DIVERSIFICATION The
practice of choosing stocks for a portfolio which come from different
industries; therefore if one industry turns down the overall portfolio
will not be that adversely affected. Can also mean spreading investments
in a portfolio between asset classes such as stocks, bonds and money market
investments. The basic premise is not to keep all of ones eggs in the
same basket.
DIVIDEND YIELD The
return on a stock expressed as a percentage from the dividend payment.
For example, if a stock pays an annual dividend of$1.00 per share and
the stock is purchased at $10.00 per share the yield is 10%. $1.00/$10.00
= 10%. If the stock is purchased at $20.00 than the yield is 5%.
DIVIDEND REINVESTMENT Many
larger companies that pay dividends have a program that you can subscribe
to that allows any dividend payments to go towards the purchase of more
of the companies stock. This is highly recommended especially if the stock
is purchased for the long term. It is a great savings method.
EARNINGS PER SHARE
(EPS) The net income of a company divided by the
number of shares outstanding. For example if net income came in for the
year at $100 Million and there was 10 Million shares outstanding than
the EPS would be $10.00 per share.
EARNINGS PER SHARE
(EPS) The net income of a company divided by the
number of shares outstanding. For example if net income came in for the
year at $100 Million and there was 10 Million shares outstanding than
the EPS would be $10.00 per share. EMERGING MARKETS Financial markets
of countries whose economies are not as mature as that of a Japan or United
States but are growing very rapidly. The countries of Southeast Asia such
as Thailand and Singapore are countries that are considered emerging markets.
EX-DIVIDEND The
time between the announcement of the dividend and when it actually paid.
An investor who buys the stock during this interval will not be entitled
to the dividend.
EXTRAORDINARY ITEM(S) Charges
which reduce a companies net income which are non-recurring. For example
a company reported earnings of $10 million from normal business operations
however during the year a factory was closed and cost $3 million to do
it This caused net income for the year to drop to $7MM. The closing is
considered an Extraordinary Item and must be explained in the annual or
quarterly report. Extraordinary charges can go the other way and inflate
earnings. When viewing a stock's P/E ratio make sure this was not influenced
by an Extraordinary Item.
FEDERAL FUNDS RATE Interest
rate charged by banks with excess reserves at the Federal Reserve to banks
needing to borrow to meet reserve requirements. This rate is the short-term
rate that the Federal Reserve (Alan Greenspan) manipulates to stimulate
or slow the economy. If the Fed wants to slow the economy than it will
raise the Fed Funds Rate the opposite is true by lowering rates.
FLIGHT TO QUALITY Term
used for a large movement of cash out of one investment class to another.
For example if there is a scare in the overall stock market the US Treasury
markets may rally as investors sell stocks and put money in to safety
of treasury bonds, bills and notes.
FUNDAMENTAL ANALYSIS A
method of analyzing companies which takes into account potential future
earnings, strength of the balance sheet and other financial data. Fundamental
analysis is the opposite of technical analysis which common stock is bought
solely on chart patterns.
FUTURES CONTRACT An
agreement to buy a specified commodity, stock index or other financial
instrument at a set price on a specified day in the future. As related
to the stock market, S&P Index Futures often predicts where the market
will be heading in the future.
