Seizing The Moment for Mortgage Refinance
Aug. 6 -- While details of daily market activity have recently gone from the business section to the front page, most people's basic investment vocabulary remains limited at best.
While "scandal," "market volatility" and "fraud" are commonbuzzwords, fundamental investment terms commonly return blank stares andoff-the-mark definitions.
I asked business professionals, students and other folks on the streets of Chicago about basic investment terms. Most of the people I spoke with were unable to explain what the everyday investment terms really mean.
Are you financially literate? Check out the terms and definitions below.
What is the S&P 500?
Standard & Poor's was originally established as a financial analysiscompany in 1860 and is still in operation today. Introduced in 1957, theStandard & Poor's 500 Index is a composite of 500 leading companies that iswidely regarded as a standard for measuring U.S. stock marketperformance — specifically, large companies. This popular index includes manywell-known, household names like Home Depot, Proctor & Gamble and Johnson &Johnson. The biggest company in the S&P 500 Index is General Electric. Even though we are inundated with news about the Dow Jones Industrial Average, the Dow is comprised of just 30 large companies likeAT&T, Exxon Mobil and Boeing. With 500 stocks, the S&P 500 is a muchbroader index. As such, most money managers are more likely to watch theS&P 500 when gauging the movement of the market. In fact, the S&P 500 isused by 97% of U.S. money managers and pension plan sponsors and over $1trillion in investor assets is indexed in the S&P 500.
What is a bear market? A bear market is when there is a general fall in stock prices.Although figures vary, the classic definition of a bear market is a 15 percent dropin the value of the stock market that lasts for more than six months.Conversely, when stock prices rise, it is known as a bull market. No one isreally sure where the terms came from, but one theory is that bulls buck uptheir horns to kill their prey, whereas bears "bear down" with claws andteeth and also hibernate in the winter.
