Lesson 16 – Investment Concepts
Investment is a game with clear winners and losers
1. Investors – 624 – Individuals who purchase investments with savings in anticipation of stable growth.
2. Speculators – 624 – Individuals who take large risks in exchange for the possibility of large returns. Similar to gambling.
3. Income Securities – 625 – Investments, such as preferred stock and corporate bonds, that offer steady dividend or interest payments
4. Transaction Cost – 627 – The costs associated with trading securities usually in commission form.
5. Investment Portfolio – 627 – a combination of investment items designed to reduce risk for the client.
6. Asset Allocation – 627 – The proportion of funds invested in various categories of assets.
7. Broker – 629 – A middleman or agent who helps investors trade financial instruments such as stocks, bonds and derivatives (now much more strongly regulated after the Global Financial Crisis)
8. Brokerage Firm – 629 – a group of salesmen who make educated guesses about investments.
9. Market Order – 630 – An order to execute a transaction at the best price available.
10. Stop Order – 631 – An order that specifies the price at which a market order is initiated.
11. Limit Order – 631 – An order to buy or sell a stock at no worse than a specified price.
12. Day Order (DO) – 631 – An instruction to cancel an order if price conditions are not met by end of one day’s business.
13. Good Til Cancelled (GTC) – 631 – An instruction to keep an order active until the price limitations are met or until the investor cancels it.
14. Fill or Kill Order – 631 – An instruction to cancel an order if it is not executed immediately (the term immediately is relative, but generally means in a few minutes).
15. Street Name – 631 – A situation in which stock is registered to the brokerage firm instead of the individual investor. This can be a an additional risk for the investor.
16. Stock Symbol – 635 – The trading initials of a company used for transactions.
ICA and HW 16
The New York Stock Exchange is the most famous financial institution in the world
Answer the following essay questions:
1. How is investing in securities similar to gambling?
2. How does a balanced portfolio help to reduce risk to an investor?
3. How are some brokerage firms unethical in their recommendations?
4. How can the timing of a market order of even ten minutes have positive or negative repercussions to an investor?
Internet Resources for this lesson:
General Reference Material For All Content
New York Stock Exchange