Stock Market 101: Learn the Lingo

Making your money work for you is a great start toward a secure financial future. Whether it’s investing in a share certificate or mutual funds, making sound financial investments at an early age will put you ahead of the financial game. If you are planning to go to college and need help paying your tuition, now is the perfect time to start saving and investing.

Although the stock market is just one option when it comes to investing your money, it can be one of the best long-term ways to increase your financial security. $20 invested each week for ten years at 8% rate of return yields $16,000. Here is your chance to learn basic stock market lingo to help you understand how the stock market really works. The following are frequently used terms when referring to the stock market:

• Stock Market: A term referring to the trading of securities through stock exchanges, such as NYSE, NASDAQ, and AMEX (see below for explanation of each exchange).
• Stockholder: A person who owns stock, or shares, of a company.
• Stock: An investment that buys you a portion, or a share, of a company (For example, Coca-Cola, Disney, McDonald’s, Texaco, etc.).
• Bond: An IOU issued by corporations or government entities. These entities borrow money from investors and promise to pay it back at a later date plus interest.
• SEC: Stands for Securities and Exchange Commission. This is a regulatory agency started by Congress in 1933 to help protect investors. The SEC is responsible for overseeing and enforcing securities regulations.
• Broker: A licensed person who is legally authorized to facilitate your order to buy or sell securities.
• Security: Note, stock, bond, or any type of investment product.
• Dividend: The portions of a company’s net earnings paid to its stockholders.
• Portfolio: A group of stocks, bonds, or other investments owned by an investor.
• Stock Split: A division of stocks made to create more or reduce the number of outstanding shares a company has.
• Dow Jones Industrial Average: An average of the stock prices of 30 large, well-known companies in the United States (e.g. Sears, General Motors, IBM, etc.).
• NYSE: Stands for New York Stock Exchange (located in the Wall Street district). The NYSE is where thousands of securities (stocks, etc.) are traded daily.
• NASDAQ: Stands for National Association of Securities Dealers Automated Quotations. An automated information network which provides brokers with quotes on securities (stocks, etc.).
• AMEX: Stands for American Stock Exchange. This exchange trades stock for medium and small-sized companies. AMEX also has the largest market for foreign securities in the United States.

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