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Investments Inc.

Investors’ Glossary

arbitrage — simultaneous purchase and sale of two different but closely related securities to take advantage of a price differential

asset — something that is owned

balance sheet — the financial statement that shows what the business owns and owes

bears — people who believe that the stock market will go down; this can also be applied to their view of individual stocks

bear market — a market that has been moving downwards

beta — how a fund or stock's value fluctuates relative to changes in an index like the TSX; an average stock has a beta of 1.0; the lower the number, the lower the variation

bid price — the price at which someone will buy a stock at a given moment

blue chip — a quality company that usually has a solid track record

bond — a loan to a corporation or government agency, repayable with interest

book value per share — the assets of a company, minus the liabilities, divided by the number of shares outstanding; this is one method of gauging the true value of shares

bulls — investors who believe that the stock market will go up

bull market — a market that is moving upwards

business cycle — the variations of the business economy as it expands and contracts, leading to prosperity, recession or depression

capital appreciation — the growth of the intial investment amount

capital gain or loss — the profit or loss on the sale of a stock

common shares — an ownership position in a company; normally common shares give voting rights

contrarian — the fish who swims against the school; the sheep who separates himself from the flock. In Contra's case, we buy shares in listed companies who have experienced major financial difficulties but appear ready to right themselves

day order — a stock order that is good for one day

demographics — a breakdown of the population into various groups; tied in with market segmentation

derivatives — securities, usually in the form of a contract between two parties, whose price depends upon the price of an underlying asset such as a stock or currency

dividend -- money paid to investors by a corporation; sometimes instead of cash the payment is in stock

dollar cost averaging — buying a set amount of stock at regular intervals regardless of price

earnings per share — a corporation with a million shares outstanding that earns a million dollars would have earnings per share of $1 per share; this is an indicator of the financial health of the corporation

economies of scale — the larger the organization, the lower the cost per unit to reach the marketplace; at a certain size, diseconomies of scale can set in

GIC — Guaranteed Investment Certificate; a certificate that pays a set interest rate; the most common vary in duration from 30 days to five years

income statement — the financial statement showing profit and loss

intial public offering (IPO) -- the first time a company seeks to raise funds from the general public

inventory — the assets a business has for sale

leverage — the principle of making dollars work harder; this increases the percentage of gains, but also the percentage of losses

liability — something owed

limit order — the maximum price at which you are willing to buy a stock, or the minimum at which you're willing to make a sale

liquidity — the degree to which it is easy to buy or sell a stock in the market

margin account — a line of credit with a bank, broker or trust company where money is borrowed for investing while using investments as collateral

market order — (at the market) an order to buy or sell a stock at the best price obtainable at that moment in time

market niche — a specialized portion of a market

market timing — a technique whereby an attempt is made to buy and sell stocks in conjunction with the ups and downs of the market

mutual fund — a pool of money to which thousands of people contribute, which is then invested in various financial arenas

net profit — proft after all charges are deducted

odd lot — a stock purchase outside of the standard trading unit of 100 shares

offer price — the price at which someone is currently willing to sell a stock

open order  — an order for a specified period of time; watch you don't book it so far in advance that you forget about it

penny stock — highly speculative stocks that generally sell for under $2

preferred shares — shares that usually have a dividend associated with them but normally no voting rights

price-earnings ratio (P/E) — the earnings per share of a stock as compared to the price; i.e. if the price the stock trades at is $10 and the earnings per share is $1, the P/E is 10:1

product life cycle — the time in which a product is introduced into a market-place and experiences a growth in sales, before sales mature and begin to decline, possibly leading to the demise of the product

ratio analysis — a method of analyzing a business by looking at its balance sheet and income statement

right — a benefit given to stockholders to buy additional stock in a company in proportion to existing holdings for a specified period of time

risk/reward ratio — the greater the risk, the greater the reward

settlement date — the three-day deadline after a trade, by which the client must pay for the buy or will receive funds from a sale

short sale — a security borrowed from a broker and sold with the intention of making a profit by buying the security back at a lower value

spread — the difference between the bid and the offer price of a security

stop-loss order — an order to sell a stock if it drops to a particular price

thin market — a stock that normally has few buyers or sellers

time value of money — the idea that a dollar today is worth more than a dollar tomorrow; this is particularly important during inflationary times

treasury bill (T-bill) — a government note with a specific interest rate

underwriter — a firm, normally a brokerage, that agrees to buy the new issue of a company at a fixed discounted price, which they will then sell to the public at retail value

value investing -- buying shares that sell for less than the company's actual worth per share

warrant — an opportunity to buy shares of a stock at a fixed price, usually within a specific time frame; often attached to the sale of shares to make them more attractive

working capital — money to be used in the daily operation of the business; calculated by subtracting current liabilities from current assets in the balance sheet

yield — the rate of return on a security paid in the form of dividends

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