Economics - Stock Market Flashcards

Investment Basics

• Investment refers to using current income to generate future benefits.
• Financial markets facilitate the exchange of financial assets between buyers and sellers.

Understanding Financial Products

• Mutual funds consist of diversified portfolios of various stocks.
• Risk denotes the potential for loss associated with investments.
• Return represents the profit or loss realized on an investment.

Strategies and Principles

• Diversification reduces risk by spreading investments across different assets.
• Stock exchanges are platforms where securities are traded.
• Capital gain is the profit earned from selling securities at a higher price than the purchase price.
• Common stock provides voting rights and a share of profits, while preferred stock generally lacks voting rights but entitles holders to profit shares.

Market Dynamics

• Stockbrokers facilitate the buying and selling of securities for clients.
• Stock indices track the price changes of a specific set of stocks, providing insights into market performance.
• Bull markets are characterized by rising stock prices, whereas bear markets involve declining prices.

Stock Market Indicators

• The DOW Jones index measures the average price of 30 high-performing stocks, reflecting general market trends.
• NASDAQ is the largest electronic stock market in the U.S., prominent for technology stocks.
• NYSE is the largest equities exchange, located in New York City, handling trades for top U.S. and global companies.

Stock Ownership and Investment Practices

• Stock represents a share of ownership in a corporation.
• Speculation involves high-risk investments made with borrowed money in anticipation of substantial returns.
• Shares denote portions of stock.

Corporate Actions and Investment Clubs

• A stock split occurs when a company divides existing shares, increasing the number of shares available.
• Brokerage firms specialize in facilitating stock trades for clients.
• Dividends are profit distributions to shareholders based on company earnings.

Notable Stocks and Crimes

• DOW stocks include major corporations like Apple, McDonald's, and Coca-Cola.
• White-collar crimes include financially motivated offenses by business or government officials, such as embezzlement and forgery.
• Insider trading involves trading shares based on confidential information.
• Securities fraud artificially inflates stock prices to mislead investors.
• Ponzi schemes use newer investors’ funds to pay earlier ones, creating a facade of high returns.

Purchasing Options and Preferences

• Common vs. Preferred Stock: Common stock offers voting rights; preferred stock does not.
• Income vs. Growth Stocks: Income stocks provide dividends; growth stocks reinvest profits into the company.
• NYSE vs. NASDAQ: NYSE has a physical trading floor; NASDAQ operates electronically.
• Mutual funds are often preferred by investors for safety as they hold diversified portfolios across industries.

This flashcard quiz focuses on key terms related to the stock market. Each card includes a word with its definition, helping you understand essential concepts in economics. Perfect for students and enthusiasts looking to enhance their financial literacy.