Stock Market Glossary letter I

IPO – The abbreviation “IPO” stands for Initial Public Offering, which refers to a private company’s conversion to a public company through the issuance of stock. Many IPOs are highly anticipated as investors line up to purchase shares in a particularly promising company with a proven record of market success and profitability.

Income Funds – Income Funds are a group of Mutual Funds designed to provide investors with regular income while still acting as an investment. Income funds may contain bonds in their portfolios, but more commonly the fund manager will add large-cap stocks that issue regular dividends, a portion of which are remitted to the investors as a form of income support.

Index Funds – Index funds are a type of Exchange Traded Funds (ETFs) that focus on the performance of specific stock indices like the Dow Jones Industrial Average. Index funds are inherently more stable than investing in specific stocks because they spread the risk factor over the entire index. On the downside, investors looking to outperform a stock index will be frustrated unless they focus on a sector or foreign market index fund.

Insider Trading – Insider trading refers to the buying or selling of a company’s stock, bonds, stock options or other securities by officers of the corporation. So-called “insiders” may not even be employees of the company, but holders of at least 10% of the company’s outstanding stock. Insider trading is considered to be unfair morally and is, if based upon information not accessible by the public at large, illegal. Popular TV personality Martha Stewart served time in prison following her conviction of obstruction of justice in the 2001 ImClone Systems insider trading case.

Investing Basics – Investing Basics refer to the fundamental tenets of wise investing. In the main, investing basics focus on “wise” investing which usually means looking toward the longer term and not panicking should the market go into temporary correction mode. Since investing basics put a premium on financial security, investors are encouraged to spread their funds among a variety of different investments and avoid speculative, risky ventures.

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