payout/ Investment Amount

88
Q

When you put your money into a security that is tried and true, what kind of investing is it?

A

Conservative Investing

89
Q

What four qualities does one look for when investing in conservative stock?

P.S.L.L.

A

Proven Performance
Large Market Size
Proven Market Leadership
Perceived Staying Power (Longevity)

90
Q

What describes an investor who invests in potential break out companies

A

Aggressive Investing

91
Q

What three qualities does one look for when investing Aggressively in stock?

PAI

A

Great Potential
Capital Gains Possibility
Innovation

92
Q

If you want greater return on your money you need to tolerate more _____.

A

Risk

93
Q

If you don’t want to tolerate more risk, you must tolerate lower rate of ______.

A

Return

94
Q

What are the seven main types of risk?

FIMITPEP

A 
Financial
Interest rate
Market
Inflation 
Tax
Political and Governmental
Emotional
Personal
95
Q

What is a Nominal Rate (Face Rate )

A

The stated and fixed value of an issued security, as opposed to the fluctuating market value.

96
Q

What are the industries considered to be sensitive to?

Electric Utilities
Real estate
Financial sector

A

Interest

Interest sensitive industries

97
Q

What kind of debt is borrowed against stock in brokerage accounts called?

A

Margin Debt

98
Q

Which securities do well when interest rates are high?

A

Money Market funds
U.S. Savings bonds
Other Variable interest rate investments.

99
Q

Essentially what is the market?

A

A group of millions of individuals making daily decisions to buy or sell stock.

100
Q

What makes the stock Market and irrational short term investment and difficult to predict?

A

The fact that millions of investors are buying and selling each minute of every day.

101
Q

What is it called when an individual is attempting to make a relatively quick profit by monitoring the short term price movements of a particular investments?

A

Speculating

102
Q

Investors seek to ______ risk

A

Minimize

103
Q

Speculators don’t mind risk because it could also_____ ______

A

Magnify profits

104
Q

The artificial expansion of the quantity of money so that too much money is used in exchange for goods and service.

A

Inflation

105
Q

Inflation Risk is also called ________

A

Purchasing Power Risk.

106
Q

What is Inflation Risk (Purchasing Power Risk) mean?

A

Your money doesn’t buy as much as it used to.

107
Q

To consumers inflation shows up in the form of___ _____

A

Higher Prices

108
Q

To the investor inflation risk threatens the investment because…

A

The value of the stock may not keep up with inflation thus a loss.

109
Q

The three investment lessons from 9/11

A

Diversify
Review/Reallocate
Check for trouble

110
Q

What does ETF stand for?

A

Exchange traded fund

111
Q

What is an ETF

A

A fund with a fixed portfolio of stocks or other securities that tracks a particular index.

112
Q

What type of investing is acceptable for people in their 20’s & 30’s?

A

A diversified portfolio in which 75% of it is in growth stocks, like mid and small cap stocks.

113
Q

What is an index?

A

Statistical measures that represent the value of a batch of stocks.

114
Q

What is the oldest index?

A

The Dow Jones Industrial Average

115
Q

What does DJIA stand for?

A

The Dow Jones Industrial Average

116
Q

Who and When was the DJIA created?

A

Charles Dow 1896

117
Q

The Dow originally tracked ___ stocks, but from 1928 until present it tracks the ____ biggest and most influential companies in the USA.

A

12

30

118
Q

The primary difference between all of the indices is…

A

Weighting

119
Q

What is weighting?

A

The RELATIVE importance of the items when they’re computed within the index.

120
Q

How many types of indices are there?

A

5

121
Q

What kind of index am I?

I track the proportion of a stock based on its market capitalization.

A

Market-Value Weighted index

Nasdaq Composite

122
Q

What kind of index am I?

I provide a snap shot of the ENTIRE Market

A

Broad-Based Index

S&P 500
Wilshire 5000

123
Q

What kind of index am I?

I am a combination of several averages or indices

A

Composite Index

NYSE Composite

124
Q

What kind of index am I?

I include both the appreciation of stocks represented in the index

and

cash payouts such as dividends issued to stockholders

A

Performance Based index

DAX

125
Q

What kind of index am I?

I track changes based on the change in the individuals stock’s price per share?

A

Price Weighted Index

The Dow

126
Q

What is a Market-Value Weighted index also known as?

A

Capitalization-Weighted Index

127
Q

What was the DOW’s all time closing high?

A

Tuesday, December 31, 2013

@ 16,576.66

128
Q

The S&P 500 tracks 500 Companies but the top ____ represent ___ of the index’s market value.

A

50

50%

129
Q

The top ___ of the S&P 500 stocks have just as much weight as the bottom ___.

A

10%

90%

130
Q

The Wilshire 5000 goes by what other 2 names?

A

Wilshire 5000 Equity Index
&
Wilshire total market index

131
Q

Which index is probably the largest in the world?

A

Wilshire 5000 (Wilshire total market index)

132
Q

What does NASDAQ stand for?

A

National Association of Securities Dealers Automated.

133
Q

The NASDAQ Covers about _____ companies

A

300

134
Q

This is the most widely quoted Index

A

NASDAQ

135
Q

The NASDAQ Primarily tracks which industries?

A

Technology, Telecommunications, and similar industries.

136
Q

This tracks the largest (based on market cap) companies on the NASDAQ.

A

NASDAQ 100

137
Q

This performance based index that includes the 3000 largest publicly traded companies

A

The Russell 3000

138
Q

The 3000 companies that the Russell 3000 tracks represent ____% of all publicly traded stocks.

A

98

139
Q

The Russell 3000 is important because it includes many _____________________

A

Mid & Small Cap Stocks

140
Q

Most stocks on the Russell 3000 have a market value of at least _______.

A

A Billion Dollars

141
Q

The Russell 3000 is also separated in to 2 smaller groups. What are they

A

The Russell 1000
and
The Russell 2000

142
Q

The Russell 1000 Represents the_____

A

Top 1000 Companies

143
Q

The Russell 2000 Represents the_____

A

bottom 2000 Companies

144
Q

The Russell 2000 does not represent _____

A

Micro cap stocks

145
Q

The index most widely used in India

A

BSE SENSEX

146
Q

The index most widely used in France

A

CAC-40

147
Q

The index most widely used in Germany

A

DAX

148
Q

The index most widely used in Great Britain

A

FTSE-100

Footsie

149
Q

The index most widely used to represent U.S. Companies that derive most of their earnings in China

A

Halter USX China

150
Q

The index most widely used in Hong Kong (China)

A

Hang Seng

151
Q

The index most widely used in Japan

A

Nikkei

152
Q

The index most widely used in Shanghai

A

SSE Composite

Stock Investing For Dummies (1 decks)

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