Bob Brinker's Marketimer

  Sunday December 9, 2018

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Learn even more about this topic with the Encyclopedia of Personal Finance™

Blue chip. A term that describes the stock of well-established companies that have a track record of paying dividends and gaining steadily in value. General Motors and IBM are examples of blue chip stocks.

Capital stock. The stock authorized by a company's charter and listed in the capital accounts section of its balance sheet.

Common stock. Shares of ownership that typically entitle holders to voting rights and to receive dividends a company issues. If the company is liquidated, common stock holders are last in line to receive a share of the company's assets.

Hot stock. Newly issued stock that is anticipated to increase in value rapidly.

Large-cap, small-cap. The "cap" here stands for capitalization, or the amount of money invested in a company. Capital can be represented either by debt or equity (ownership). Large-cap companies are capitalized with at least $5 billion, while small-cap companies are capitalized with less than $1 billion. Generally speaking, small-cap companies have much room for potential future growth, yet are more vulnerable to market downturns.

Non-voting stock. Stock that does not carry voting rights. Most preferred stock is the non-voting kind.

Penny stock. A highly speculative stock that costs less than a dollar a share. Investors hope they will create large returns on a small investment.

Phantom stock. Not capital stock at all, but a share of equity a company offers employees. It is typically not transferable.

Preferred stock. A kind of capital stock that pays a fixed dividend and typically lacks voting rights. If a company's assets are liquidated, preferred stockholders have a higher claim to a share of remaining assets than do common stockholders.

Next up: terms that apply to the trading of stocks.


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