Markets
What is day trading?
Someone who trades throughout the same day and profits from short-term price changes
Explain the difference between a bull and a bear market
A bull market is a market on the rise, and a bear market is falling.
Briefly describe the concept of asset allocation
An investment strategy that divides a portfolio among different asset classes to diversify investments.
Describe the role that discount brokers play in carrying out secutiry transactions
Discount brokers are people who buy and sell orders at reduced commission rates.
Describe the operations of the NASDAQ market, and compare it with an exchange.
An electronic stock market that allows individuals to buy and sell stocks, and does not have a physical location like the New York Stock Exchange.
Describe how the return on an investment is calculated.
Divide an investment's net profit by its initial cost
What are online brokers, and what kinds of investors are most likely to use them?
They are used by self-directed investors who want to manage their own investments and execute trades online at a lower cost than traditional brokers
What is the SIPC, and how does it protect investors?
Protects consumers if their brokerage firm fails.
Explain why it might be preferable for a person to invest in a portfolio of securities rather than in a single security.
Risk reduction, reduce volatility, higher likelihood of consistent returns.
What role do market averages and indexes play in the investment process?
They allow investors to compare their portfolio performance to the broader market.
How does a primary market differ from a secondary market?
A primary market is where securities are issued for the first time, and a secondary market is where investors trade existing securities
Why is it important to have investment objectives when embarking on an investment program?
Because it allows investors to have a strategic road map to map out their progress.
What are broker and dealer markets?
Brokers execute trades on behalf of others, while dealers execute trades on their own behalf.
Contrast the NASDAQ and National Market System with the OTCBB.
The NASDAQ is highly regulated and used primarily for large companies. While the OTC is riskier and have less regulations and for smaller companies, and a decentralised market for broker-dealers.
What’s the difference between an investment plan and a capital accumulation plan?
An investment plan is a broader strategy for using your money to achieve various financial goals by investing in different assets. Capital accumulation plan is a specific plan on building wealth over a long term.