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Glossary of investing terms
In this continually changing investing environment, we may all need a refresher on key terms we may not have heard in about 10 years. Asset Allocation: Investment strategy whereby investors diversify assets among stocks, bonds and money market instruments, to reduce investment risk. Bear Market: A prolonged period of falling stock prices, generally defined as a market correction of at least 20 percent or more in the Dow Jones Industrial Average. Capitalization: A corporation’s total long-term debt and stockholders’ equity. Compounding: Interest, dividends or capital gains accrued on an original investment and its reinvested earnings. When earnings are reinvested, you buy additional shares, which in turn purchase even more shares. Defensive Investment Policy: An investment policy used to minimize market risk. Policies are defensive at different times, depending upon prevailing economic and business conditions. Diversification: The allocation of investments among different companies, industries, and/or types of securities to reduce risk. Market Timing: A practice based on predicting market cycles by anticipating the market trend and buying before share prices go up and selling before prices go down. |
