12b -1 fee
The 12b-1 fee is the fee that covers the cost of advertising the mutual fund.
Investing Glossary
ADR
The stocks of most foreign companies that trade in the U.S. markets are traded as American Depositary Receipts (ADRs). U.S. depositary banks issue these stocks. Each ADR represents one or more shares of foreign stock or a fraction of a share. If you own an ADR, you have the right to obtain the foreign stock it represents, but U.S. investors usually find it more convenient to own the ADR. The price of an ADR corresponds to the price of the foreign stock in its home market, adjusted to the ratio of the ADRs to foreign company shares.
Annuities
An annuity is a product sold by insurance companies. You pay for the annuity through a lump sum or by making payments over time, then the insurance company invests your money, paying you the residuals at the end of the term. One giant pro is that an annuity has the ability to pay out regular payments each month. These payments could provide a supplemental income during your retirement, even enough to cover your regular expenses. These are complex arrangements orchestrated by an insurance company and as such, come with high fees. Most will have administrative fees, mortality, and expense fees that cover the costs and risks of insuring your money.
APR
The term annual percentage rate of charge, corresponding sometimes to a nominal APR and sometimes to an effective APR, is the interest rate for a whole year, rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc. It is a finance charge expressed as an annual rate
APY
A savings account Annual Percentage Yield (APY) will show you how much interest you can expect to earn over the course of a year. For example, if you deposited $10,000 into a savings account with an APY of 2%, you can expect to earn roughly $200 in interest in one years time. If you were to withdraw all of your money after the first six months, you’d get $100 in interest. You can use APY to compare different savings accounts advertised interest rates.
Ask Price
The Ask Price, on the other hand, is the price that a stock is actually being offered for. More technically, its the lowest price that sellers of the stock are willing to accept for it.
Asset Allocation
Asset allocation refers to the strategy of dividing your investments among different asset categories, such as stocks, bonds, real estate, cash, and cash alternatives. Asset allocation aims to control risk by diversifying an investment portfolio.
Assets
Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks and patents. And cash itself is an asset. So are investments a company makes.
Back End Load
Applies to Mutual Funds. A back-end load is basically paying the front-end load when you make your withdrawal as opposed to when you make your deposit. You’re highly unlikely to pay both. The front-end and back-end load actually end up being the same amount since, for example, 2.5% upfront is the same as 2.5% at the end, once the profits are removed.
Bear Market
The opposite of a bull market is a bear market, defined as a point in time in which the market is seeing challenges and investor sentiment is on the decline. Just like bull markets, bear markets can span weeks, months, or years.
Beneficiary
This term refers to the individual who inherits the funds or property because of a financial account, trust, or will.
Beta Stocks
A stocks beta is a measure of its volatility relative to the market, or in other words, the risk you open yourself up to when you invest in a particular stock. A beta of zero means that stock is likely not affected by the overall trends of the market. A beta of less than zero means the stock is moving in the opposite direction of the market. A beta between zero and one means that it is moving in the same direction as the market, but with far less volatility. A beta of one means that the stock is moving in the same direction as the market, and matches the volatility of the market as well. A beta greater than one means that the stock is moving in the same direction as the market, but with significant volatility.
Bid Price
The Bid Price is the other side of the coin. This is the price that buyers are actually willing to pay for a stock, regardless of what sellers are asking for it. This works exactly like a bid at an auction the highest bid wins.
Bid-Ask Spread
The amount by which the ask price exceeds the bid price for an asset in the market. The bid-ask spread is essentially the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept.
Bitcoin
Bitcoin is a cryptocurrency. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Blockchain
Blockchain.com is a Bitcoin block explorer service, as well as a cryptocurrency wallet supporting Bitcoin, Bitcoin Cash, and Ethereum. They also provide Bitcoin data charts, stats, and market information
Blue Chip Stock Stability
Blue-chip stocks tend to be stable because of their established foothold within whatever industry they dominate. A company like McDonalds isn’t going away, even if it encounters controversy, because it has the resources and the cultural cache to withstand hardship and scrutiny.
Blue Chip Stocks
Blue-chip stocks are the term for stocks issued by companies with name recognition that experience consistent growth and usually pay dividends.
Bond
A bond is functionally a loan made to a company or governmental organization. You get paid back in the future, and you accrue interest until that payment comes. Bonds tend to carry less risk because you know when youll be paid back and how much.
Bond Benefits
Bonds are typically low-risk investments that come with the added benefit, in the case of government or municipal bonds, of helping public goods and services come to fruition. In the case of junk bonds, you can also get a greater return on investment as compensation for taking on a greater risk, which means you could be helping an important yet uncertain venture achieve realization, if thats of concern for you. Tangentially, keeping track of bonds is also important because an inverted yield rate, which is what happens when short term government bonds deliver a better return than long term government bonds, is often a precursor to a recession.
Brokerage Account Number
Banks and brokerage firms assign a brokerage account number code for each of your brokerage accounts. This number functions much like a username, and it allows the electronic as well as human interface within your brokerage firm to identify you.
Budget
Budgeting just means establishing a framework for your personal money management that factors in the realities of your financial situation and your unique financial objectives.
Bull Market
A bull market is when the market is doing well and growing at a steady pace. In a bull market, investor sentiment is optimistic and stock prices rise significantly following a previous decline. Bull markets can last several months or even span into years.
Buying Power
Buying power is the amount of money you have available to buy stock. Typically, buying power will match your cash balance, unless you have an outstanding/pending order.
Callability
Callability is the option for some bonds to be paid off prior to maturity. If the bond is paid off before reaching maturity, that usually means the bondholder will get some extra money. Callability can also apply to prefered stocks.
Capital Gain
A capital gain occurs when you sell an investment at a profit. Capital gains can receive favorable tax treatment because the rules generally favor capital gain over ordinary, earned income.
Capital gains are measured by the difference between the amount realized in a sale and the basis on the asset you sold. You pay taxes on the difference.
Clearing Firm
A clearing house is a financial institution formed to facilitate the exchange of payments, securities, or derivatives transactions. The clearing house stands between two clearing firms. Its purpose is to reduce the risk of a member firm failing to honor its trade settlement obligations.
Closing Price
Closing price generally refers to the last price at which a stock trades during a regular trading session. For many U.S. markets, regular trading sessions run from 9:30 a.m. to 4:00 p.m. Eastern Time.
Common Stock
Common stock is the most common stock bought. Each share bought is equal to a single vote at a shareholder meeting. Common stocks often, but not always, entitle their owner to a portion of the companys profits, which is known as a dividend. Sometimes a dividend can be paid in the form of more stock rather cash. In the case of large companies, dividends are usually paid out four times a year.
Not all companies pay dividends, and companies opt to withhold dividends for varying reasons. Sometimes these businesses choose to reinvest in the company and its growth with an ambition to create capital gains for shareholders. In general, growth companies are more likely to reinvest in the business, while more mature companies are more likely to pay out dividends to their shareholders.
Component of a Market Index
As can be expected, blue-chip stocks are in the major indexes: the S&P 500, the Dow Jones Industrial Average, and the NASDAQ-100.
Compounding Method
Closely related to APY is the financial institutions compounding method for its savings accounts. While its most common to expect your interest payments on a quarterly basis, some institutions will pay interest monthly, semi-annually, or annually. The more compounding, the faster your money grows.
Consumer Interest Rates
Consumer interest rates refer to the percentage that lenders charge consumers on the borrowed principal amount for various types of credit and loans. These rates are set by the financial institutions and are influenced by several factors, including the base rate set by a nation’s central bank, the market conditions, the creditworthiness of the borrower, and the type of loan or credit issued.
Convertible Bonds
A convertible bond is a bond that can be turned into a certain number of shares of common stock in the company that issued the bond or in exchange for equal cash value.
Corporate Action
A corporate action takes place when a company’s board of directors decides to initiate a process that directly affects the securities issued by that company. The good news is the value of your position before the split has not changed, simply the amount of shares you owned have been adjusted and the price of the stock was also adjusted.
Corporate actions can range from urgent financial matters – including bankruptcy or liquidation, to a firm changing its name or trading symbol. Dividends, stock splits, reverse stock split, mergers, acquisitions and spinoffs are all common examples of corporate actions.
Corporate Bonds
These are bonds put out by commercial undertakings such as corporations and LLCs. Corporate bonds offer high yields but are not favored by the tax code. Upwards of 40% to 50% from corporate bonds may end up going toward taxes.
Coupon
A bonds coupon is the interest rate the bond pays out. Its unlikely to change once the bond is issued.
Credit Card Debt
High-interest credit card debt can hamper your ability to maneuver financially, especially since your credit score will impact your ability to take out loans in the future. For this reason, a good rule of thumb is to maintain little to no credit card debt.
If need be, you can use a balance transfer card, allows you to pay off one debt with another card. The advantage of this approach is that you can consolidate debts for a fee that is a small percentage of your debt. If you have a mortgage, you can attempt a cash-out mortgage refinance, which is when you refinance your mortgage (meaning you get a loan with different constraints) for a sum thats greater than your original mortgage. With these additional funds, you can pay off your credit card debt.
In both cases, keep in mind that getting out of debt is a two-step process. The first step entails stopping the bleeding by tackling the debt you have head-on. The second step, of critical importance, is to identify the habits that got you into debt in the first place and correct them for the future.
Creditor
A person or company to whom money is owed.
Cryptocurrencies
Cryptocurrency is a type of digital or virtual money. It serves as ordinary money, such as dollars, pounds, euros, yen, etc. But it has no physical counterparts banknotes or coins that can be carried around, that is, the cryptocurrency exists only in electronic form
Current Yield
If you wanted to compare the interest paid out by a bond to the dividends paid out by stock you could calculate the current yield. This is done by dividing the interest paid out by the bond by its current price. This figure only calculates the interest and not any gains or losses that the bond may have experienced, so its only really useful for people who want to know the income generated by the bond right now.
Cyclical Stock
A cyclical stock is a stock thats affected by the overall trends of the economy. They follow the market as it goes up and down. These stocks belong to companies that provide goods and services that people purchase or employ when they have the funds to do so, as opposed to goods and services that are purchased or employed irrespective of how the market is doing.
Day Trading
Day trading is considered the buying and selling of a stock during the same business day. The issue with Day Trading is that as a strategy is considered incredibly risky and with safety always being our number one priority at Public its not currently allowed on the platform. If you’d like to learn more about Day Trading, why it’s risky and how to avoid it I’d love you to check out this article by the SEC on it here.
Debt
Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase
Defensive Stocks
When the going gets tough, defensive stocks stay the same (more or less). Thats because they sell consumer staples, so theoretically demand will likely not go down just because the economy may be floundering. Such companies provide reliable dividends and stable earnings.
Deferred Load
A deferred load is what you get when you take your calculated front-end load and pay it off when you sell your investment in the fund. The advantage of a deferred load is that its potentially a smaller figure than what your back-end load would be.
Discretionary Income
Discretionary income is the amount of an individual’s income that is left for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing. Discretionary income includes money spent on luxury items, vacations, and nonessential goods and services. Because discretionary income is the first to shrink amid a job loss or pay reduction, businesses that sell discretionary goods tend to suffer the most during economic downturns and recessions.
Diversification
The idea behind diversification is that having a variety of investments will yield a greater return while assuming lower risk.
One way to practice diversification is to create your portfolio of stocks. You can do this by investing in companies you believe in, and using a combination of first-hand knowledge on a category, additional research, and insights gleaned from trusted friends and experts.
Public is the first social investing app, which means that its users can see investments made by people in their network and start conversations and learn from the people they trust.
Dividend
The term dividend includes any distribution of property to shareholders to the extent made out of accumulated or current earnings and profits.
Dollar Cost Averaging
Dollar-cost averaging is an investment strategy that involves investing a fixed amount of money in the same funds or stocks at regular intervals over long periods of time. It might seem like a crazy idea, but if you have an employer-sponsored 401(k) retirement plan, you’re already using this strategy.
When you set up recurring investments, you average out your purchase price over time and help prevent all of your purchases from going through at a high point for stock prices. Its impossible to time the marketthe experts say don’t even bother trying. Instead, purchase throughout the year and the price you’ve paid per share will be averaged out over the highs and lows of that whole 12-month period.
For example, if a stock is trading at $100 per share in January, and then continues to rise by 10% each month, it will trade at almost $285 in December. When was the right time to jump in and buy that stock and how would you know? Using dollar-cost averaging, you could have invested $150 each month into purchasing stocks, or fractions thereof, and averaged out your price all of the monthly prices added up and then divided by 12. In this case, $162.
Now consider that versus if you had just plunked down $1,200 to make a bulk stock purchase in December. That would mean paying $285 per share and therefore buying fewer of them.
DRIP
Automatic Dividend Reinvestment! When this feature is enabled on your account, any dividend eligible stocks that receive a dividend payment will automatically reinvest right back into that stock!
When it comes to setting up Automatic Dividend Reinvestment for your account, there are a few ways to have this set up:
You can choose to enable this feature for your entire account – When choosing this option, any dividend eligible stocks in your account will be automatically enrolled in this feature, or you can choose certain stocks to be enrolled in this program as well!
One of the features of Slices at Public is that they do earn dividends at the exact same rate of your ownership. So if you own half a slice of stock you’ll receive the same proportion on a dividend when it’s paid out.
Emergency Fund
Before beginning your investing journey, its wise to accumulate savings for an emergency fund. How much should be in this rainy day fund? Experts suggest three to five months worth of living expenses. Emergency funds make tough times easier to weather and will allow you to invest elsewhere without the stress of wondering what happens if you suddenly come into hard times.
EPS
Earnings per share
Estate Tax
The federal estate tax only applies to inheritance greater than $11.18 million for individuals and $22.36 million for married couples. But you don’t have to think about that because its the estate and not you that ends up getting taxed, and that occurs before you even receive the estate.
ETF
Also known as an ETF, an exchange-traded fund is several investments sold as a package. The difference between an ETF and a mutual fund is that ETFs are sold throughout the day just like a stock, and theyre sold for a share price. ETFs often sell for less than the minimum investment cost of a mutual fund. For this reason, ETFs are a solid place for new investors or investors with a small budget.
Executer
The personal representative is whoever is named in the will and/or found themselves appointed by a probate court as the person responsible for realizing the desires of the deceased. This entails clouding out accounts, distributing assets in the manner instructed by the departed, managing paperwork, paying creditors, etc.
Expense Ratio
The fund’s total annual operating expenses, including management fees, distribution fees, and other expenses, expressed as a percentage of average net assets.
Extended Hours Trading
Extended-hours trading is stock trading that happens either before or after the trading day of a stock exchange, i.e., pre-market trading or after-hours trading. After-hours trading is the name for buying and selling of securities when the major markets are closed.
FAANG Stocks
FAANG is an acronym referring to the stocks of the five most popular and best-performing American technology companies: Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google).
Face Value
This is the bonds value when its issued, AKA its par value. The most common face value you’ll encounter for a bond is $1,000.
Fiduciary
As fiduciaries, investment advisers are required to act in the best interest of their clients and not place their own interests ahead of their clients. The IAA has consistently taken the position that all professionals in the business of providing investment advice about securities to clients should be subject to similar fiduciary principles.
FIFO
First In, First Out, commonly known as FIFO, is an asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first. For tax purposes, FIFO assumes that assets with the oldest costs are included in the income statement cost of goods sold (COGS). The remaining inventory assets are matched to the assets that are most recently purchased or produced.
Financial Literacy
Financial literacy is the ability to understand and effectively apply various financial skills, including personal financial management, budgeting, and investing. Financial literacy helps individuals become self-sufficient so that they can achieve financial stability.
FINRA
In the United States, the Financial Industry Regulatory Authority, Inc. is a private corporation that acts as a self-regulatory organization. FINRA is the successor to the National Association of Securities Dealers, Inc. and the member regulation, enforcement, and arbitration operations of the New York Stock Exchange.
Fixed Expenses
In economics, fixed costs, indirect costs or overheads are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as interest or rents being paid per month, and are often referred to as overhead costs.
Fractional Shares
To understand what fractional shares are, it helps to know how stocks work. Stocks are an equity investment that represents part ownership in a corporation and entitles you to part of that corporations earnings and assets. So, when an investor buys a share of a companys stock, they are buying ownership in a publicly-traded company.
This is why stocks are classified as equities, because investors own equity in that company. Stocks are sold in individual units called shares. A fractional share is a fraction of one share of stock. At Public, we call them slices.
Front End Load
The front-end load is a fee you pay just for putting money into your account. This can be a significant chunk of cash. Its not uncommon for a front end load of $20,000 to be $500 off the bat. That means your actual investment is going to be $19,500 rather than $20,000.
Full-Service Brokers
A full-service broker is an equivalent of working with an actual stockbroker and therefore provides a more personalized, white-glove experience than basic online brokers. Once you find a full-service brokerage, he or she will take the time to get to know you both personally and financially. The broker will take into account certain factors about your life when crafting a financial plan with objectives that are tailored to your financial realities and life-stage. Full-service brokers can help with other services as well, such as budgeting, retirement planning, and providing general financial advice. Given the high-touch nature of their client relationships, full-service brokers are a more expensive option but can be worth the investment for people who value personalization. Some accounts can be set up for as low as $1,000.
Gain
The stock market is an exchange, that means every time you buy a stock, it’s being sold by someone else, and every time you sell a stock, it’s being purchased by someone else. When you purchase a stock for a specific amount and the value of that stock appreciates in value (the share is worth more than you paid for it) that is what’s known as unrealized gains. Only when you sell the stock you can lock in those gains, and the result is you making money on that stock!
GFV
If you buy a stock with settled funds today, you can technically sell the stock tomorrow without getting a violation. Now for the tricky part. You can then use those funds from the sale to purchase more stock immediately, however if you sell that stock before the 2 day settlements period, those would be considered unsettled funds and that would result in a cash account violation. As a reminder, trades placed in a cash account require 2 business days to settle before you can use those funds to buy and sell. I hope this clears things up, and we’re here if you need anything else!
Government Bond
These are bonds issued by sovereign governments. They are backed by the full faith and credit of the issuing country, which can take whatever steps necessary to pay off the bond. Governments put out various different types of bonds to finance all sorts of endeavors. Even though government bonds are stable and, as a result, carry lower risk, they often deliver a significant return.
Grantor
This is the person who set up the trust in the first place.
Gross Pay
Gross pay is the amount of money your employees receive before any taxes and deductions are taken out
Growth History
Blue-chip companies are dependable. Their growth is consistent over time and the prognostications are equally good. They lack the sizzle and pop of skyrocketing start-ups, but thats only because theyre the big kids on the block.
Growth Investing
A growth investment strategy focuses on capital appreciation. Growth investors look for companies that exhibit signs of above-average growth, through revenues and profits, even if the share price appears expensive. A relatively riskier strategy, growth investing involves investing in smaller companies that have a high potential for growth, blue chips, and emerging markets. This is a research-heavy approach to investing that is best handled by seasoned investors.
GTC
A Good-Til-Cancelled (GTC) order is an order to buy or sell a stock that lasts until the order is completed or cancelled. Brokerage firms typically limit the length of time an investor can leave a GTC order open. This time frame may vary from broker to broker. Investors should contact their brokerage firms to determine what time limit would apply to GTC orders.
Heir
If theres no valid will, then the heir is the one who inherits the assets. This term is often used in reference to the individual who receives assets because of a will, but the correct term to use in that case is actually beneficiary.
High – Yield Savings Account
A high-yield savings account is an account that pays the account holder a higher-than-average interest rate. If the average savings account in the U.S. offers an interest rate of 1%, for example, then a high-yield savings account might offer a 2% to 5% or higher interest rate.
You can deposit money into a high-yield savings account any time you wish to make your account balance grow. You may also make withdrawals from the account, though you may be limited as to how many times you can take your money out in a given month.
Hybrid Stocks
Hybrid stocks are known as such because they combine aspects of two or more financial instruments. Most commonly, they have characteristics of both debt and equity. So, this may be a bond, which is a loan that you make a profit off of as its paid back, thats also influenced by the price fluctuations of the stock. Hybrid stock are traded on exchanges or can be bought and sold through a brokerage. Their rate of return may be fixed or floating, and take the form of interest or dividends.
Impulse Spending
An impulse purchase or impulse buying is an unplanned decision to buy a product or service, made just before a purchase. One who tends to make such purchases is referred to as an impulse purchaser or impulse buyer.
In the Money
In the money refers to an option contract that, if it were exercised today, would be worth more than $0. A call option is said to be in the money when its exercise price is below the current price of the underlying asset
Income Investing
An income investing, sometimes called fixed income, strategy involves buying securities that generally payout returns on a steady schedule. Bonds, dividend-paying stocks, exchange-traded funds (ETFs), mutual funds, and real estate investment trusts (REITs) fall into this category. Fixed income investments provide a steady income with minimal risk they are a healthy addition to any investors portfolio.
Inheritance Tax
Inheritance tax is paid after you get the assets. Theres no federal inheritance tax, but six states to apply taxes to inheritance. Most beneficiaries, however, including children, grandchildren, husbands, and wives, don’t pay inheritance taxes.
Initial Deposit
Every bank and credit union will have a minimum initial deposit amount to open a high yield savings account. Some institutions will let you open an account with $0 down with the expectation that youll fund the account within 30 days, but most will usually ask that you make an initial deposit of at least $25 to $100 to open the account.
Instant Settlement
Transfers to and from your bank account can take 3-5 business days to process or settle before you can use those funds to invest in stock. The good news is, once your Public account has at least $100 in settled funds, any future deposits will be instantly available to invest up to the all-time amount of settled funds in your account (up to $1,000). I hope this helps, and we’re here if you need anything else!
Interest Payments
A payment amount determined by the interest rate on an account. As a borrower, an interest payment represents the rate charged for being lent funds. As an investor, interest payments represent income on earned on cash accounts or fixed and variable rate securities.
Interest Rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed. The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited or borrowed.
Investment Objectives
Setting your investment objectives is a key part of investing and what will ultimately define your strategy. An investor whose objective is long-term growth over decades will have a different strategy than one who wishes to cash out their accounts in 10 years. Define your objectives and work your strategyor strategies!out.
IPO
When a company first decides to go public, it issues stock for the first time. This is known as the initial public offering, or IPO for short. When large companies have an IPO, investors can expect for there to be big gains and large fluctuations in the first few weeks. Thats due to the fact that the reason many companies go public is to raise money.
Large – Cap Stocks
Large-cap companies have a value of $10 billion or more. A company of this size has likely been around for a while within a well-worn business territory. Putting your money into a large-cap company is unlikely to bring about large returns in the short run, but its a safe place to park your cash if you want consistent asset appreciation and dividends. Coca-Cola, Apple, and Ford are examples of large-cap companies.
Large Market Capitalization
A market cap is the means by which we quantify the size and value of a company. Blue-chip stocks tend to be large-cap stock, which translates into a market valuation that exceeds $10 billion.
Liabilities
Liabilities are amounts of money that a company owes to others. This can include all kinds of obligations, like money borrowed from a bank to launch a new product, rent for use of a building, money owed to suppliers for materials, payroll a company owes to its employees, environmental cleanup costs, or taxes owed to the government. Liabilities also include obligations to provide goods or services to customers in the future.
Limit Order
A limit order is an order to buy or sell a stock at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. A limit order is not guaranteed to execute. A limit order can only be filled if the stocks market price reaches the limit price. While limit orders do not guarantee execution, they help ensure that an investor does not pay more than a predetermined price for a stock.
Lock Up Period
Lockup agreements prohibit company insidersincluding employees, their friends and family, and venture capitalistsfrom selling their shares for a set period of time. In other words, the shares are locked up. Before a company goes public, the company and its underwriter typically enter into a lockup agreement to ensure that shares owned by these insiders dont enter the public market too soon after the offering.
The terms of lockup agreements may vary, but most prevent insiders from selling their shares for 180 days. Lockups also may limit the number of shares that can be sold over a designated period. U.S. securities laws require a company using a lockup to disclose the terms in its registration documents, including its prospectus. Some states require lockup agreements under their “blue-sky” laws.
Long Term Investing Strategy
A long-term investing strategy means investing in companies prepared to endure the bad times and that have a plan for the good times. Pricing power, an influential brand presence, and other competitive advantages can mean a lot more than a high speculative valuation.
Margin
“Margin” is borrowing money from your broker to buy a stock and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. But margin exposes investors to the potential for higher losses. Here’s what you need to know about margin.
Margin Call
If your account falls below the firm’s maintenance requirement, your firm generally will make a margin call to ask you to deposit more cash or securities into your account. If you are unable to meet the margin call, your firm will sell your securities to increase the equity in your account up to or above the firm’s maintenance requirement.
Always remember that your broker may not be required to make a margin call or otherwise tell you that your account has fallen below the firm’s maintenance requirement. Your broker may be able to sell your securities at any time without consulting you first. Under most margin agreements, even if your firm offers to give you time to increase the equity in your account, it can sell your securities without waiting for you to meet the margin call.
Margin Maintenance
After you buy stock on margin, FINRA requires you to keep a minimum amount of equity in your margin account. The equity in your account is the value of your securities less how much you owe to your brokerage firm. The rules require you to have at least 25 percent of the total market value of the securities in your margin account at all times. The 25 percent is called the “maintenance requirement.” In fact, many brokerage firms have higher maintenance requirements, typically between 30 to 40 percent, and sometimes higher depending on the type of stock purchased.
Market Capitalization
Market capitalization is the value of a corporation determined by multiplying the current market price of one share of the corporation by the number of total outstanding shares.
Market Hours
Regular trading hours for stocks traded on exchanges and certain other markets are from 9:30 a.m. to 4:00 p.m. Eastern Time.
Market Orders
A market order is an order to buy or sell a stock at the best available price. Generally, this type of order will be executed immediately. However, the price at which a market order will be executed is not guaranteed. It is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed. In fast-moving markets, the price at which a market order will execute often deviates from the last-traded price or real time quote.
Maturity
Maturity indicates how long it will take for you to earn back the bonds face value. Most, but not all, bonds cease to exist when they reach their maturity.
Merger
Mergers are business combination transactions involving the combination of two or more companies into a single entity. Most state laws require that mergers be approved by at least a majority of a company’s shareholders if the merger will have a significant impact on either the acquiring or target company.
If the company you’ve invested in is involved in a merger and is subject to the SEC disclosure rules, you will receive information about the merger in the form of either a proxy statement on Schedule 14A or an information statement on Schedule 14C.
The proxy or information statement will describe the terms of the merger, including what you will receive if the merger proceeds. If you believe the amount you will receive is not fair, check the statement for information on appraisal or dissenters rights under state law. You must follow the procedures precisely or your rights may be lost.
Mid-Cap Stocks
Mid-cap companies tend to have a market value somewhere between $2 billion and $10 billion and operate within sectors that show the promise to experience quick growth. Not surprisingly, successful companies in these sectors are likely to be growing, as well. Mid-cap stocks carry more risk than large-cap counterparts because they are not as established or secure yet. At the same time, that is what makes them an attractive opportunity for some investors. Examples of mid-cap stocks include 3D Systems Corp (a maker of 3D printers) and the home appliance company Whirlpool.
Minimum Balance
To entice you to keep your high yield savings account as full of cash as possible, banks and credit unions will waive account maintenance fees and offer their most competitive APY as long as your balance stays above the account minimum balance requirement.
If your account balance dips below that amount in a given month, you may be required to pay a maintenance fee on your account and earn a lower APY on your money until your balance rises above the minimum balance. So before you choose a savings account, be sure the minimum balance on it is something you can maintain.
Money Managers
A money manager is someone who you hire to invest your money for you, which is different from a broker who provides you with a detailed plan but leaves the actual investing to you. Money managers work with large portfolios and, as a result, charge significant fees. If you’re someone who can hand over at least $100,000 to a money manager, though, the fee likely won’t bother you.
Money Market Funds
Money market funds invest in short-term bonds issued by governments or corporations. Bonds are small loans that allow investors to make a profit off interest payments. Money market funds are low risk because the can only make high-quality investments.
Municipal Bonds
Also known as muni bonds, these are bonds put forth by localities to finance public projects or services. Muni bonds take one of two forms: general obligation or revenue. A general obligation bond is backed by the full fair and credit of the issuer. That means the locality can take whatever measures deemed fit to pay the bondholders on time. This may include taxes, selling assets, and the like.
Revenue bonds, meanwhile, are backed by the income generated by whatever project or service being funded. If, for example, the revenue bond is going toward maintaining a park, then a portion of the cost of admission may be used to pay off the bond. The interest paid out by both bonds is exempt from federal taxes, and if you invest in bonds issued by the state in which you reside, then you don’t have to pay state or local taxes either. The interest on municipal bonds tends to be less than comparable corporate bonds.”
Mutual Funds Benefits
There are a few reasons that make mutual funds an attractive option for investors.
Instant diversification
When you invest in a mutual fund youre able to invest in multiple assets with a single purchase. This diversification makes you a more resilient investor by virtue of the fact that all your eggs are no longer in one basket.
Time savings
Not only do you build a diverse portfolio with a single transaction, but you also save time since the mutual fund is managed by professionals.
Potential outperformance
Since mutual funds are a business, the people managing your funds want you to beat the market so that they can attract more potential investors and have a greater pool of resources to work with. Your win is their win.
Mutual Funds Drawbacks
The pros of mutual funds must be weighed against their cons.
Fees
All the work that it takes to maintain mutual funds doesn’t pay for itself. For this reason, mutual funds often come bundled with fees that are greater than that of many other forms of investment. The question becomes, then, Do you think the potential profit is worth the cost?
Historical underperformance
Some, but not all, mutual funds over-perform. That said, more than a large percentage of mutual funds have fallen short of their stated goals in the past 15 years. That means, unfortunately, that too many investors end up paying more in fees than other forms of investment only to lose to the market. For this reason, some experts propose investing in index funds, which have lower fees but can tend to outperform mutual funds in some cases.
Tax inefficiency
Managing a mutual fund entails buying and selling stocks with regular frequency. This creates a taxable event, which means you now have to deal with capital gains taxes, which can eat away at your profits. Unless you’re working with a tax-advantaged account, you’re going to have to pay taxes on your investment every year.”
Mutual Funds for Beginners
If you’re just starting out, you want a mutual fund thats not going to scare you away. Here are two ways to play it safe.
No-Load funds
A no-load fund is one that doesn’t charge a front, back, or deferred load.
S&P 500 index funds
If you’re a long term investor, you can always invest in an S&P 500 index fund. This will allow you to invest in hundreds of the most successful companies with a single purchase. If you want further diversity in your investment portfolio you can always seek out other opportunities down the line.
Mutual Funds: How do they work?
When the value of your mutual fund goes up, you make money. The money you make can then be reinvested into the mutual fund so that you have even more shares. When those shares make more money, you can reinvest again so that you get a greater share of the profit. This process can continue up to the point when you decide to sell your shares.
Online Brokerage Firm
Online brokerages like Public do not require account minimums, do not charge commission fees, and allow for investing in slices of shares for thousands of stocks and ETFs. If you’re just starting out, you might set a comfortable target to invest each month and optimize as needed. Tools like Mint make it easy to see where your money is going, so you can assess your spending and determine if your purchases are truly worth the short-term benefit versus the longer-term impact they could have if put to work in the market over many years.
Online Brokerage Firm with Assistance
For a little more money per transaction, you can work with a discount broker with assistance. These platforms provide an additional layer of support relative to spartan online brokers and may provide more information about the stocks you are trading or published newsletters with tips.
Option
An option is a contract that gives you the option to buy or sell a stock at a particular price by a given date. Importantly, you are buying the contact and not the stock. You can follow through on the contract, sell them to a different investor, or just let them expire. Options make money when the market rate of the stock becomes less than what it was when you entered the contract. If the stock costs more, you don’t actually have to buy the stock.
OTC Market
The Financial Industry Regulatory Authority (FINRA) regulates broker-dealers that operate in the over-the-counter (OTC) market. Many equity securities, corporate bonds, government securities, and certain derivative products are traded in the OTC market. The OTC Bulletin Board (which is a facility of FINRA), and OTC Link LLC (which is owned by OTC Markets Group, Inc., formerly known as Pink OTC Markets Inc.), for example, operate within the OTC market, particularly with respect to OTC equity securities.
Out of Money
“Out of the money” (OTM) is an expression used to describe an option contract that only contains intrinsic value. These options will have a delta of less than 50.0.
An OTM call option will have a strike price that is higher than the market price of the underlying asset. Alternatively, an OTM put option has a strike price that is lower than the market price of the underlying asset.
OTM options may be contrasted with in-the-money (ITM) options.
Real vs. Personal Property
Real property means real estate, while personal property means anything else that one may inherit that isn’t real estate.
Realized Yield
The realized yield is an estimate of the bonds future price. This is calculated when the bond holder intends to sell the bond before it reaches maturity. Realized yield is an estimate at best, but its useful nonetheless. The best way to calculate the realized yield is by using spreadsheet software or a financial calculator.
Reverse Stock Split
When a company completes a reverse stock split, each outstanding share of the company is converted into a fraction of a share. For example, if a company declares a one for ten reverse stock split, every ten shares that you own will be converted into a single share. If you owned 10,000 shares of the company before the reverse stock split, you will own a total of 1,000 shares after the reverse stock split.
A company may declare a reverse stock split in an effort to increase the trading price of its shares for example, when it believes the trading price is too low to attract investors to purchase shares, or in an attempt to regain compliance with minimum bid price requirements of an exchange on which its shares trade. In some reverse stock splits, small shareholders are “”cashed out”” (receiving a proportionate amount of cash in lieu of partial shares) so that they no longer own the companys shares. Investors may lose money as a result of fluctuations in trading prices following reverse stock splits.
Although the SEC has authority over a broad range of corporate activity, state corporate law and a companys articles of incorporation and by-laws generally govern the companys ability to declare a reverse stock split and whether shareholder approval is required.”
Risk Tolerance
Risk tolerance is how much risk you’re willing or able to take on as an investor. Setting aside how much risk you can stomach emotionally, if youve got very little financial wiggle room then youve got low-risk tolerance. Some factors used in calculating risk tolerance include how much time you have for your investments to grow, how much you expect your income to grow, your current and future forecasted expenses, and your health status. If you have a big salary and years until retirement then you have a high-risk tolerance; if you’re living paycheck to paycheck you have low-risk tolerance.
Safe Harbor Statement
A call usually begins with a safe harbor statement, which just lets everyone know that financial results may include predictions about the future that may not necessarily come true. This disclaimer limits the companys liability if the predictions about the future differ wildly from what the future actually brings.
SEC
The U.S. Securities and Exchange Commission (SEC) is an independent federal government regulatory agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of the securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States. It also approves registration statements for bookrunners among underwriting firms.
Generally, issues of securities offered in interstate commerce, through the mail or on the Internet, must be registered with the SEC before they can be sold to investors. Financial services firmssuch as broker-dealers, advisory firms and asset managers, as well as their professional representativesmust also register with the SEC to conduct business. In example: they would be responsible for approving any formal bitcoin exchange.
Secured Bond
A secured bond is backed by a particular type of collateral. In the event of a default, that asset is divided between bondholders.
SEP IRA
The Simplified Employee Pension IRA, or SEP, is a type of traditional IRA that lets self-employed people and small-business owners save up to $57,000 in 2020 toward retirement. A huge pro with a SEP IRA is that contributions are tax-deductibleincluding those made into your employee accounts. One con for sure is the mandatory distributions at 70, like those associated with a traditional IRA.
Shareholders Equity
Shareholders equity is sometimes called capital or net worth. Its the money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money belongs to the shareholders, or the owners, of the company.
Short Selling
A short sale is the sale of a stock that an investor does not own or a sale which is consummated by the delivery of a stock borrowed by, or for the account of, the investor. Short sales are normally settled by the delivery of a security borrowed by or on behalf of the investor. The investor later closes out the position by returning the borrowed security to the stock lender, typically by purchasing securities on the open market.
Investors who sell stock short typically believe the price of the stock will fall and hope to buy the stock at the lower price and make a profit. Short selling is also used by market makers and others to provide liquidity in response to unanticipated demand, or to hedge the risk of an economic long position in the same security or in a related security. If the price of the stock rises, short sellers who buy it at the higher price will incur a loss.
Brokerage firms typically lend stock to customers who engage in short sales, using the firms own inventory, the margin account of another of the firms customers, or another lender. As with buying stock on margin, short sellers are subject to the margin rules and other fees and charges may apply (including interest on the stock loan). If the borrowed stock pays a dividend, the short seller is responsible for paying the dividend to the person or firm making the loan.”
Small-Cap Stocks
Small-cap companies have a market value ranging from $300 million and $2 billion. A small-cap company may be at the start of its lifespan, serve a niche sector, or exist within a developing arena. Small-cap companies are said to be riskier investments because of their age, size, and the industries they serve. They are also more sensitive to market volatility given their limited resources. However, if you find the right company you could be rewarded handsomely for investing early.
Speculative Stocks
Speculative stocks belong to fledgling companies with unknown futures. A startup is an example of a speculative stock. They are considered higher risk investments.
Stock
A stock, also known as an equity, is when you get a share of ownership in a company. Stocks are sold at the price of each share, the cost of which varies from company to company.
Stock Dividend Split
A split is what occurs when a company decides to give more stock to shareholders based on how much stock shareholders already have. This is likely to occur following an IPO. The company may give one stock for every ten you have, for example, which would make the general price decline 10 percent, even though the general value of all the stock owned by each shareholder would remain the same (the value would just be distributed amongst more stock). If the dividend is big enough its called a stock split.
Stock Funds
Stock funds invest in companies. Here are some examples:
Growth funds: These focus on stocks that show potential for a high return on investment as opposed to dividend payouts. A dividend is a portion of a companys profits owed to investors paid on a regular basis.
Income Funds: These funds generate their profits from regular dividend payments.
Index Funds: These funds mimic the performance of particular indices such as the Dow Jones Industrial Average and the S&P 500.”
Stocks with Embedded Derivative Options An embedded option is a special condition thats most often attached to a bond. It gives the holder or the issuer the opportunity to perform a specified action at some point down the line. An embedded option cannot be sold separately from its underlying security.
Stock Slice
At Public, you can become an owner in any company by investing any amount of money regardless of the share price.
We developed the technology to allow for any stock to be cut up into tiny bits of a share or slices. These slices of stock represent a fixed amount of fractional shares in a single share.
You can still always buy full shares of a stock but if you wanted to buy $5 worth of a stock that costs $800 per share you can make that happen by buying a slice for $5. That fraction of a share remains yours until you sell it. When you want to sell a Slice you can simply enter how much of the value you want to sell.
One note is that when you buy a slice of a stock the order will always be a Market Order.
Stock Split
An increase in the number of shares of a corporation’s stock without a change in the shareholders’ equity. Companies often split shares of their stock to make them more affordable to investors. Unlike issuing new shares, a stock split does not dilute the ownership interests of existing shareholders. For example, if you own 100 shares of a company that trades at $100 per share and the company declares a two-for-one stock split, you will own 200 shares at $50 per share immediately after the split. If the company pays a dividend, your dividends paid per share also will fall proportionately.
Stop Limit Order
A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, a stop-limit order becomes a limit order that will be executed at a specified price (or better). The benefit of a stop-limit order is that the investor can control the price at which the order can be executed.
Stop Order
A stop order, also referred to as a stop-loss order, is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order. A buy stop order is entered at a stop price above the current market price. Investors generally use a buy stop order to limit a loss or to protect a profit on a stock that they have sold short. A sell stop order is entered at a stop price below the current market price. Investors generally use a sell stop order to limit a loss or to protect a profit on a stock that they own.
Yield
A bonds yield is what you get when you divide the bonds coupon by the bonds changes in value.
YTC
If you’re holding a callable bond, then you’re going to want to know what your return on investment is going to be at various points in the future given that the bond may be paid off before it reaches maturity. This is yet another measure thats best calculated using spreadsheet software or a financial calculator.
YTD Change
Year to date (YTD) refers to the period beginning the first day of the current calendar year up to the current date. YTD percent change refers to the comparison of the current YTD to the same time period a year ago.
YTM
The YTM measures the return of the bond if you keep it until maturity and then has its interest reinvested. Since the interest will be paid out at various points, its unlikely that the interest will be reinvested all at once. This means that the return on investment wont be 100% aligned with its face value. Calculating the YTM can be time-consuming, so its best to use either spreadsheet software or a financial calculator to do the work for you.
Disclosure: The above content provided and paid for by Public and is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.