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Initial
Public Offering (IPO) = This is when a company
switches from being privately owned to selling stock so
that everyone can own a little piece. It's often
called "going public."
Bear
Market = When stock prices are going down
Bull
Market = When stock prices are going up
Dividends
= When the company distributes some or all of it's
profits to the stockholders
Price/Earnings
Ratio = The price per share divided by the
earnings per share
Liquid
=
This just means that you can get access
to your money very quickly
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Buy and Hold
= Buy a stock and keep it for a long
time -- years. Day Trader
= A person who buys and sells stocks
quickly and on a daily basis. (The opposite of a
buy-and-hold kind of guy.)
Sell
Short
=
This is when you sell a stock you don't
even own yet for, say, $100... You
are hoping to be able to quickly buy it
for $80 and turn around and make 20
bucks.
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Buy on Margin
=
This is when you borrow money from your
stockbroker to buy stock. Since you have to pay
interest on the loan, you are gambling that the stock
will make more than what you're paying. If the
stock goes down, you can get into big trouble.
Diversification
= Don't put all your eggs in one
basket... Be safe and buy lots of
different kinds of stock.
Stock
Split
= When a
single share of stock gets too expensive
for the average investor to buy, the
company distributes more shares to lower
the price. Example: A share
of Booger Art, Inc. sells for $200 and
you own 100 shares which is $20,000
worth. Booger Art, Inc.
distributes more shares, so you now own
400 shares, each worth $50. You
still own $20,000 of Booger Art, Inc.,
but now your friend who only has $100
can afford to buy a couple of shares.
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