Inflation Rise in the price of goods and services, as happens when spending increases relative to the supply of goods on the market; in other words, too much money chasing too few goods.
Inflation Rate
Rate of change in prices. Two primary U.S. indicators of the inflation rate are the CONSUMER PRICE INDEX and the PRODUCER PRICE INDEX, which track changes in prices paid by consumers and by producers.
Institutional Investor
Organization that trades large volumes of securities. Some examples are mutual funds, banks, insurance companies, pension funds, labor union funds, corporate profit-sharing plans, and college endowment funds.
LiquidityThe ability to buy and sell securities easily.
Long
Having a long position signifies ownership of a security.
Long-Term Debt or Long-Term Liability
Accounting: Liability due in a year or more. Normally, interest is paid periodically over the term of the loan, and the principal amount is payable as notes or bonds mature.
Finance: Generally, debts due in more than 10 years.
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MarginThe amount paid by the customer when using a broker’s credit to buy or sell a security.
Merger
Any combination that forms one company from two or more previously existing companies.
Money Market Fund
A form of mutual fund that specializes in securities such as T-bills and commercial paper – money market instruments.
Mutual Fund
An investment vehicle that pools money from many investors and invests in a diversified portfolio of stocks, bonds or other securities based on a stated overall objective.
NASDNational Association of Securities Dealer.
NASDAQ
National Association of Securities Dealers Automated Quotation Services – A communication network
used to broadcast the quotation for qualified over-the-counter securities.
Net Asset Value (NAV)
The value of a fund’s investments. For a mutual fund, the net asset value per share usually represents the fund’s market price, subject to a possible sales or redemption charge. For a closed-end fund, the market price may vary significantly from the net asset value.
Odd LotWhen you buy between 1 to 99 shares of stock at a time.
Over-the-Counter
A secondary market comprised of thousands of companies that have insufficient shares outstanding, stockholders or earnings to warrant application for listing on the New York Stock Exchange.
PortfolioThe collection of securities that make up a mutual fund’s or an individual’s investments.
Price-Earnings (P/E) Ratio
Price of a stock divided by its earnings per share, also known as the multiple. The P/E ratio may either use the reported earnings from the latest year (called a trailing P/E) or employ an analyst’s forecast of next year’s earnings (called a forward P/E). The trailing P/E is listed along with a stock’s price and trading activity in the daily newspapers. For instance, a stock selling for $20 a share that earned $1 last year has a trailing P/E of 20. If the same stock has projected earnings of $2 next year, it will have a forward P/E of 10. Other indicators, Price-Book Ratio and Price-Sales Ratio.
Primary Market
First issued stock. A relatively small market compared to secondary markets. When a stock is sold the first time, the money goes to the company issuing the stock and becomes part of its capital. Once the stock trades on the secondary markets the company does not see any money, direct gains or losses are to the investors.
