The term “securities” refers to stocks, bonds and money market instruments.
Individual investors and financial institutions can buy stocks (= equities) of companies listed on a stock exchange.
The term “shares” includes both stocks and privately held stakes in small firms that are not publicly traded. A “basket” of stocks can be picked by a fund manager and put together into amutual fund (UK: trust).
Funds may invest in particular countries, or different sectors of the market, or may ‘track’ (= exactly follow) a particular index.
Each fund will have an investment objective, normally either regular income (from share dividends), or long-term capital growth (from an increase in the share price), or a balance between the two.
Read carefully and complete theinformation reading the text above.
1. Another word for stocks is ____________________________ .
2. In the UK mutual funds are called _________________________.
3. To “track” means that funds ___________________________ a particular index.
4. The investment objective get its regular income _________________________
Stocks are bought and sold on a stock exchange (= bourse).
Sometimes this isa location, like the New York stock Exchange on Wall Street. Other times there is no location: the NASDAQ is an electronic exchange. A small selected group of stocks can be brought together to make an index. For example, the Dow Jones publishing organization compiles ‘the Dow’ (an index of 30 large companies), and standard and Poor’s - a credit ratings agency - compiles dozens of different indicesbased on company size or market sector.
1. Where are stocks bought and sold? ___________________________________
2. Name an electronic exchange: _________________________________________
3. What location to buy stocks can you find on Wall Street?
4. What do “the Dow” compile?___________________________________________
Why do stocks go up and down in price? When is a stock worth buying? Financial analysts do this, using three main tools:
• Analysis of individual companies: their market position and performance.
• Analysis of the national and global economy.
• Technical analysis: using charts and internal market statistics (eg volume and momentum) to identifyfuture trends and turning points.
Answer the questions:
1. Who analyses the stock exchange?
2. What do they analyze?
3. How can they identify turning points?
Thebond market is about then times bigger than the stock market. If a government or large company wants to borrow a large sum of money, it issues a bond and receives the money as a loan from the institution or individual who buys it (= the bondholder). The original amount (= the principal) is then paid back over a fixed period of time (= the maturity / the term of the loan). And of course thebondholder also receives interest (= the coupon). The bond market is entirely electronic and does not have any physical exchanges.
________ 1. The bondholder
________ 2. The maturity
________ 3. Interest
________ 4. Bond market
a. Money that is paid back over a fixed period of time
b. Extra money received for lending money.
c. It buys bonds and lends money as a loan to theinstitution which issues it.
d. It’s electronic and doesn’t have any physical change
US government bonds include the 30 year T-bond (= treasury bond) and the 10 year T-note, while European government bonds include the German bond. These are all considered to be low-risk. Corporate bonds have two grades, depending on the risk, ie the credit rating of the company. Safer corporate bonds...