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| Richard's Favorite Words |
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In order to help you further understand all of the terms I often use in my newsletters, journal entries and flash alerts I've created Richard's Favorite Words. Not quite sure what annuities are? Never heard of a "cash cow"? No problem, I'll explain it all in this helpful glossary.
Annuities
Financial products sold by insurance companies that are designed to accept and grow funds from an individual and then, upon annuitization, give back a stream of payments to the investor.
Blue Chip Stocks
These are stocks that come from companies which are deemed well-established and financially sound by demonstrating their ability to pay dividends in both good and bad times.
Buybacks
In order for a company to invest in its self they may buyback their outstanding shares. This also allows a company to reduce the amount of shares it has on the market. Companies do this in order to increase the value of the share still available as well as to eliminate any threats by shareholders who may be looking to own enough shares in order to have a controlling stake.
Call
A call is a bet that an individual stock, or the market as a whole, will rise.
Cash Cow
A cash cow can refer to several different specific items, but Richard most commonly uses this term to refer to an investment that once acquired will then produce a nice cash flow.
Credit Crunch
A credit crunch is a time period when the economy is suffering from a lack of investment capital. Banks and other lenders become wary about giving out additional aid and end up driving up the price of debt products for borrowers.
Dividend
A portion of a company's earnings paid to a class of its shareholders. The specific amount of the dividend is decided by the company's board of directors. Commonly the dividend is quoted in terms of the dollar amount each share receives, though it can also be quoted in terms of a percent of the current market place.
Dividend Yields
The dividend, though mostly paid off in dividends per share, can also be quoted in terms of a percent of the current market place. These payoffs are then called dividend yields.
Earnings
The amount of profit a company generates during a specific quarter. Earnings essentially determine a company's stock price per share. If a company reports strong earnings, it will likely profit over the long-term.
Fire-Sale
A fire-sale occurs when prices of securities are considered to be very low. This is commonly considered to be a good time to buy shares.
Green Stocks
Companies that a) balance economic and environmental objectives in their business practices, and b) engage in the production and discovery of alternative energy sources–such as wind and solar–and other environmentally friendly projects.
Liquidity
This refers to the degree at which an asset can be purchased or sold in the market without affects its price. Liquidity can also refer to an asset's ability to convert into cash easily.
Master Limited Partnership (MLP)
This is a publicly traded limited partnership with two types of partners. The limited partner provides the capital to the MLP and in return receives periodic income distributions. There general partner is the party responsible for managing the MLP and receives compensation accordingly.
Recession
The technical definition of a recession is two consecutive quarter of negative economic growth as measured by gross domestic product (GDP). However, often a recession is referred to during any long-lasting widespread economic decline.
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