Caused by the business cycle, this risk is associated with just being in the market.
"When the ocean rises, all the boats go up; when the ocean falls, all the boats go down"
What is ... Market Risk
100
This type of stock remains stable and pays dividends even during economic declines - in effect if defends your portfolio from economic recession. These companies have stable earnings. Examples are grocery stores and health care.
What is ... Defensive Stock
100
This type of bond is issued by a federal agency
What is ... an Agency Bond
100
A technique for estimating the number of years required to double your money at a given rate of return.
What is ... the Rule of 72
200
Price for which stock is bought and sold in the marketplace.
What is ... Market Value
200
The risk associated with owning a specific company.
For example: British Petrolium or Wal-Mart.
What is ... Company Risk
200
Thes stocks do well when the economy is growing, but do not do very well when it goes into recession. Examples of these are cruise ships or expensive cars.
What is ... Cyclical Stocks
200
A bond that can be paid off early, or "called back" by the issuer.
What is ... a Callable Bond
200
Using earned dividends to buy more shares of stock.
What is ... Dividend Reinvestment
300
The spreading of risk among many types of investments.
What is ... Diversification
300
Unrelated to market trends. This risk is totally unpredictable and uncontrollable. Example: Terrorism threats, tornadoes.
What is ... Nonmarket Risk
300
This type of stock has a history of paying high dividends
What is ... Income Stock
300
This bond is issued by a state or local government and the interest is not federally taxable.
Examples include Highway departments, Schools, Hospitals.
What is ... a Municipal Bond
300
A summary of a corporation's financial result for the year and future prospects.
What is ... an Annual Report
400
The amount the bondholder is paid at bond maturity
What is ... Face Value
400
The risk that the actions of a government will affect the value of your investment
What is ... Political Risk
400
A class of stock that pays dividends but has no voting rights. This class of stock is considered safer than common stock, because it pays dividends before common stock.
What is ... Preferred Stock
400
This type of bond can be exchanged for shares of common stock. The investor can choose whether to receive the face value of the bond or exchange the face value for an equivalent value of stock.
What is ... a Convertible Bond
400
A marketplace where brokers meet to buy and sell securities. Examples: AMEX, NYSE.
What is ... a Securities Exchange
500
A bond issued to raise money for a specific project. These type of bonds are can be issued by both corporations and municipalities. Example, add a new wing to a corporate home officeor build a new dormitory at a college.
What is ... Revenue Bond
500
The chance that inflation will rise faster than the return on your investments. This is the same risk you face if you "save" money in a shoebox under your bed. It is what causes you to lose purchasing power due to inflation.
What is ... Interest Rate Risk
500
Stocks of large-well extablished companies.
Example IBM, Phillip-Morris, Johnston & Johnston.
What is ... Blue Chip Stocks
500
This type of bond does not pay any interest. It is purchased for much less than the face value (deep discounts). But investors receive the full face amount at maturity.
Examples: Federal Savings Bonds.
What is ... a Zero-Coupon (or deep discount) Bond
500
The market price of a stock divided by annual earnings per share