The Essentials Of Stock Investing Flashcards
(152 cards)
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.
1
Q
What is a bear market?
A
A prolonged period of falling prices - in this case stock prices
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.
3
Q
What are the 2 primary types of stock?
A
Common stock
and
Preferred stock
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
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.
6
Q
Some times in the event that a company is going bankrupt ____ ____ receives dividends before _____ _____
A
Preferred stockholders
Common stockholders
7
Q
What are the two times that you should gather information on your stock picks?
A
Before and After you invest
8
Q
When you are ready to invest what kind of account do you need?
A
Brokerage account
9
Q
What is the most basic way you can determine a company’s market value?
A
Look at the market capitalization ( market cap).
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
11
Q
What is the value of a microcap?
A
Under $250 million
12
Q
What is the value of a small cap?
A
$250 million-$1 billion
13
Q
What is the value of a large cap?
A
$10 billion to $50 billion
14
Q
What is the value of an ultra cap (mega caps)?
A
Over $50 billion
15
Q
What market cap has the least risk?
A
Ultra Caps (Mega caps)
16
Q
Which market cap has steady appreciation with great safety?
A
Large caps
17
Q
What are the stocks in the large caps frequently referred to as?
A
Blue chips
18
Q
Which market caps are a good compromise between high-risk and low-risk stocks?
A
Mid caps
19
Q
Which market caps are risky but not the riskiest with gaining potential.
A
Small caps
20
Q
The smallest and riskiest market caps available.
A
Micro caps
21
Q
You are investing for appreciation that is called investing for_____
A
Capital gains
22
Q
If you are investing for income that is called investing for _____
A
Dividends
23
Q
In the short-term stock investing is considered_____
A
Irrational
24
A disciplined investor has money in several places like...
BAMA
Investment grade bonds
Bank accounts
precious metals
other assets for growth or income
25
What is a balance sheet?
A list of your assets and liabilities.
26
What is a net worth
Total assets minus total liabilities
27
What is the opposite of income
Outgo
28
What is liquidity?
How quickly you can convert an asset into cash.
29
What is an asset?
Something one owns that has value.
30
What is illiquidity
No access to immediate cash to meet a pressing need
31
What are long term assets?
An asset that has value but has little liquidity.
32
What is the one question one can ask to determine an asset's liquidity?
How quickly can I turn this asset into cash?
33
What is a liability
A bill that someone is obligated to pay.
34
What does unsecured mean as in unsecured debt?
That a debt is not backed by an asset for collateral.
It usually results in higher interest rates.
35
What does secured mean, as in secured debt.
That a debt backed by an asset for collateral.
It usually results in lower interest rates.
36
Your brokerage account can be used as _______ to secure a debt.
Collateral
37
What is variable (floating) interest debt?
An interest rate that fluctuates at the creditors will.
38
What is fixed interest debt?
Interest rate on a debt that is fixed and predictable.
39
What variable (floating) interest debt should be replaced with?
Fixed interest debt.
40
What does Murphy's Law say about stocks?
That a stockholder will sell his stocks at the worst possible moment.
41
What was one of the reasons that the US appeared to be doing so well going to late 1990s stock-market boom
The fact that individuals and organizations went on an unprecedented spending binge financed mostly by excessive debt
42
What is the definition of a Net Worth (Net Assets/Net Equity)?
The value of all assets minus the total number of liabilities
Assets - Liabilities = Net Worth (Net Assets/Net Equity)
43
What are the other names for a Net Worth
Net Assets
Net Equity
44
What is it called when the value of your assets exceed the value of your liabilities?
Positive net worth.
45
What is the safest type of account in the US?
A treasury money market fund
46
Your emergency fund money should be...
In an ultra-safe account earning the highest interest available.
47
You should do your best to replace depreciating assets with...
Appreciating assets
48
What is the definition of a depreciating asset?
An item that keeps shrinking and value
49
What is an appreciating asset?
An item that grows in value when invested.
50
What happens if you withdraw funds from a CD before it matures?
You may risk losing money such as some interest.
51
You should try to pay off any high interest debt with...
Funds from low interest assets
52
If the interest on an investment is higher than the interest on a debt that you owe you should,
Use the interest from your investment to pay off the interest of your debt.
53
What is the definition of reallocating?
Selling some investments or other assets and reinvesting that money into something else such as stocks.
54
What is a cash flow?
What money is coming in (income) and what money is being spent (outgo).
55
What is an income statement?
An income statement is basically a cash flow statement that takes more technical things into consideration like depreciation or amortization.
56
What is amortization
Paid money that is owed for something by making regular payments over a long period of time.
Mortgage
57
What does IRA Stand for?
Individual retirement account
58
What is a Roth IRA?
Roth Individual retirement account
59
A tax strategy to consider is doing your stock investing in a...
IRA
or
Roth IRA
60
Long-term goals refer to projects or financial goals that need funding...
5 + years from now
61
Intermediate-term goals refer to financial goals that need funding...
2-5 years from now.
62
Short-term goals need funding...
Less than 2 years from now.
63
If an investor is "bullish"he is...
Optimistic that stock prices will rise
64
If an investor is "bearish" he is...
Pessimistic about the market's growth
65
What is investing?
Putting your current funds into securities or tangible assets for the purpose of gaining future appreciation, income, or both
66
What is saving?
The safe accumulation of funds for a future use
67
What is speculating?
The financial world's equivalent of gambling.
68
What is the stock market is also called?
Equity markets.
69
Most successful investors invest in the stock market for greater more than
1 year
70
As an investor it is important to know ____ you want to reach my financial
When
71
What kind of investor am I?
Long-term (over five years)
Large-cap stocks - mid-cap stocks
Conservative investor
72
What kind of investor am I?
Long-term (over five years
Small cap stocks- mid cap stocks.
Aggressive investor
73
What kind of investor am I?
Intermediate term (2-5 years)
Large cap stocks- mid cap stocks.
Conservative investor
74
What kind of investor am I?
Intermediate-term (2 to 5 years)
Small-cap stocks - mid-cap stocks
Aggressive investor
75
Payments made to a stock owner
Dividends
76
Payment made to a creditor
Interest
77
If you plan to invest in the stock market for intermediate-term goals, consider________ or _________ companies
In industries that provide _______.
Established
Dividend paying
Necessities
78
Appreciation is also known as...
Capital gain
79
To increase in value...
Appreciate
80
To decrease in value
Depreciate
81
Limit risky investments to know more then of your____ % of your investable funds.
10
82
Who are dividends paid to?
Shareholders
83
How often are dividends typically.
Quarterly
84
When you put money in a bank or when you buy bonds you are basically...
Loaning your money
86
What do you call an investment's pay out expressed as a percentage of the investment amount?
Yield
87
What is the formula for yield?
Yield = Payout/ Investment Amount
88
When you put your money into a security that is tried and true, what kind of investing is it?
Conservative Investing
89
What four qualities does one look for when investing in conservative stock?
P.S.L.L.
Proven Performance
Large Market Size
Proven Market Leadership
Perceived Staying Power (Longevity)
90
What describes an investor who invests in potential break out companies
Aggressive Investing
91
What three qualities does one look for when investing Aggressively in stock?
PAI
Great Potential
Capital Gains Possibility
Innovation
92
If you want greater return on your money you need to tolerate more _____.
Risk
93
If you don't want to tolerate more risk, you must tolerate lower rate of ______.
Return
94
What are the seven main types of risk?
| FIMITPEP
```
Financial
Interest rate
Market
Inflation
Tax
Political and Governmental
Emotional
Personal
```
95
What is a Nominal Rate (Face Rate )
The stated and fixed value of an issued security, as opposed to the fluctuating market value.
96
What are the industries considered to be sensitive to?
Electric Utilities
Real estate
Financial sector
Interest
| Interest sensitive industries
97
What kind of debt is borrowed against stock in brokerage accounts called?
Margin Debt
98
Which securities do well when interest rates are high?
Money Market funds
U.S. Savings bonds
Other Variable interest rate investments.
99
Essentially what is the market?
A group of millions of individuals making daily decisions to buy or sell stock.
100
What makes the stock Market and irrational short term investment and difficult to predict?
The fact that millions of investors are buying and selling each minute of every day.
101
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?
Speculating
102
Investors seek to ______ risk
Minimize
103
Speculators don't mind risk because it could also_____ ______
Magnify profits
104
The artificial expansion of the quantity of money so that too much money is used in exchange for goods and service.
Inflation
105
Inflation Risk is also called ________
Purchasing Power Risk.
106
What is Inflation Risk (Purchasing Power Risk) mean?
Your money doesn't buy as much as it used to.
107
To consumers inflation shows up in the form of___ _____
Higher Prices
108
To the investor inflation risk threatens the investment because...
The value of the stock may not keep up with inflation thus a loss.
109
The three investment lessons from 9/11
Diversify
Review/Reallocate
Check for trouble
110
What does ETF stand for?
Exchange traded fund
111
What is an ETF
A fund with a fixed portfolio of stocks or other securities that tracks a particular index.
112
What type of investing is acceptable for people in their 20's & 30's?
A diversified portfolio in which 75% of it is in growth stocks, like mid and small cap stocks.
113
What is an index?
Statistical measures that represent the value of a batch of stocks.
114
What is the oldest index?
The Dow Jones Industrial Average
115
What does DJIA stand for?
The Dow Jones Industrial Average
116
Who and When was the DJIA created?
Charles Dow 1896
117
The Dow originally tracked ___ stocks, but from 1928 until present it tracks the ____ biggest and most influential companies in the USA.
12
30
118
The primary difference between all of the indices is...
Weighting
119
What is weighting?
The RELATIVE importance of the items when they're computed within the index.
120
How many types of indices are there?
5
121
What kind of index am I?
I track the proportion of a stock based on its market capitalization.
Market-Value Weighted index
Nasdaq Composite
122
What kind of index am I?
I provide a snap shot of the ENTIRE Market
Broad-Based Index
S&P 500
Wilshire 5000
123
What kind of index am I?
I am a combination of several averages or indices
Composite Index
NYSE Composite
124
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
Performance Based index
DAX
125
What kind of index am I?
I track changes based on the change in the individuals stock's price per share?
Price Weighted Index
The Dow
126
What is a Market-Value Weighted index also known as?
Capitalization-Weighted Index
127
What was the DOW's all time closing high?
Tuesday, December 31, 2013
| @ 16,576.66
128
The S&P 500 tracks 500 Companies but the top ____ represent ___ of the index's market value.
50
50%
129
The top ___ of the S&P 500 stocks have just as much weight as the bottom ___.
10%
90%
130
The Wilshire 5000 goes by what other 2 names?
Wilshire 5000 Equity Index
&
Wilshire total market index
131
Which index is probably the largest in the world?
Wilshire 5000 (Wilshire total market index)
132
What does NASDAQ stand for?
National Association of Securities Dealers Automated.
133
The NASDAQ Covers about _____ companies
300
134
This is the most widely quoted Index
NASDAQ
135
The NASDAQ Primarily tracks which industries?
Technology, Telecommunications, and similar industries.
136
This tracks the largest (based on market cap) companies on the NASDAQ.
NASDAQ 100
137
This performance based index that includes the 3000 largest publicly traded companies
The Russell 3000
138
The 3000 companies that the Russell 3000 tracks represent ____% of all publicly traded stocks.
98
139
The Russell 3000 is important because it includes many _____________________
Mid & Small Cap Stocks
140
Most stocks on the Russell 3000 have a market value of at least _______.
A Billion Dollars
141
The Russell 3000 is also separated in to 2 smaller groups. What are they
The Russell 1000
and
The Russell 2000
142
The Russell 1000 Represents the_____
Top 1000 Companies
143
The Russell 2000 Represents the_____
bottom 2000 Companies
144
The Russell 2000 does not represent _____
Micro cap stocks
145
The index most widely used in India
BSE SENSEX
146
The index most widely used in France
CAC-40
147
The index most widely used in Germany
DAX
148
The index most widely used in Great Britain
FTSE-100
| Footsie
149
The index most widely used to represent U.S. Companies that derive most of their earnings in China
Halter USX China
150
The index most widely used in Hong Kong (China)
Hang Seng
151
The index most widely used in Japan
Nikkei
152
The index most widely used in Shanghai
SSE Composite
