Investing Basics
Something you acquire with the goal of making money.
What is an investment?
Certificates that represent ownership in a company.
What are stocks?
Bought at $45, sold at $54. Percentage return?
What is 20%?
A promissory note to repay money with interest.
What is a bond?
A firm that provides access to the stock market.
What is a brokerage?
The process of investing in multiple investments to reduce risk.
What is diversification?
Cash distributed to shareholders.
What are dividends?
900 shares at $45, sold at $56. Dollar return?
What is $9,900?
Buying a bond means you are doing this.
What is loaning money to a company or government?
A brokerage that gives advice and manages investments for you.
What is a full-service brokerage?
Why shouldn’t you invest all your money into one stock, even if it’s doing well?
What is risk / lack of diversification?
When stock prices are rising overall.
What is a bull market?
Bond worth $1,000 at 8.5% for 5 years. Total interest earned?
What is $425?
These are generally safer than stocks but offer lower returns.
What are bonds?
A brokerage that allows you to make your own decisions at lower cost.
What is a discount brokerage?
Investing should outpace this in order to grow your purchasing power.
What is inflation?
The first time a company sells stock to the public.
What is an IPO (Initial Public Offering)?
Bought at $32, sold at $38. Percentage return?
What is 18.75%?
Government agency that regulates the stock market.
What is the SEC?
Selling shares you don’t own, betting the price will drop.
What is short selling?
Stocks are considered risky because you could lose this.
What is your original investment?
The market where stocks are bought and sold after the IPO.
What is the secondary market?
Bought at $48, sold at $54. Percentage return?
What is 12.5%?
This is the biggest risk when buying a bond from a company.
What is default risk (or the risk the company cannot repay you)?
Borrowing money to buy stocks.
What is buying on margin?