Introduction to Financial Investment

The United States, along with the U.K. and Japan, has one of the 3 most developed financial markets in the world.  In the U.S. itself, over half of all the 300 million people own stock in some form of another.  This can be (1) owning shares themselves, (2) owning a mutual fund, or (3) participating in a pension fund that owns stock.

This post, along with others of this type, are meant to be informational and as a foundation for further research.  They are not meant to be a final authority on anything.  Financial Investment is so important especially if we ever want to retire.  Given the dire straights of Social Security, it is looking more and more likely that we will have to be responsible for our own retirement.  The only way we will achieve this security is if we save money and invest it wisely.

Here is a basic rundown of basic terms we hear a lot about in the media:


Dow Jones Industrial Average (DJIA): This is an index of 30 leading U.S. companies' common stock.  These 30 companies are supposed to be representative of the U.S. economy.  There is generally representation from all major industries.  This is, for some reason, the most popular index. 

DJIA: is the ticker symbol, each public company, mutual company fund, all sorts of other financial products.  Ticker symbols is part of the language of the financial world.

NASDAQ: is one of the two leading stock exchanges in the U.S., the other being the New York Stock Exchange (NYSE).  Unlike the NYSE, which has its location on Wall Street, NASDAQ is all-electronic.

Bond: a loan you make to a government or company

Yield: the percentage gain on your investment

Coupon: Payments you receive, generally on a semi-annual basis, on a bond

Dividend: What a company pays you in cash based on your ownership in stock, usually paid quarterly

Here is a list of the most popular kinds of investment in order of increasing riskiness:
1.  Money Market
2.  Certificate of Deposit (CD)
3.  Bonds
4.  Real Estate
5.  Stocks
6.  Foreign Exchange
7.  Commodities/Metals

Once you have an IRA and/or 401k plan, you will likely dabble in these.

I will discuss risk and its relationship to return in a later post.