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Untitled

Joseph Cesario English 59 cards

Cards in this deck (59)

  1. 1negotiable equity investmentcommon stock, freely-transferable (easy to buy and sell) ownership. Negotiable securities are traded in the market between investors
  2. 2issuerorganization that distributes and sells securities to investors
  3. 3redeemable securitiescan only be bought or sold with the issuer
  4. 4equityformal term for ownership
  5. 5securitylegal term for financial investment
    Investment of money
    Common enterprise*
    Expectation of profit
    Third-party effort**
    *Common enterprise occurs when there are multiple investors in a business venture.
    *** Third-party effort refers to profit made due to the efforts of someone other than the investor. For example, an Amazon (ticker: AMZN) investor does not manage Amazon - the employees of Amazon do!*
  6. 6examples of a securityCommon stock
    Preferred stock
    Debt securities
    Mutual funds
    Exchange-traded funds (ETFs)
  7. 7common stockequity investment (ownership in a company)
    two ways to profit:
    -capital appreciation (buy low sell high)
    -cash dividends
  8. 8net earningsretain earnings and invest in company to grow company or cash dividends
  9. 9negotiable tradecommon stock, preferred stock, corporate bonds, municipal bonds, gov't bonds, exchange traded funds (ETFs), exchange traded notes (ETNs), options.
    -place trade through a brokerage firm and goes to stock market (another investor) at market price
  10. 10redeemable securitiesinvestor to issuer
    -open end mgmt co (mutual funds)
    -unit investment trusts (UIT)
    -purchased at a net asset value
    -sales charges may apply
    -mutual funds & UITs
  11. 11issuerown a security (stock, bond)
  12. 12sales chargeoccur during mutual fund transactions
  13. 13net asset value (NAV)= assets-liabilities/outstanding share
    reflects the overall value of the fund on a per share basis
  14. 14sale of a redeemable securityinvestor redeems shares at NAV to issuer
  15. 15unit investment trust (UITs)only through redeemable securities
  16. 16regular-way tradessettle in 2 business days
  17. 17cash settlement basisfinalize same day if performed by 2:30pm
  18. 18long stockobtain ownership in company expecting value to rise
  19. 19short sharesif the stock price falls, they can buy them back at a lower price and profit. if price goes up lose money
  20. 20bullishexpect value to rise
  21. 21bearishexpect the value to fall
  22. 22common stockholderspart owners of the company they invest in, some control of business decisions, more shares = furthering their vote on company related issues
  23. 23authorized stockamount of stock a company is permitted to sell to investors
  24. 24issued stockshares sold to investors
  25. 25oustanding stockowned by the public
  26. 26treasury stock (stock buybacks)buy their own stock at a favorable price. fund executive compensation. increases demand of stock=higher earnings per share
  27. 27common stockshares representing an equity stake in the firm. A common shareholder can only receive a share of annual profits (i.e., dividends) after all bondholders receive their interest payments and other investors and creditors receive any payment preferences they might have been due. Common shareholders also generally have the right to vote in elections determining the company's board of directors.
  28. 28multiple classes of common stockgenerally to give a limited number of shareholders influence over corporate governance well beyond their numbers. This system can allow favored company insiders to retain control of a firm while spreading its economic base. In many cases, the super voting shares trade infrequently, if at all.
  29. 29preferred stockgive their holders a higher claim on any profits or proceeds from asset sales, putting their shareholders ahead of common stockholders, but behind bondholders. Preferred stock does not represent a company debt that must be repaid. It is, rather, a fixed claim on future profits. It does not generally give shareholders any voting rights.
    any missed payments to preferred shareholders must be made up before common shareholders are allowed to receive anything
  30. 30restrictive stockrepresents the holdings of active employees who earned the shares through incentive or employee stock ownership programs. These shares generally have full economic rights to dividends and distributions, but they may be forfeited if regulations are not followed.
  31. 31market pricemarket's appraisal of the worth of that company at a particular point in time. Price changes are typically driven not only by objectively measurable changes in business conditions and the economic environment, but also by changes in investor emotion.
  32. 32price-to-earnings ratioderived by dividing the stock price by the company's earnings per share, is used to determine what an investor is paying for the earning power of the company. The ratio can be calculated using either the most recent reported earnings, or an analyst's projection of expected future earnings. It's one figure that can be used in comparing the value of several companies even though their prices may be vastly different.
  33. 33dividend yielddetermined by dividing the amount of the dividend by the share price, simply indicates what percent return the company is paying its investors. This number can also be used in a comparison of companies.
  34. 34payout ratiopercentage of earnings a company is paying out to its investors. It's an indication of whether most of a company's earnings are being paid to its investors or whether they are being reinvested in the growth of the company.
  35. 35preferred share's dividend yieldpromised (or most recently declared) dividend as a portion of current market value
    generally not considered automatic entitlements but instead are typically declared individually by the board of directors. Any unpaid preferred dividends would generally rank below obligations to creditors in the event of bankruptcy or liquidation.
  36. 36growth stocksearnings growing at a faster rate than the market average. They rarely pay dividends and investors buy them in the hope of capital appreciation. A start-up technology company is likely to be a growth stock.
  37. 37income stockspay dividends consistently. Investors buy them for the income they generate. An established utility company is likely to be an income stock.
  38. 38value stockslow price-to-earnings (PE) ratio, meaning they are cheaper to buy than stocks with a higher PE. Value stocks may be growth or income stocks, and their low PE ratio may reflect the fact that they have fallen out of favor with investors for some reason. People buy value stocks in the hope that the market has overreacted and that the stock’s price will rebound.
  39. 39blue-chip stocksshares in large, well-known companies with a solid history of growth. They generally pay dividends.
  40. 40direct stock plansSome companies allow you to buy or sell their stock directly through them without using a broker. This saves on commissions, but you may have to pay other fees to the plan, including if you transfer shares to a broker to sell them. Some companies limit direct stock plans to employees of the company or existing shareholders. Some require minimum amounts for purchases or account levels.
    Direct stock plans usually will not allow you to buy or sell shares at a specific market price or at a specific time. Instead, the company will buy or sell shares for the plan at set times — such as daily, weekly, or monthly — and at an average market price. Depending on the plan, you may be able to automate your purchases and have the cost deducted automatically from your savings account.
  41. 41dividend reinvestment plansbuy more shares of a stock you already own by reinvesting dividend payments into the company. You must sign an agreement with the company to have this done. Check with the company or your brokerage firm to see if you will be charged for this service.
  42. 42discount or full-service brokerbuy and sell shares for customers for a fee, known as a commission.
  43. 43stock fundstype of mutual fund that invests primarily in stocks. Depending on its investment objective and policies, a stock fund may concentrate on a particular type of stock, such as blue chips, large-cap value stocks, or mid-cap growth stocks. Stock funds are offered by investment companies and can be purchased directly from them or through a broker or adviser.
  44. 44dividendsWhen companies are profitable, they can choose to distribute some of those earnings to shareholders by paying a dividend. You can either take the dividends in cash or reinvest them to purchase more shares in the company. Investors seeking predictable income may turn to stocks that pay dividends. Stocks that pay a higher-than-average dividend are called "income stocks."
  45. 45capital gainsStocks are bought and sold constantly throughout each trading day, and their prices change all the time. When the price of a stock increases enough to recoup any trading fees, you can sell your shares at a profit. These profits are known as capital gains. In contrast, if you sell your stock for a lower price than you paid to buy it, you'll incur a capital loss.
  46. 46what is a bond?a loan an investor makes to a borrower. As with loans that you take out yourself, bond investors expect to receive full repayment of what was borrowed and consistent interest payments.
    Many investors value bonds for the regular income they offer through these interest payments, as well as the comparative safety they provide compared to stocks. While stock values fluctuate day to day, highly rated bonds essentially assure investors that they will see repayment of the amount they invested plus modest interest. Going back more than 90 years, investment-grade bonds as a category have not had a single 5- or 10-year period in which they offered negative returns.*
  47. 47Bond IssuerThis is the government, government-sponsored enterprise, or company that seeks to fund its activities with a loan. It issues bonds as part of its promise to repay its debts.
  48. 48Bond maturity datewhen you will receive repayment of what you loaned an issuer (assuming the bond doesn't have any call or redemption features). If you want or need to sell a bond before its maturity date, you may be able to sell it to someone else, though there is no guarantee you will get what you paid
  49. 49Bond face valuevalue the bond holder will receive at maturity unless the issuer fails to repay the loan, a practice called defaulting. Investors usually pay par when they buy a bond from the issuer, unless it's a zero-coupon bond.
    If investors buy the bond from someone else (meaning they buy it on a secondary market), they may pay more or less than face value.
  50. 50Bond coupon rateannual percentage of interest the issuer pays someone who owns a bond. The term "coupon" originates from when bond certificates were issued on paper and had actual coupons that investors would detach and bring to the bank to collect the interest. Bonds may have fixed, unchangeable rates or floating coupon rates, meaning they adjust over time based on a predetermined formula. Most bonds make interest payments semiannually based on the principal (the amount they originally borrowed), although some bonds offer monthly and quarterly payments.
  51. 51Bond ratingindicate the financial health of the issuer and how likely they are to repay their debts. Ratings agencies such as Standard & Poor's, Moody's, and Fitch assign a rating that indicates their opinion of whether the bond is "investment grade" or not. Higher-rated bonds are considered safer and can be attractive even with lower interest rates, whereas lower-rated bonds pay higher interest rates to compensate investors for taking on more perceived risk. An issuer's bond or credit rating can change over time.
  52. 52Bond Callabilitybonds that the issuer can repay, or call back, early. Issuers may recall bonds if interest rates fall low enough that they can issue comparable new bonds at substantially lower rates and save money overall. The attraction of callable bonds for investors is that they typically offer higher rates than noncallable bonds, though there is no guarantee that they would be able to find a similar rate on a new bond—or even one equal to the current market rate when they buy their callable bond—if their bond is recalled. Callable bonds often have guidelines governing how soon they can be recalled and if the issuer must pay a premium on the principal if they do.
  53. 53Zero-coupon bondsAlso known as "strips," these are bonds that do not make periodic interest payments. In other words, there's no coupon. Instead, you buy the bond at a discount on its face value and receive one payment of the full face value at maturity. For example, you might pay $16,000 now on a 10-year zero-coupon bond with a face value of $20,000. In a decade, when the bond is mature, you’ll receive a payment of $20,000. Perhaps the best-known example of a zero-coupon bond is a US savings bond. Note: Investors interested in bonds may also consider brokered certificates of deposit (CDs), which work similarly to bonds: Not only do they return their full par value at maturity but they are also FDIC-insured, meaning they guarantee the return of your principal up to the FDIC limits.
  54. 54Treasury bondspay for government activities and to service the national debt. Treasuries are considered to be extremely low risk if held to maturity, since they are backed by "the full faith and credit" of the US government. Because of their safety, they tend to offer lower yields than other bonds. Income from Treasury bonds is exempt from state and local taxes.
  55. 55Agency bondsGovernment-sponsored enterprises (GSEs), like Fannie Mae, Freddie Mac, and the Tennessee Valley Authority, issue bonds to support their mandates. That typically involves ensuring certain segments of the population—like farmers, students, and homeowners—can borrow at affordable rates.
    Yields are higher than government bonds, representing their higher level of risk, though are still considered to be on the lower end of the risk spectrum. Some agency bonds, like Fannie Mae and Freddie Mac, are taxable. Others are exempt from state and local taxes.
  56. 56Municipal bondsMunicipal bodies, like states, cities, counties, and towns, issue bonds to pay for public projects (think: roads, sewers) and to finance other activities. The majority of these bonds, commonly called munis, are exempt from federal income taxes and, in most cases, also exempt from state and local taxes if the investor is a resident of the state that issues them. As a result, the yields tend to be lower but still may provide more after-tax income for investors in higher tax brackets.
  57. 57Corporate bondsCompanies issue bonds to expand, modernize, cover expenses, and finance other activities. The yield is generally higher than government and municipal bonds, though they do carry more risk. Bond rating agencies help you assess that risk by grading the bonds based on the issuing company's creditworthiness, or how likely it is to repay its loans. Income from corporate bonds is fully taxable.
  58. 58Mortgage-backed Securities (MBS)Banks and other lending institutions pool mortgages and "securitize" them so investors can buy bonds that are backed by income from people repaying their mortgages. This raises money so the lenders can offer more mortgages. Examples of MBS issuers include Ginnie Mae, Fannie Mae, and Freddie Mac. Mortgage-backed bonds have a yield that typically exceeds high-grade corporate bonds.
    The major risk of these bonds is that if borrowers repay their mortgages in a "refinancing boom," it could have an impact on the investment's average life and potentially its yield. These bonds can also prove risky if many people default on their mortgages. Mortgage-backed bonds are fully taxable.
  59. 59High-yield bondsSome issuers simply aren't as creditworthy as others and must offer what are known as high-yield bonds. High-yield issuers can be local and foreign governments, but they're most commonly companies that are considered by bond ratings agencies to be at greater risk of not paying interest and/or returning principal at maturity. As a result, the issuer will pay a higher rate to entice investors to take on the added risk. These bonds are frequently rated below investment grade by credit agencies and are considered speculative; you may also hear them referred to as "junk bonds."

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Flashcards on Untitled, created by Joseph Cesario on 22/02/2023.
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