An investor who thinks the market or a particular stock will rise.
Bull Market
A market characterized by generally rising security prices. Historically, at least in the postwar period, bull markets have lasted longer than bear markets. The longest bull market in history began in late 1990 and lasted until March 2000.
Business Cycle
Repetitive cycle of economic expansion and contraction, also known as boom and bust. The official peaks and troughs of the U.S. cycle are determined by the National Bureau of Economic Research in Cambridge, Mass.
Buy-and-Hold Strategy
An investment strategy with little active buying and selling of stocks from the time the portfolio is created until the end of the investment horizon. Investors who adhere to this strategy do so in hopes of reducing their trading costs, thereby generating more net income.
Money invested in a firm or stock.
Capital Appreciation
Growth of capital; increase in the market price of a common stock.
Capital Gain
When a stock is sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost, or original basis price. If a stock is sold below cost, the difference is a capital loss.
Capital Gains Tax
The tax levied on profits from the sale of capital assets. A long-term capital gain, which is achieved once an asset is held for at least 12 months, is taxed at a maximum rate of 15 percent or 5 percent, depending on a taxpayer's income. Assets held for less than 12 months are currently taxed at regular income tax levels, which are considerably higher.
Cash Flow
In investments, cash flow represents earnings before depreciation and amortization, known as noncash charges. Sometimes called cash earnings. Cash flow from operations (called funds from operations by real estate and other investment trusts) is important because it indicates the ability to fund ongoing operations and pay dividends.
The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or their dollar value. In 1975 deregulation led to the establishment of discount brokers, who charge lower commissions than full-service brokers. Full-service brokers offer advice and usually have a staff of analysts who follow specific industries. Discount brokers simply execute a client's order and usually do not offer an opinion on a stock.