BASIC STOCK TERMS
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? Broker. An intermediary between the buyer and the seller. Brokers earn commissions for handling trades. Brokers who trade at an exchange must be
registered members of that exchange.
? Certificate. A document that serves as
evidence of ownership of a company's stock. It shows the number of shares, the
issuing company, the par value, and the shareholder's rights.
? Class. Separation of equity into two kinds
of shares, usually Class A and Class B. Classified stock is issued to give one
group of shareholders, usually founders, board members and key employees, more
rights than others.
? Diversification. A strategy of including
different kinds of assets in a portfolio to reduce risk.
? Dividend. A distribution of earnings to
shareholders as decided by the firm's board of directors.
? Equity. Equity is what you are buying when
you buy stocks?a share in the ownership of a company that gives you a right to a
portion of its assets and earnings.
? Portfolio. A collection of different kinds
of stocks. Investors generally put together a portfolio with particular kinds of
stock to meet specific goals, such as current income or achieving high
? Principal. The funds you invest, as
opposed to your earnings.
? Public company. One that offers stock for
sale to the public.
? The Securities and Exchange Commission
(SEC). Appointed by the president, this is a five-member board responsible
for supervising the sale of securities and enforcing securities exchange
? Stock. A share of ownership in a company
that represents a claim on the company's assets and earnings.
? Stock market. The general term for the
organized trading of stock. The stock market consists of stock exchanges and the
? Symbol. An abbreviation used to identify a
stock on the exchange on which it is traded. Stocks are often listed by their
symbols in newspaper and television market reports.
? Voting rights. Most shares of common stock
permit you to vote in board of directors elections and other key decisions;
preferred stock usually lacks this right.
Now let's look at some terms that describe types of