ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Basic investing terms you need to know - Part 2

Updated on June 12, 2011

When you open a financial magazine or business section of newspaper, you might have notice some common financial terms that you don’t understand. I’ll try to provide some details of these terms. The following is the first part of the article. I'll also try to provide some figures or/and tables to help you to understand these terms.This hubpages is the continuation of my previous article of investing definition (part 1) .

investment grade level from wikipedia
investment grade level from wikipedia

Investment Grade Bond

Investment Grade Bond is the broad credit designation given to either corporate and/or municipal bonds which have a high probability of being paid, and few, if any, speculative features. Very rarely this type of bond goes unpaid by the issuer. These bonds rated Baa and higher by Moody's Investors Service, or BBB and higher by Standard & Poor's, are considered by those agencies to be "investment grade." You can find this bond either from new issuance or secondary market from your brokerage. Example of GE Capital Internotes (CUSIP: 36966R6S0) has maturity date of May 15, 2022 Moody Rating of & S&P Rating of AA+. This bond has 5.4% yields and paid semiannually.

I’ll provide more details on bonds on my next article.

dow jones industrial index
dow jones industrial index

Index

Index is on of method measuring a section of the stock market. For example, Dow Jones industrial consists of 30 different stocks in its index and S&P 500 has 500 different stocks in its index.

One of the following major stock market indexes:

  • S&P 500 (.SPX) - Standard & Poor's 500
  • DJIA (.DJI) - Dow Jones Industrial Average
  • NASDAQ (.IXIC) - NASDAQ Composite Index
  • Russell 2000 (.RUT) - Russell 2000 Index

 

walmart stock overview from yahoo
walmart stock overview from yahoo

Market Capitalization or Market Cap

Market Cap is the market price or value of an entire company. This is calculated by multiplying the number of shares outstanding by the price per share. For example Wal*Mart Stores, Inc (WMT) as of July 20, 2010 has 3.71 Billions shares outstanding and closing price of $50.88. This means the market cap of Wal*Mart (WMT) is 188.76 Billions (i.e. 3.71Billions multiply by $50.88).

Market Capitalization is a measure of company size in stock market. For comparison purposes, companies are usually divided into three groups according to Market Capitalization—large cap, mid cap, and small cap. For example, most of the companies in the Dow Jones Industrial Average and the Standard & Poor's 500 (S&P 500) are large cap. Small cap companies are typically not widely followed by analysts. Small company is riskier than large company.

Moving Averages

Moving averages are an average price of a security calculated periodically over a period of time. Price charts typically provide several popular moving averages using SMA or EMA. Moving Averages always plot in the chart's price window. Typically, people use 9 days, 50 days, 100 days, 200 days moving average for buying stock. For example, above Dow Jones Industrial index, it has 50 days moving averages of 10,206 & 200 days moving averages of 10387.

also, if you choose a multiple moving average (e.g., SMA (3-line)), the chart automatically determines the lengths of SMA 2 and SMA 3 based on the number you enter. For example, if you select SMA (3-line) and enter 9, the chart plots three Moving Averages of 9 bars, 18 bars, and 27 bars in length. SMA 2 is always twice the length of SMA 1, and SMA 3 is always three times the length of SMA 1.

No Transaction Fee (NTF) Funds

Funds available through your mutual fund selection without paying a transaction fee to your brokerage such as Fidelity. A transaction fee is similar to a brokerage fee or commission, which you pay when buying or selling a stock. You can find all fees as described in a fund's prospectus still apply. Usually, redemption/exchange fees must be paid on those funds that charge such fees if shares are sold within certain time frames. Other fees of mutual fund include sales charges or 12b-1 fees as well as interest expense fees and management fees.

For example in Fidelity, No Transaction Fee Funds (NTF) included in the Mutual Fund Evaluator include all no-load funds (and a few funds with a 12b-1 fee greater than .25%, which are not considered no-load funds) available without paying a transaction fee to Fidelity.

Options

Option is a right of investor/ trader to buy or sell shares at a guaranteed price for a specific period of time. With a call option, the buyer has the right to buy shares of the underlying security at a specific price for a specified time period. With a put option, the buyer has the right to sell shares of the underlying security at a specified price for a specified period of time. For instance, in U.S. exchange-listed equity option contracts, the expiration date is always on the Saturday that follows the third Friday of the month unless Friday is holiday.

Note: Only use option if you understand the basic of option strategy etc.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)