What is Income Stock?

A common or preferred stock with higher than average dividend yields. Often, but not always, stocks with dividends that are considered likely to be maintained or raised. Income stocks are normally suitable for investors with a conservative risk tolerance. 

What is Blue-Chip Stock? 

A large and creditworthy company. A company renowned for the quality and wide acceptance of its products and services, and for its ability to make money and pay dividends in both good and bad years…..an equity security usually found on the Dow Jones (30) Industrial Index. Blue chip stocks are usually suitable for investors with a conservative risk tolerance.

What is Growth Stock? 

Stocks of companies whose revenues and earnings increase consistently over time reflecting the fact that such companies have limited sensitivity or correlation to the country’s economy as it moves up and down. Growth stocks are the opposite of cyclical stocks which normally move with the economy. The expectation of continued high or higher earnings growth are part and parcel to growth stocks. A common equity with moderate volatility usually found on the S&P 500 Index as opposed to the NASDAQ. Growth measures are historical and projected earnings, earnings growth, sales growth, cash flow growth and book value growth. Growth stocks are normally suitable for investors with a moderate risk tolerance. 

What is Speculative Stock? 

Higher risk common stocks usually found on the NASDAQ as opposed to the Dow Jones or S&P 500 Indexes. Common equities that possess high volatility along with a high Beta (greater than 1.00 compared to the S&P 500). These stocks usually present the possibility of larger profits, but also pose a higher-than-average possibility of loss. A distinction can be made in comparing various levels of risk tolerance:

   Moderate Risk 

A moderate predictability of earnings, dividends and average price volatility. 

   High or Aggressive Risk 

A low predictability of earnings, dividends or average price volatility. 

   Speculative Risk 

Exceptionally low predictability of earnings and the highest risk of average price volatility. 

Buying speculative stocks is tantamount to gambling! i.e. buying an asset without an inherent ascertainable underlying buildup of value through earnings, cash flow, revenue growth or increasing net worth. Speculative stocks are usually suitable for only those investors with Speculation as a risk tolerance! Investors with moderate or aggressive risk tolerance are better suited to emphasize the S&P 500 stocks as opposed to those listed on the NASDAQ. 

What is Penny Stock? 

An OTC common stock that is not traded on a recognized securities exchange such as the NYSE, AMEX., PSE, or the NASDAQ, and is priced at less than $5.00 per share. These stocks are usually traded on the “pink sheets” or the NASD OTC “Bulletin Board”. The SEC, under its Penny Stock Rule provides that certain disclosures must be made and signed off on by written acknowledgment by customers who are solicited to purchase “penny stocks”. These stocks would be suitable only for investors with a risk tolerance of speculation. 

What is  “Collar” or “Custom Collar”? 

This is a protective device normally provided by major brokerage or clearing firms for investors with portfolios of $1,000,000 or more. Protective put options are purchased on common stocks to limit downside (perhaps 10-20%) and at the same time, call options are sold on these same common stocks which limit upside (perhaps 10-20%). In effect, this protective strategy places “collars” around the rise or fall of a common stock limiting gains and losses to perhaps 10-20% on both the upside and downside. It is especially appropriate for concentrated security positions as part of an exit strategy for investors of varying risk tolerance. 

What is High-Tech Stock?

Stocks of companies in the technology field usually found on the NASDAQ stock index. Examples would be internet, software, hardware, media or dot com type companies. High-Tech stocks are closely allied to stocks in the telecom sector. Both sectors are part of the Information sphere. High-tech stocks concentrated in excess of 15-20% are suitable for investors with risk tolerance of speculation. 

What is the difference between Internet Stocks, Tech Stocks and Bio-Tech Stocks?  

Internet stocks would be in the technology sector while bio-tech stocks are normally considered to be in the healthcare sector. A difference can be seen between tech stocks and bio-tech stocks in that tech. stocks are normally classified in the Information sphere which includes software, hardware, media and telecom sectors. Bio-tech. stocks are normally classified in the Services sphere which includes health care, consumer services, business services and financial services. However, when you use the term High-Tech, some would include bio-tech in that segment of technology.

What about Mutual Fund Families? 

Some mutual fund families that currently remain untainted in the late trading controversy include Oppenheimer, Delaware and Franklin in the load fund categories and Vanguard and Neuberger and Berman in the no load category. Thomson Financial’s database can run hypo’s utilizing all of these families.

Answers courtesy of Fend

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