Vocabulary
Bear Market: Slang for when the stock market is in a general, prolonged period of falling stock prices. Opposite of a bull market.Broker: A person who buys or sells an investment for you [stocks, bonds, commodities, etc.] in exchange for a fee, called a "commission"
Bull Market: Slang for when the stock market is in a general, prolonged period of rising stock prices. Opposite of a bear market.
Dividend: A dividend is a portion of a company's earnings that is paid out to shareholders on a quarterly or annual basis. Most dividend policies are set by the current management.
Exchange: An exchange is a place in which options, futures, and shares in stocks, bonds, indexes, and commodities are traded. The most famous in the United States is the New York Stock Exchange.
Index: An index is a benchmark which is used as a reference marker to which financial performance is measured and compared against. The Dow Jones Industrial Average and Standard & Poor's 500 are examples.
Institution: A word used to describe any company, brokerage house, or entity that is not an individual.
Margin: A margin account lets a person borrow money from a broker to purchase securities. The difference between the amount of the loan, and the price of the securities, is called the margin.
Market Maker: A market maker is a person, brokerage, bank, or institution that maintains a permanent firm bid and ask price on a certain stock. This means that they are standing and prepared at any moment to pay a particular price to buy or sell a stock.
Mr. Market: An investment concept created by Benjamin Graham in the early part of the 20th century. Will be discussed in this lesson.
Sector: A group of stocks that are in the same business [e.g., the "Utilities" sector would include Water and Power & Light companies].
Volume: The number of shares of stock traded during a particular time period.
Introduction
In the last lesson, we established why stocks came into existence. In this essay, we are going to examine how the stock market actually works - everything from what drives stock prices up and down to how stocks are purchased on an exchange. Perhaps more importantly, we will discuss one of [if not the] most important investment concept of all... Mr. Market.Next page > Why Stock Prices Fluctuate > << 1, 2, 3, 4, 5, 6, 7, 8 >>
This page is part of Investing Lesson 2 - What Makes Stocks Become Over or Under Valued. If you have already read this lesson, you can skip directly to the Investing Lesson 2 Quiz.
