American Stock Exchange (AMEX) - Located in New York City, it has the second largest volume in the United States, with trading consisting of many stocks and bonds of small and medium-size companies and many foreign companies, as well as some over-the-counter stocks.

Amortization - Reduction of debt through periodic payments consisting of interest and part of principal.

Arbitrage - The buying of foreign exchange, securities, or commodities in one market and the simultaneous selling in another market, in terms of a third market. By this manipulation a profit is made because of the difference in the rates of exchange or in the prices of securities or commodities involved.

Balance Sheet - A quantitative summary of a company's financial condition at a point in time, including assets, liabilities and net worth.

Balance of Trade (BOT) - The largest component of a country's balance of payments. It is the difference between exports and imports. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy, and foreign investments in the domestic economy.

Beta - A coefficient that measures volatility relative to the total market.

Blue Chip Stocks - These are companies with along history of sustained earnings and uninterrupted dividends. They have been around long enough to show a good track record. Their good management and regarded products and services holdout the potential for continued growth.

Board of Directors - A group of individuals elected by stockholders to manage a corporation.

Bond Issuance - A certificate issued by a government entity or company, undertaking to repay borrowed money together with any due interest.

Book Value - An accounting term used to describe the original cost of an asset less accumulated depreciation, depletion or amortization, and all other liabilities or claims.

Business Cycle - A predictable long-term pattern of alternating periods of economic growth and decline. The cycle passes through four stages: expansion, peak, contraction and trough.

Capital - The money, tangible or intangible property, and accumulated wealth of an individual or firm used to create profits.

Capitalism - An economic system in which trade and industry are controlled by private owners, and is motivated by profit.

Cashflow - a measure of an organization's liquidity that usually consists of net income after taxes plus noncash charges (as depreciation) against income.

Chairman of the Board - The regular president of the board of directors.

Consumer Confidence Index - The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by NFO WorldGroup, a member of The Interpublic Group of Companies.

The Consumer Price Index (CPI) - The Consumer Price Index is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Current Assets - These are assets that can be converted to cash within one year, i.e., cash, accounts receivables, inventory, marketable securities, pre-paid expenses, etc.

Current Consumption Products or Services - Products or services that are purchased and meant to be consumed or used within a year.

Current Liabilites - Debt due within a year, i.e., accounts payables, short-term loans, expense incurred but not paid, etc.

Debt - An amount of money owed from a person, private firm or public entity to another person, private firm or public entity.

Deflation - A fall in the general price level or contraction of credit and available money leading to a psychology of deflationary expectations in the market place.

Derivative - A contract whose value is based on the performance of an underlying security. Derivatives are simply tradable instruments that are derived from the main market. Options of various types are the most common derivative.

Diluted Earnings Per Share - The earnings per share (EPS) if all convertible securities were exercised. In other words, diluted earnings take into account if all warrants, stock options, and convertible bonds were traded in for stock. This would result in an increased number of shares outstanding. Diluted EPS is a much more accurate reflection of a company's earnings.

Dividend - A share of profits paid to shareholders. They are most eften granted in cash but can take a number of forms, including additional securities, and are traditionally issued quarterly.

Dogs of the Dow - Investing in the Dogs of the Dow is relatively simple. After the stock market closes on the last day of the year, of the 30 stocks which make up the Dow Jones Industrial Average, select the ten stocks which have the highest dividend yield. Invest an equal dollar amount in each of these ten highest yielding stocks. Then hold these ten "Dogs of the Dow" for one year. Repeat these steps each and every year.

Dollar cost averaging - is a technique, often used in buying mutual funds, but, can apply to most type of investments, in which investments of defined amounts are made on a regular basis.

Dow Jones Industrial Average (DJIA) - A widely quoted measure of stock market price movements of 30 of the largest, seasoned industrial firms.

The Dow Theory - The Industrial Average and the Transportation Average must corroborate and confirm each other's direction for there to be a reliable market direction signal.

Due diligence - The process of investigation, as performed by investors, into the details of a potential investment or acquisition. It involves the examination of operations and the verification of material facts.

Economy - The state of the country or region in terms of the production and consumption of goods and services, and the supply of money.

Elasticity of demand - A measure of consumer response to price changes. Demand is elastic when low prices cause the demand to increase and high prices cause it to decrease.

Enterprise - A business or company.

Entreprenuer - One who undertakes a commercial enterprise with a chance of profit or loss.

Euro - The euro is the official currency in 31 states and territories, 10 more will join in 2004 and 6 others may join in the next five years, an additional 22 peg their own currency to it.

European Union (EU) - is a union of fifteen independent states based on the European Communities and founded to enhance political, economic and social co-operation. They were formerly known as European Community (EC) or European Economic Community (EEC).

Federal Reserve Board - The seven governing members of the Federal Reserve System who determine the country's monetary policy.

Fiscal Policy - Federal government policy regarding taxation and spending, as set by Congress and the Administration.

401K Retirement Plan - A 401k plan is a contribution plan offered to employees by a corporation, which allows employees to set aside a portion of their paycheck for retirement purposes. The money placed in the 401k is tax-deferred. Some corporations even offer 401k matching, which can mean the difference between a comfortable and a standard retirement.

Fundamental Analysis - A method of valuation of stocks based on examination of fundamental factors, such as company earnings, growth prospects, and so forth, to determine a company's underlying worth and potential for growth.

Futures contract - A standardized agreement, traded on a futures exchange, to buy or sell a commodity at a specified price at a date in the future. It specifies the commodity, quality, quantity, delivery date and delivery point or cash settlement. The traded price is the basis on which profit or loss is calculated at maturity or on closing out the position if this takes place before maturity.

Government Policy - Government actions to influence the development of particular industries.

Gross Domestic Product (GDP) - Gross domestic product or GDP is the broadest measure of the health of the US economy. The major expenditure components are personal consumption (C) (68%), gross private domestic investment (I) (19%), government purchases (G) (17%), and net exports (X-M) (-4%). They form the familiar identity equation of: GDP = C + I + G + X - M. Because of the detail available in the GDP reports, this series provides comprehensive information on supply and demand conditions, including information for various types of developing imbalances over the business cycle.

Hedge - The purchase or sale of a futures contract as a temporary substitute for a cash market transaction to be made at a later date. Usually it involves opposite positions in the cash market and futures market at the same time.

Inception - The beginning of an organization or activity.

Incorporation - To form a group of people authorized to act as an individual, or separate entity, which may indemnify or reimburse derectors for litigation expenses or damages charged against them in court decisions.

Index - Statistical composite that measures changes in the economy or in financial markets, can be expressed in percent changes from a base year or from the previous month. Most common are the S&P500 and the Dow Jones Industrial Average.

Individual Investors - A private individual who uses money to buy stock shares, debt instruments or property so as to earn interest or bring profit.

Individual Retirement Account (I.R.A.) - A tax sheltered retirement account for employed individuals.

Industrial Segment - All the people and organizations selling goods or services in a specified industry.

Inflation - Inflation is a measure of the change in the value of money which is generally expressed as a percentage reduction in value over the previous year which is the rate of inflation. Thus in simple terms an inflation rate of 5% means you will need 5% more units of money to buy the same basket of products than you would have needed a year ago.

Initial Public Offering (I.P.O.) - The first public sale of common stock, usually by a privately owned company that wants to go public.

Institutional Investor - An organization pooling investment funds from multiple sources to trade securities in large volume.

Inventories - These are raw materials, in-process and finished items ready for sale.

Investment Banker - An institution in the business of raising capital for corporations and municipalities.

Keogh Plan - A federally approved retirement program that permits self-employed people to set aside for savings up to $30,000 or up to 25% of their income, whichever is lower.

Keynesian Economics - Named for John Maynard Keynes. An economic theory which advocates government intervention, or demand-side management of the economy, to achieve full employment and stable prices.

Limited Liability Company (LLC) - A limited liability company is not a partnership or a corporation, but it combines the corporate advantages of limited liability with (normally) the partnership advantage of pass-through taxation.

Market Capitalization - The current market price of one share of a company's common stock multiplied by the number of shares outstanding.

Monetary Policy - A central bank's actions to influence short-term interest rates and the supply of money and credit, as a means of helping to promote national economic goals. Tools of U.S. monetary policy include open market operations, discount rate policy, and reserve requirements.

Mutual Fund - A mutual fund is a company that combines, or pools, investors' money and, generally, purchases stocks or bonds. Ideally, a fund's size and resultant efficiency, combined with experienced management, provide advantages for investors that include diversification, expert stock and bond selection, low costs, and convenience.

National Association of Securities Dealers (NASD) - The financial market for trading securities that are not listed on organized stock exchanges, such as the American Stock Exchange or the New York Stock Exchange. The stocks often belong to smaller companies that do not meet the listing requirements of organized exchanges.

Nasdaq (National Association of Securities Dealers Automated Quotations) - A computerized system that stores and displays up-to-the-second price quotations for securities traded over the counter.

Nasdaq 100 Index - An index that includes the Nasdaq's 100 largest companies (Microsoft, Intel, WorldCom, Dell, etc.) and is heavily focused on technology companies.

Net Asset Value (NAV) - The market value of an investment company's (mutual fund) asset less any liabilities divided by the number of shares outstanding. This is the value of the each share if the fund sold all of its assets at their current market value and paid off any outstanding debts.

Net Worth - total assets minus total liabilites of an individual or company, also called shareholder's equity.

New York Stock Exchange (NYSE) - Also, located in New York City, they are the oldest and largest exchange, with more than 80% of all U.S. securities traded on it, including those of very large corporations.

Non-Essential - Products or services, which are not central or absolutely necessary.

Option - An option is a contract that permits the owner to buy a commodity, security or futures contract at a specified price any time between now and the expiration date as specified by the option contract. Call options give the holder the right to buy the stock at the strike price. Put options give the holder the right to sell the stock at the strike price.

PEG Ratio - The PEG Ratio is a powerful formula which compares earnings growth and Price Earnings Ratio. The PEG Ratio (formula) is the current Price Earnings Ratio divided by the expected long-term growth rate (per the earnings per share).

Portfolio - A collection of investments all owned by the same individual or company.

Price/earnings ratio - Price of a stock divided by its earnings per share. See "Keys To Understanding And Using Your - Stock N' Trade Report"

Productivity - Productivity, technically, is the rate of output per unit of input. In the economy, at large, productivity generally means labor productivity, or the output per hour worked.

Product Life Cycle - The estimated useful life of a product until it has to be replaced.

Profit - A company's earnings calculated by subtracting expenses, interest, taxes and depreciation form revenues.

Profit Margin - Net earnings, after taxes, divided by revenues.

Prudent Man Rule - A federal and state regulation requiring trustees and portfolio managers to make financial decisions in the manner of a prudent man, e.g., with intelligence and discretion.

Recession - The media and certain financial institutions have taken it on themselves to define a recession. Their definition of a recession in the United States (and elsewhere?) is "Two consecutive quarterly declines in the Gross Domestic Product".

Recession Resistant - The ability of a company to sustain financial momentum while the overall economy may be slowing.

Return on Equity (R.O.E.) - A measure of a corporation's profitablility cauculated by dividing net income by shareholder's equity.

Roth IRA - A tax-deferred retirement account. But slightly different than a regular IRA, contributions to a Roth IRA aren't tax-deductible but there is no tax on withdrawals as long as the taxpayer is age 59½ and the account has been open for five years.

The Rule of 20 - The stock market is at fair value when the stock market's Price Earnings (P/E) Ratio plus (+) the rate of inflation is the sum (=) total of 20.

Rule of 72 - Divide the number 72 by the percentage rate you are earning on your investment (s) or paying on your debt, this is the number of years it takes, respectively, to double your investment (s) or your debt.

Russell 2000 Index - The Russell 2000, one of 21 U.S. equity Russell indexes, is used to measure the performance of U.S. small company stocks ("small caps," in Street parlance). But these aren't the smallest of the small. They are actually the 2000 smallest companies in the Russell 3000 index, a broad based index that represents approximately 98% of the value of the investable U.S. equity market, but leaves out the tiny mini- and micro-cap stocks that make up the remaining 2%. The Russell 2000 makes up only about 8% of the total market capitalization of the Russell 3000.

Sell Short - Sell borrowed securities, usually in the hope that the price will decline and a profit can be made on the difference.

Shareholder's Equity - See Net Worth.

Shareholders of Record - An individual or company that owns (holds) at least one share of stock of a corportion as represented by a stock certificate or record of shares held by the owner's broker.

Standard & Poor's 500 (S&P500) - An inclusive index of 500 stocks including 400 industrial stocks, 40 utilities, 20 transportation and 40 financial stocks.

Stock - A stock certificate representing shareholder ownership in a corporation.

Stock Appreciation - The increase in the value of stock over time.

Stock-Split - A division of a certain number of shares of stock into a greater number while keeping the overall dollar amount the same. To increase the number of shares outstanding without a change to the shareholder's equity.

Supply-Side Economics - The economic theory that concentrates on influencing the supply of labor and goods as a path to economic health, rather than approaching the issue through such macroeconomic concerns as (demand) gross national product. The central concept of supply-side economics is that tax cuts cause economic growth. Tax cuts allow entrepreneurs to invest their tax savings, which creates higher productivity, jobs and profits. This, ironically, allows the entrepreneur and his new workers to pay even more taxes, even at lower rates.

Underwriter - Investment banker who purchases a new issue of securities (such as company stock or bonds) and distributes it to investors. Most underwriting is done through a group or syndicate of companies.

Value investing - Managers who invest in companies believed to be undervalued on an absolute basis or relative to the market and/or historic basis. Value stocks or portfolios tend to have lower than average per share growth, low debt, and be of higher quality. Value portfolios have a lower than average portfolio turnover (purchases and sales).

Warrants - They entitle the holder to buy or sell a specific number of shares in that company at a specific price (the exercise price), at a specific time or during a specific period in the future. They are rather like long-term options, presenting opportunities for capital gains which can make them an attractive medium both for speculative and longer-term investment. Warrants differ from options in that, when exercised, the shares come from the issuing company and not from another investor.

Wilshire 5000 Index - Started in 1974, the Wilshire 5000 is often referred to as the Total Stock Market Index because it seeks to track the returns of practically all publicly traded, U.S.-headquartered stocks that trade on the major exchanges. Although this index is less well known than the others, it is in fact the largest index by market value in the world.

If you would like us to consider researching and adding additional investor terms to our dictionary, please e-mail us, with your suggestions, and let us know.

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