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nuf2bdangrus (< 20)

Understanding basic investment terms



March 30, 2011 – Comments (0)

Having been in the business for 12 years, I have thought about how difficult it is for newcomers to understand the :"lingo" of the trade-so as a public service gesture, I have decided to offer a basic list of investment terms and their definitions to makeit easier for new and experienced FOOLS to understand the markets.


Stock-  an "equity" security that goes down the moment you buy it.

Bond- An interest bearing debt security that is sold to the public, usually when rates are at all time lows.

Junk Bond-Something you should never buy when your broker is selling it, as all income received from the security usually turns out to be return of principal.

Mutual Fund-A way that you can pool your money with other "investors" to buy a managed basket of securities the most expensive way possible.

Annuity-Guaranteed recurring cash flow exclusively for brokers

ETF- A cheaper way to diversify your losses

Buy-  A reccomendation made to clients by Investment banks that have a specific security on their books they want to sell you

Sell-A reccomendation made to clients by investment banks that want to buy a specific security at lower prices than are presently available on the market.

Sell Short-A guaranteed way to make any security's price  rocket higher with no underlying fundamental reason.

Hold- A reccomendation made to clients by investment banks about a specific security that they believe will likely decine in value.

Broker-A financial services professional who owns yachts, nice cars, and an even nicer vacation home

IPO-The sale of a worthless security at a premium price from a private holder to the general public

Call option-something you sell that guarantees the underlying security you sold it on will appreciate in value radiply after going nowhere for an extended period of time

Put option-something you buy that evaporates like water in the desert.

Resistance-a techincal analysis term used to describe the reaction your spouse will give you when you want to part with hard earned money to put in the market

Support-a technical analysis term to describe what your spouse will not give you when you lose money.

Trendline- a technical analysis term that describes the prevailing direction of a security or index until you deploy funds to follow that direction

Federal Reserve-a non governmental agency that engages in financial operations designed to inflate stock indeces.when natural market forces are taking prices lower.

Limit order-an offer to bid for a security that has a preordained price, usually lower than the present bid/offer of the security. This price is most frequently just pennies below a key reversal price before a security appreciates meaningfully in value

Market order- an instruction to have your offer miraculously filled at a price mysteriously higher than the current bid/ask of a security.

Inside information-material non public information used by privilged wealthy people to permanently game the system to their favour.

Bankruptcy-the common fate of the speculative small cap security you just purchased


There you have it.  Terms to help you understand the markets.  Good luck.


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