Glossary of Terms
A
50 Day MA (Fifty day moving average)
Presented as a coloured line (normally red) on a daily stock chart, it represents the average price over the previous fifty trading sessions. On a weekly chart, it represents the average price over the previous ten week trading sessions.
200 Day MA (Two hundred day moving average)
Presented as a coloured line on a daily chart (normally black), it represents the average price over the previous two-hundred trading sessions. On a weekly chart, it is a forty week average.
Accumulation (Of shares)
Buying of stock by investors.
Analyst
An employee of a bank, brokerage, advisor or investment fund company who studies companies and makes buy and sell recommendations, often specialising in a single sector or industry. Also called a financial analyst.
Annual Fee
A fee paid once a year usually for on-going work such as administration.
Annual Income
This is how much money your current lifestyle costs or it can be called "your yearly living expenses".
Asset Allocation
When you divide your money to lower your overall risk among various types of investments, such as property, stocks, unit trusts, OEICS; bank and building society accounts. The way in which your money is divided is called Asset Allocation.
Assets
Any items of economic value owned by an individual or corporation, especially those which could be converted to cash.
B
Balance Sheet
A summary of an individual or company's financial condition at a specific time.
Bank of England
The central bank of the United Kingdom, similar to the Federal Reserve in the US; it sets the official interest rate in order to achieve the government's inflation target.
Base (Sound Base /Faulty Base)
A price consolidation or "resting" area for a stock or index. Bases can be built soundly or faulty. A sound base is when a stock or index is being professionally accumulated during the base building process. A faulty base is when a stock or index is being professionally distributed during the base building process.
If the base is sound, the stock or index at some point in time will "breakout" of the current price range and move into new price territory usually accompanied with high or above average volume. From a faulty base, a stock or index will at some point break down, falling sharply in price and usually on high or above average volume.
Bear
An investor with a pessimistic market outlook.
Bearish
Believing that a particular stock (or other investment vehicle), a sector, or the overall market is about to fall.
Bear Market
The term "Bear Market" is used by most investors when most stocks prices are falling over a period of time. A period of several months or several years in the overall market cycle where any index (NASDAQ, Dow Jones Industrial, S&P500 or S&P 600) has declined 20% or more from a long-term uptrend. The downtrend can sometimes last as long as two to three years in severe cases, but an average bear market usually lasts from nine to eighteen months.
Bellwether stock
A bellwether stock is a stock believed to be a leading indicator of the direction of the economy or of a sector of the market or the market as a whole. Their market performance may also signal how a sector or the market as a whole is likely to perform.
Black Monday
On October 19th, 1987, most of the world stock markets fell, by as much as 20%.
Benchmark Index
An index against which performance of a share or fund is measured.
Blend Fund
A combination of different types of investments, such as the combination of growth and value stocks.
Bonds
An IOU or a loan representing a loan agreement between the issuer (as borrower) and the investor (as lender). Interest is paid periodically, and the principle is repaid at maturity.
Bottom Fishing
Investing in shares whose prices have dropped dramatically based on the belief that the share has reached bottom and are likely to rebound soon.
Bowling / Bowling out
A positive chart pattern that highlights a stock or indexes chart looking like a bowl shape The pattern shows the trend changing from down to up over a period of time (for example, six months) and means that the index or stock is recovering, gathering strength and has changed from a down trend to an uptrend.
Breakout
Technical analysis term for a rise in a security's price above a resistance level (usually its previous high) or drop below a support level (usually its previous low). New breakout stocks, especially from leading stocks in leading industries will typically lead the market forward when it is rallying.
Broker
An individual or firm who acts as an intermediary between a buyer and seller - usually charging a commission - for securities and other products.
Bull
An investor with an optimistic market outlook.
Bullish
Believing that a particular stock (or other investment vehicle), a sector, or the overall market is about to rise.
Bull Market
The term "Bull Market" is used when most stocks are generally rising in price over a period of time. Bull markets generally last from two to four years.
Bull Phase
A term used by most investors when stocks are generally rising in price over a period of time. The uptrend can sometimes last as long as four years, but an average bull market can be anything from 24 months to 4 years.
Buy Order
Specific instructions made by an individual to a broker to buy a security (stock, fund).
C
Capital Mass
A large amount of money that we can live on by withdrawing a percentage from it each and every year.
Cash Flow
Cash flow is the continuous cash stream you receive from an asset you own such as an investment fund or a property.
Churning
This is when professional investors sell into strength. The way to identify this is through stock charts. The stock or index’s volume levels will normally rise from the day previous and be very heavy when compared to its average volume but the price will hardly move for the day. Churning occurs mostly at market tops and can give investors an early indication that a market has topped / temporarily topped.
Closed - Ended
An investment company with a fixed number of issued shares.
Closed Flat / Flat Close
When the market or a stock closes the day with very little price action difference from the price that it began the session.
Common Stock
Securities representing equity ownership in a corporation. Common stock does not pay dividends.
Company Profits
The positive gain from a business operation after subtracting all expenses.
Company Sales
Total cash amount collected for goods and services provided.
Compound Interest
Interest paid on a sum and its accumulated interest.
Compounding
Involves the continued reinvestment of profits that allows for greater sums of money to work for you over future years of growth.
Confirmation Letter
A written statement acknowledging a securities transaction. This verifies an agreement between the buyer and seller.
Consolidation
This is when a market index or stock will spend a period of time resting and digesting recent gains or losses.
Corrected - Correction
A reversal of the prevailing trend in price movement for security or index. The term is most often used to describe a decline after a period of rising prices. A correction is often considered beneficial for the long term health of the market, in that the prices had risen too quickly and the drop put them back to more realistic levels.
Cup With Handle
A very strong technical chart pattern is called a "cup with handle" because that is what it resembles when looking at the pattern on a daily or weekly chart. A handle is the final part of the chart pattern. Building "tight" sloping downwards handles is always a bullish sign and usually happens before a stock or index is about to attempt to break out to the upside.
D
Debt
A liability or obligation in the form of bonds, loans or mortgages owed to another person or persons, which is required to be paid by a specific date.
Depression
A period during which business activity drops significantly. High unemployment rates and deflation often accompany a depression.
Discount Broker
A brokerage which executes buy and sell orders at commission rates lower than a full services brokerage, but which provides fewer services such as research and advice.
Diversification - Diversify
We can diversify our chosen investments into various industries rather than just one or two. Instead of putting all our money into let's say the technology sector, we can spread our money into various industries such as financial, retail, energy, food and many others.
Distribution
Selling of stock by investors.
Dividend
The return paid to shareholders out of the company's current or retained earnings; it can be given as cash, or the individual can take it in the form of a stock dividend.
Dow; Dow Jones Industrial Average (DJIA)
An Index in the US that tracks the daily price performance of thirty big-caps, blue chip companies on the New York Stock Exchange.
E
Economist Forecaster
A person who works in the field of economics who tries to predict or forecast where the economy is heading by analysing economic trends and statistics.
Economy
Activities related to the production and distribution of goods and services in a particular geographic region.
Emergency Account
An account used to hold reserve or insurance money. It would hold an amount equivalent to three to twelve months' living expenses. This money may be invested in a cash ISA or a high interest building society account in the event of an emergency.
Equities
Another word for shares (part ownership in a publicly traded company).
Equity Release
Equity is the difference between the amount you owe on your current mortgage and the present value of your home. If your home was worth £100,000, and your mortgage balance was £70,000, you'd have equity of £30,000.
Exit and Switch Strategies
These are strategies that you can use to help quickly exit an investment that is underperforming and then switch your capital into a different investment altogether. This helps to preserve and protect your money while investing in the stock market.
Exit The Market
The time when you sell or switch your investment to get out of the market.
F
Fed / Federal Reserve
The 7-member board of governors that oversees federal reserve banks, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the president subject to senate confirmation, and serve 14-year terms. Also called the federal reserve board.
Financial Advisor
Advises investors on financial matters such as what investment products and services to purchase. The advisers can be fee-based or paid on a commission.
Financial Destiny
Your ideal financial vision for your future.
Financial Independence
Financial Independence is when you are no longer influenced or controlled by others to sustain a chosen lifestyle.
Financial Legacy
A gift or a large fixed sum of money left, for example to an individual, family or a charity.
Financial Plan
A workable document that a person can follow, on paper that contains details of a clear, realistic financial objective, together with specific steps in how to attain the objective with a deadline and sub deadlines for completion.
Financial Conduct Authority (FCA)
Statutory body that maintains confidence in the UK financial system and protects consumers from financial crime and malpractice.
Financial Services Compensation Scheme
In the event of malpractices the scheme will pay up to £48,000 for a valid claim (when an authorised business becomes insolvent).
Financial Times All Share Index
The index is designed to include between 98-99% of the total UK stock market value. There are about 900 companies included in the index.
Fingers Burnt
When a person has suffered a financial loss, usually through investing.
Follow Through Confirmation
The market's price-and-volume action gives clear signs of the market's direction. A follow-through day gives you the biggest of head starts. A follow-through occurs at the earliest stages of a fledgling rally. After a significant market correction, the market will look to regain its footing. Any up day then counts as Day 1 of an attempted rally.
The next two sessions, Days 2 and 3 don't need to show much in the way of gains. As long as they don't undercut Day 1's low, the rally remains intact. For a follow-through to occur, you want it to land between Day 4 and Day 7 of the attempted rally. On any one of those days, you're looking for one or more of the major indexes — the Nasdaq, S&P 600, S&P 500 or Dow — to rise 1.7% -2% or more in higher volume than the previous day.
Footsie
The shortened name or nickname for the FTSE 100.
FSA Register
A public record of financial service firms, individuals and other bodies, which fall under its regulatory jurisdiction as defined in the Financial Services and Markets Act 2000 (FSMA).
FTSE 100
The top 100 company stock index in the UK.
Fund
A pool of money or investments.
Fundamentals
Any factor that could be considered important to the understanding of a particular business. Fundamentals are usually considered outside the context of the market as a whole. Some examples of fundamentals include a company's growth, revenues, earnings, management, and capital structure. The use of fundamentals as an investment strategy is called fundamental analysis.
Fund Supermarket
A Website that provides information on a variety of collective investment funds from several providers, and allows users to invest in those funds by transactions online.
G
Growth Industries / Sectors
A collection of stocks that come from historically strong (price wise) groups such as semiconductors, internet, computer, telecom, retail and medical.
Growth Stock
Stocks that come from typically high growth industries such as semiconductors, internet, computer, telecom, tetail and medical. It is the stock of a company which is growing earnings and/or revenue faster than its industry or the overall market. Such companies usually pay little or no dividends, preferring to use the income instead to finance further expansion.
Gilts
The name given to government bonds in the UK.
H
Handle (For example, Cup With Handle)
A "handle" is a term used in technical analysis and a term commonly used by stock market investors. A very strong technical chart pattern is called a "cup with handle" because that is what it resembles when looking at the pattern on a daily or weekly chart. A handle is the final part of the chart pattern. Building "tight" sloping downwards handles is always a bullish sign and usually happens before a stock or index is about to attempt to break out to the upside.
Healthy Market
It means a market that seems fit enough to invest money into. To calculate if a market is healthy, many factors need to be considered. Primarily, you look at the price and volume action of the 4 main indices (The Nasdaq, S&P 500, S&P 600 and the Dow).If a market is healthy, the market indexes' price will rise in above average volume and drop in below average volume. After looking at how the main indexes are acting, its best then to look at how leading stocks are doing.
If a stock is healthy, the stock's price will rise in above average volume and drop in below average volume. New breakout stocks are very important to a market's success especially after a recent market downturn. There are also numerous other things that can help you determine a market's condition such as the action of leading industry groups and a range of psychological indicators such as the put / call ratio.
Healthy Pullback
This is when a stock index or stock drops in price in below average volume. Preferably, this retreat or pullback in low volume is less than the volume levels from the previous day .
HIRE CAR™
HIRE CAR™ is a secret formula that ISACO uses to select the best of the best investment funds. By using the HIRE CAR™ formula you can quite easily find the crème de le crème of Investment funds
HM Treasury
The Treasury is the department responsible for formulating and putting into effect the UK government's financial and economic policy.
I
Income
For corporations it is the same as earnings. For individuals, money earned through employment and investments.
Index
A number calculated to approximate the value of a representative group of stocks chosen to represent the overall market. Indexes values and changes in index values are used to track historical prices and rates of return of the stock market in total. Example indexes are the Dow Jones Industrial Average, NASDAQ Composite Index, S&P500, S&P600 and S&P400.
Industry Group
A group of stocks that form an industry that belong to a particular sector. For example, two industry groups may be "medical -hospitals" and "medical-instruments" which both belong to the "medical" sector.
Information Kit
An information kit is a set of particulars that relate to information on an investment fund.
Inflation
A trend of rising prices caused by demand exceeding supply. It means that every year £1.00 will buy us less and less. For us to keep up with inflation our income needs to rise with or above inflation each year.
Initial Charge
To cover the cost of running the fund you will usually have to pay an initial charge when units or shares are purchased and an annual fee for ongoing costs such as administration.
Institutional Investors
Institutional investors are the fund managers who direct stock purchases and sales for investment funds, bank trusts, pension funds, hedge funds, insurance companies, governments, charitable organisations, educational institutions, and others who invest large amounts of money in the stock market.
Insurance House
Another name for an Insurance company.
Interest Rates
Represents the different prices a bank and other institutions charge customers who borrow money.
Intraday
During a single trading day.
Invest
To engage in any activity in which money is put at risk for the purpose of making a profit.
Investment
An item of value purchased for income or capital appreciation.
Investment Company
A firm or company that invests the pooled funds of investors for a fee.
Investment Fund
Investment funds are usually a collection of investments such as stocks or bonds, that offer people with limited time, or limited investment skills or modest means, access to investment returns available only to more sophisticated investors able to buy their own professional advice. Individual investors have the opportunity to "pool" their money with other investors.
Investment Rules
When investing, especially in the stock market, you need rules and guidelines to follow to try to remove or reduce the emotion (greed, hope and fear) out of the investing process.
Investment Trust
Public companies that are floated on the stock market. They are companies that exist simply to buy and sell shares in other companies. They will hold a large portfolio of stocks like unit trusts and oiecs.
Investment Vehicle
An investment such as an investment fund - a way of growing your money over time.
ISA
Individual Saving Account. A tax-favoured savings account introduced on 6th April 1999, which replaced PEPs and TESSAs.
ISA Umbrella Or Wrapper
Each individual has £7,200 (current ISA limits for 2008) that they can invest tax-free. An ISA "umbrella" or "wrapper" protects this money. An ISA is not a fund as some people may think. It is simply a legal way that the government has allowed investors like you and me to protect our fund from the taxman.
Key Features Document
This is a document that will be sent by the fund management company to you when considering or buying an investment fund. It can sometimes be accessed through the internet. It will list all the key elements of the investment, such as historical performance details.
L
Leading bellwether stock
A leading bellwether stock is a stock believed to be a leading indicator of the direction of the economy or of a sector of the market or the market as a whole. Their market performance may also signal how a sector or the market as a whole is likely to perform.
Leaders / Leading Stocks
These are stocks that typically (in bull markets) lead their industry or sector when the market is in a rally. Normally they have the strongest sales, profit margins and recent price action (over the last 6-12 months) when compared to their peers. ISACO's leading stocks have to have an EPS (earning per share) score of 80 or above and RS (Relative strength) score of 80 or above,
Leading Sectors / Leading Industries
These are stock sectors and industry groups that typically (in bull markets) lead the rally. They normally come from the likes of semiconductors, internet, computer, telecom, retail and medical. ISACO like to follow three sectors. They are semiconductors, (chips) internet, and telecom.
Legacy
A gift of a fixed sum of money left for example, to an individual or a charity.
Leverage
The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. Leverage can be created through options, futures, margin, and other financial instruments. Leverage increases one's risk.
Liability
The debts of a person or company, which are due for repayment over a period of time. (example: mortgage)
Listed Company
A company that has satisfied the requirements for its shares to be listed on a recognised investment exchange (RIE).
Long-Term Horizon
When investing in the stock market, we must have a long-term investment horizon as opposed to a short-term one. Remember that if you invest for a period of ten years, your risk of losing money is zero.
Loss
A reduction in the value of an investment.
M
Major Correction Period
A reversal of the prevailing trend in price movement for a security or index. The term is often used to describe a decline after a period of rising prices.
Malpractice
Failure to act correctly or legally. (example: they are accused of business malpractice.)
Market Bottom
This refers to the overall general market making a low point before turning around for a period of improvement or recovery.
Market Correction
A reversal of the prevailing trend in price movement for a security or index. The term is often used to describe a decline after a period of rising prices.
Market Place
A public place where buyers and sellers make transactions, directly or via intermediaries also sometimes means the stock market.
Market Top
This refers to the overall general market making a high point and then turning down for a period of time into what is called a bear market.
Morningstar Rating
The Morningstar rating is one of the pieces of information you could use to perform a preliminary screening of funds within the categories that you are considering for your portfolio.
N
NAV
The price of a unit at any time is called the fund's net asset value, or nav. For a unit trust, the nav is referred to as the unit price.
NYSE
New York Stock Exchange, founded in 1792, the oldest and largest exchange in the US where buyers and sellers meet via their brokers to execute buy and sell orders. It's located on Wall street in New York.
NASDAQ
An index that represents the movement of stocks traded by the National Association of Securities Dealers Automated Quotation. It is a worldwide computer network on which certain stocks are traded "over the counter", unlike the NYSE.
NASDAQ 100
The Nasdaq’s brother. It's comprised of 100 of NASDAQ’s largest non-financial companies based on their market capitalisation. It tends to be a wee bit stronger than its brother on both the upside and the downside.
Net Profit
The profit or money left over when all other expenses have been taken into account, such as operating costs and taxes.
New Higher Ground
The overall general market or a stock moving to a new high point, a sign of strength.
O
OEIC
Stands for open ended investment company. Oeics and unit trusts are both open-ended funds, meaning that the size of each fund can vary according to supply and demand. Typically, a unit trust or oeic is worth anything from £5 million to £300 million and sometimes more.
Ombudsman
A person who deals with complaints that have not been settled satisfactorily by the management company. He is concerned with the fair treatment of investors.
One - Off Fees
Also known as the sales charge, commission or load. This can be anything up to 6%.
Ongoing Expenses
The fund company each year will automatically deduct an annual fee for the overall management of the fund.
Open-Ended Fund
A unit trust or open-ended investment company, which does not have a fixed amount of capital, but is "open-ended". This means that the fund managers can issue new units and cancel old ones in accordance with supply and demand of investors.
Option
The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time. For stock options, the amount is usually 100 shares.
Out Perform
Better performance when measured against something else. Example: When a fund manager beats the market he or she is outperforming the market.
P
Past Performance
The history or past results of an organisation or investment over a given period of time.
Pension Fund Manager
A city professional whose job is to decide how the pension's fund money is invested.
PEPS
Stands for personal equity plan. A plan where people over the age of 18 could formerly invest in the shares of UK and other EC companies via an approved plan manager or through qualifying unit trusts and investment trusts and receive both income and capital gains free of tax.
Percentage Rate of Return
The actual rate of return from an investment. For example, he received a 15% rate of return on his investment fund over the last year.
Pool Money
Allows us to put our money together (as in pool your money) with other investors' money and then let a professional invest for you.
Portfolio
A collection of investments all owned by the same individual or organisation. These investments often include stocks, which are investments in individual businesses; bonds, which are investments in debt that are designed to earn interest; and investment / mutual funds.
Pound Cost Averaging
A very effective method of investing in the stock market. It involves investing over a period of time at the same time consistently. You usually set it up so that your money is invested every month into the stock market whether it is high or low. Over time, you get an "average" cost. This is a good method for people who do not want to time their buys in the market.
Price Action
The number of points that the index has moved up or down in a given time frame. So if the Dow (DJIA) started the day at 10,000 and finished the day at 10,100, you would say that the Dow had risen 100 points or 1%.
Prioritise
When you have a list of action items on a plan, it's when you decide what items are the most important so that you can do the most important things first and the least important things last.
Professional Accumulation
When institutional investors are heavily buying stocks it is called professional accumulation. It is characterised by the trading volume for a time period being much larger than the average and the price of the stock is rising.
Professional Distribution
When institutional investors are heavily selling stocks. It is characterised by the trading volume for a time period being much larger than the average and the price of the stock is falling.
Professional Fund Manager
A city professional whose job is to decide how the fund money is invested.
Professionally Managed Funds
Another name for an Investment fund.
Professional Money Manager
Another name for a fund manager
Profit
Measure of a company's profitability calculated by dividing annual earnings by revenues, displayed as a percentage.
Profit and Loss Statement
Corporate report that shows a company's profitability, identifying both income and expenses.
Program Trading
The NYSE defines program trading, also known as portfolio trading, as the purchase or sale of a basket of 15 or more stocks with a total value of at least one million.
Prospectus
Formal lengthy printed statement released by a company or investment fund.
Put
An option contract that gives the holder the right to sell a certain quantity of an underlying security to the writer of the option, at a specified price (strike price) up to a specified date (expiration date); here also called put option.
Put / Call Ratio
Put volume divided by call volume for a specific period of time. At market bottoms, fear and despair are the dominant emotions.
The put-call ratio is a good measure of investor panic. When investors are buying an outsized numbers of bearish puts, putting the ratio above 1.0, a market bottom might be near.
Q
QQQQ
Formerly the QQQ, this is the ticker symbol for the Nasdaq-100 Trust, which is an ETF that trades on the Nasdaq. This security offers broad exposure to the tech sector by tracking the Nasdaq-100 Index, which consists of the 100 largest and most actively traded non-financial stocks on the Nasdaq.
R
Rally (and a False Rally)
An attempt by a stock, or the general market, to turn and advance in price after a period of decline. Successful rallies are usually identified by more consistent price increases on greater than normal volume. False rallies are generally signified by increases in price but a lack of big or increased volume, indicating absence of large buying in the market. False rallies frequently either do not last as long or do not recover as much in price.
Read The Market
The ability to determine the consequences of how the stock market has recently been acting, and capitalise on that knowledge.
Recession
A decrease in economic activity (usually measured in terms of Gross National Product or GNP).
Resistance
In technical analysis, the Inability of a stock to rise above a certain price (resistance level).
Regulation - Regulated
Companies or individuals are "policed" by higher financial authorities such as the FSA to ensure rules are abided by and investors are protected.
Reinvest
An arrangement in which the investment returns or profits are used to purchase additional shares or units over a period of time; this can help the compounded growth of an investment.
Relative Strength (RS)
A stock's relative strength line compares a stock's price performance versus the S&P 500 index. Many charting services plot a RS Line along with the stock's price, moving averages, etc. The line is derived by dividing the stock price by the S&P 500 Index value. An upward sloping line means that the stock's price is outperforming the S&P 500 Index.
Returns
Annual return on capital used over a period of time. If you select your fund carefully you can expect to return between 15% and 20% a year.
Risk
Represents the maximum potential financial loss inherent in the placement of an investment. The more we learn about the investment the more the risk is reduced. Risk is relative.
Risk Adjusted Return Calculation
A calculation Morningstar use to grade funds.
S
Stocks and Shares ISA
An individual savings account, which places all ISA money for the tax-free year with a single plan manager. A stocks and shares ISA must offer investment in shares, including unit and investment trusts. If you take out a stocks and shares ISA then you cannot also take out a cashISA, or another stocks and shares ISA, in the same year.
Sectors
A number of similar industry groups. Sectors are broader than industries. For instance, the high-tech or consumer sector can include several different industries.
Shakeout
When a market index or stock pressures investors to sell, often at a loss. It is an area that “shakes” or flushes out weak stock holders.
Shareholder
Someone who owns shares of stock in a company or investment fund. For companies, along with the ownership, comes the right to receive dividends.
Shareholder Report
An audited document by the company reporting the financial results for the year (including a balance sheet and income statement).
Shares
Ownership or share in a company; this is the same as equities.
Short-Term Fluctuation
Short term changes of market price possible in a stock or investment fund.
Sophisticated Investor
An investor who has sufficient knowledge and experience with investing to be able to evaluate the merits of an investment.
Stalling / Stalling Action
When a stock or index “hesitates” or stalls. Generally it means that the character or personality of that index or stock may have changed as normally when everything is rising, it normally rises. But on this occasion, it hesitates which generally indicates that the professionals are selling instead of buying. When stocks or indexes stall, it can be an early warning indicator that the stock or index is about to change direction.
Standard & Poor's 500 (S&P 500)
An Index of 500 major companies; the breakdown is 400 industrial firms, 20 transportation firms, 40 utilities and 40 financial firms. This Index is market-value weighted.
Standard & Poor's 600 (S&P 600)
The S&P 600 is a market-value weighted index consisting of 600 small-capitalisation U.S stocks from a broad range of sectors.
Stock Index
An index is used to track the market value of a group of companies over time. An example is the Nasdaq Composite.
Stock Market
An actual physical location (or computerised system) for the organised buying and selling of stocks.
Stock Market Cycle
A full stock market cycle starts when the economy is healthy and has a bull market, which can last usually from two to four years. It is followed when the economy becomes unhealthy, which is called a bear market; and this usually lasts from nine months to eighteen months. The full cycle is usually around five years.
Stocks
A share or stock represents ownership or equity in a company. Stocks or shares of companies are bought and sold at a stock market.
Strategy
A method or system used to accomplish a goal.
Sub-Fund
A fund within a fund. For example, you could own a fund called "International fund" that comprised of three separate funds or sub-funds that were called European Fund, American Fund and Japanese Fund.
Supply and Demand
At any time, it can be stated that the total number (supply) of shares is fixed. Demand for the fixed supply of shares will vary continuously, depending on the investment community's interpretation of all the data available for the company, its sector and prevailing economic trends.
Support
In technical analysis, a price level which a stock has had difficulty falling below. It has trouble falling below. It is “supported” by the buying action of professional investors.
T
Techical Analysis
A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future market trends. Unlike fundamental analysis, the intrinsic value of the security is not considered. Technical analysts believe that they can accurately predict the future price of a stock by looking at its historical prices and other trading variables.
Technical analysis assumes that market psychology influences trading in a way that enables predicting when a stock will rise or fall. For that reason, many technical analysts are also market timers, who believe that technical analysis can be applied just as easily to the market as a whole as to an individual stock.
The Trustee
Normally a large bank or insurance company. It acts in the interests of unit-holders, owning the investments in the unit trust on your behalf. It is the trustee's role to ensure the unit trust is invested according to its investment objectives.
Transaction Statement
A statement by a stockbroker or an investment fund company. A document issued by a supplier to its customer listing transactions over a given period, normally a month.
Treasury Bills
A negotiable debt obligation issued by the US Government and backed by its full faith and credit, having a maturity of one year or less.
Trend Investing
The general direction of the price of an asset or market in general. If you can identify a trend, it can be highly profitable, because you will be able to trade with the trend. Success depends on identifying the trend with confidence and catching the trend after it has started. Success includes getting out of the trend as soon as possible after the uptrend turns into a downtrend.
U
Unit Price
The price of a unit at any time is called the fund's net asset value, or nav. For a unit trust, the nav is referred to as the unit price.
Unit Trust
Unit trusts and oeics are both open-ended funds, meaning that the size of each fund can vary according to supply and demand. Typically a unit trust or oeic is worth anything from £5 million to £300 million and sometimes more.
Units
The way in which holdings in unit trusts and insurance funds are allocated to investors.
Upfront Charge
Upfront charges can be as much as 6% and annual management fees usually run at around 1 to 1 ½ % per year.
Unhealthy Market
When the market drops in price, it falls on more than average volume. This indicates that the professionals are selling and selling heavy. This is known as professional distribution. This is a bad sign and indicates that the market may be ready to move lower in the future. It acts the total opposite of how a "healthy market" acts
Upward Trend
A trend is a recognisable pattern that the stock market makes. It can be either down, sideways or up. An upward trend is when the trend is going up.
V
Value Fund
An investing strategy that focuses on companies believed to be undervalued. Value stocks are typically described as bargain-priced stocks or good value.
Variable Rate Mortgage
The rate changes on a variable rate mortgage if the lender alters the interest rate.
Vehicle
A means of getting your money to grow. An example is an investment fund.
Volatile - Volatility
A measure of the degree of fluctuation in an index or a stock's price.
Volume
The number of shares that have exchanged hands in any one given period of time. Price and volume are the two most important elements to use when determining how healthy a stock market or a stock is at any given period of time.
W
Withdraw
To take money out of an account to spend.
