WinningStocks.com® Investor Glossary G

GROSS DOMESTIC PRODUCT (GDP) The market value of all goods and services produced by labor and other assets in the country.The GDP is the most widely used measurement to gauge the economic strength of the country. The GDP figures are released by the commerce department on a quarterly basis and can have significant impact on the direction of the markets.

GROWTH STOCK A company whose earnings and sales are rising at a faster rate than the average of publicly traded companies. Growth stocks tend to out-perform the rest of the market, however they carry a higher level of risk.

HEDGING The Process ofusing other financial instruments to reducethe risk of an investment. Tools for hedging against downward movement in stock are primarily options (See Options). While hedging may reduce the risks it may also reduce returns.

INDEX In regard to the stock market, a grouping of stocks that are tracked to measure the overall performance of the market. The major index's used in the United States are the Dow Jones Industrial Average (30 stocks), the Standard & Poor's 500 and the NASDAQ 100.

INDEX FUND A mutual fund that holds a portfolio of stocks that mirror a major index such as the S&P 500. Returns (or losses) will match the performance of the Index.

INSTITUTIONAL INVESTOR An organization such as an investment companyor corporation that invests in stocks. A mutual fund is considered an institutional investor. It widely believed that individual investors will do well if they follow the "Institutional" money. Institutions are large buyers and can move a stock higher (or lower if they are sellers).

LEVERAGE Another term for debt and borrowing.Highly leveraged companies usually have borrowed greater amounts than peers and carry a higher risk.

LIMIT ORDER An order placed with a broker to buy or sell stock at a set price. If the stock does not trade at that price the order will go unfilled.

LIQUIDITY As applied to stocks it measure how easily or difficult to buy or sell a stock. Strong liquidity simply means there are many buyers and sellers while low liquidity is the opposite.

LONG TERM In finance usually referred to holding a security for more than 12 months.

MARGIN An accounting term used to indicate profit. If a product is sold for $10.00 and it costs $7.00 to produce the $3.00 difference is the margin or 30%.Also, stocks can be bought on margin (see Margin Account)

MARGIN ACCOUNT An account with a brokerage firm that allows an investor to borrow money to buy stocks. The amount that can be borrowed is no more than 50% of the value of the investors portfolio. Also known as Regulation T. For example if an investor $10,000 worth of equities than he may borrow up to $5,000.00 to purchase more stock.

MARGIN CALL If a stock that is bought on margin declines in value the brokerage firm ask the investor for more cash to bring the margin ratio back to 50%.

MARKET CAPITALIZATION All outstanding shares of a company multiplied by the current share price. Another way of looking at it is if you wanted to buy an entire company on the open market that would be the cost.

MARKET ORDER An order to purchase stock at the market price. Wherever the price is at the time of the order is the price you will pay. Opposite of Limit Order.

MOMENTUM INVESTING The practice of choosing stocks based on swift upward price movement without regard to the company's value. The theory is to follow where the money is going.

MOVING AVERAGE Tracking the price of a security or market over a period of time. The standard for the stock market is 50 or 200 days. Technical analysts use the moving average heavily. It is believed that if a stock closes above its 50 day average than it stands a good chance of continuing its advance. The opposite is true if a stock closes below its 50 day average.

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