This document defines key terms related to investing and financial markets. It explains that investing means spending money to improve a business with the goal of making a profit in the future. It then defines various financial assets like bonds, stocks, and securities; financial markets like the bond market and stock market; and terms like mutual funds, dividends, and stock market indexes.

1. INVESTING

2. When you hear “investing,” you
think of putting your money in
the stock market, but in
economics, investing means
spending money on human
and physical capital to improve
your business, in the hope of
making more money in the
future.
INVESTING:

3. Any marketplace where buyers and
sellers participate in the trade of assets
such as bonds, stocks, and securities.
FINANCIAL MARKETS:

4. 1. Bond Market
2. Stock Market
FINANCIAL MARKETS:
(Others: money market, capital market)

5. A certificate that represents partial
ownership of a company or
institution, and that is a financial asset
which can be traded.
SECURITY:

6. A certificate that represents money
loaned by you to the government or an
institution. The institution agrees to pay
the money back to by a certain date
(maturity date) in addition to paying you
a fixed interest rate.
BOND:

7. The market in which are issued and
traded. Bonds can be issued by
governments, banks, and large
corporations.
Governments and
institutions sell bonds
in order to finance
large projects.
BOND MARKET

8. A type of security that
represents partial ownership
in a corporation and
represents a claim on part of
the corporation’s total value
and earnings. When the
value and earnings of the
company increase, the value
of your stocks increase.
STOCK:

9. STOCK MARKET
The market in which shares of publicly
held companies are issued and traded.

10. “GOING PUBLIC”
The process of selling shares that were
formerly privately held to new
investors for the first time. Otherwise
known as an initial public offering (IPO).
When a company goes
public, it means the
general public has the
ability purchase shares
for the first time.

11. “GOING PUBLIC”
Why do you think a
company would want
to go public?

12. DIVIDENDS:
The distribution of a company’s
earnings to all shareholders. If you own
stocks, you will receive a dividend check
in the mail each month with your profit.
Your profit is determined by what
percentage of the company you own.
This person received a
check from Disney for
.35 cents!

13. CAPITAL GAINS:
When you sell your stocks at a higher
price than you purchased them for,
thus making a profit.
$
$
$
$
$
$

14. DIVERSIFICATION:
Buying stocks in a wide variety of
industries. The rationale behind this
technique is that a portfolio of different
kinds of investments will, on average,
yield higher returns and pose a lower
risk than any individual investment.

15. MUTUAL FUND:
A company that pools money from
many investors and invests the
money in stocks, bonds, other
securities, or some combination of
these investments. When you
purchase mutual fund shares, you are
purchasing an already diversified
stock portfolio.

16. MUTUAL FUND:
Own shares of
multiple companies
across a wide variety
of industries!
Your profit is
based on the
average gains
and losses of all
the companies
in the mutual
fund portfolio.

17. Don’t think you have the
skills to research and
purchase stocks wisely?
Hiring a professional
investment broker to do
it for you is an option.
They invest your money
based on your preferences,
and collect a commission
as payment.

18. STOCK MARKET INDEX:
A tool used to measure the changing
prices of stocks in a stock market over
time.This is very much like the Consumer
Price Index (CPI) used to measure
inflation in the economy.
Example: the S&P
500 is a measure of
the prices of stocks in
500 major US
companies.

19. KOSPI:
The Korea Composite Stock Price Index
or KOSPI is the representative stock
market index of South Korea.

20. STOCK MARKET GAME
REFLECTION:
Respond to questions about the stock
market game on schoology.