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How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...
What is par value? The notional value of a stock or bond before an offering takes place. When a company is started, founders come up with a par val...
What are margins? Margin refers to the difference between the actual value of stock owned and the amount the investor borrows from their broker. In...
What is liquidity? Think: water. It's liquid. It can be squeezed into little, tiny spaces and infused into large spaces. A defining trait of liquid...
What is a corporation? Corporations are legal bodies. Bodies exist in various forms: LLC (Limited Liability Corporation), S-Corporation (now with p...
What is net worth? You own $100,000,000 worth of Coke stock. That's the good news. Unfortunately, you also have $90,000,000 in debt. Your net worth...
What is the Efficient Markets Theory? The Efficient Markets Theory says that stocks trade at their fair value all of the time, assuming all informa...
What is a strike price? Strike prices are used in conjunction with options. Calls and puts give investors the right to buy or sell stocks at predet...
What is the difference between stocks and bonds? Stocks are ownership. They control the election of the board of directors, who hires the CEO, who...
What is the difference between federal and state taxes? Federal taxes: the whole country. Taxes for national defense, interstate roadways, national...
What rights does a public stockholder have? Common shareholders elect the board of directors. They vote. They have the right to quarterly financial...
What does it mean to "go public?" An IPO raises cash in the form of equity, usually, for investors. When public, a company exists under SEC dominio...
What is equity? It's ownership. A stock, not a bond. A common shareholder, not a debt obligator. When you own one share in a million-share outstand...
What is common stock? Ownership. Common shareholders own a pro rata slice of the pie. They elect the board of directors by vote. Some companies hav...
What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...
What do you need to retire? Retirement - think: 401k, pension fund, IRA, roth IRA, etc. All of these savings socked away while you worked hard are...
Who invests in stocks? 401k plans, pension funds, institutional investors, banks, traders, clients of Schwab, Fidelity, and Franklin. Joe Blow buys...