Basics

When I first started working in finance, I was overwhelmed by simple definitions.  It took a lot of time, patience, and self-education to become comfortable with general finance terms.  Even as I began to understand generalities, though, stock terms still intimidated me.  Stocks took even more of an effort on my part to become comfortable with terms and ideas, so I'm glad to have the chance to share the benefit with you!  Let’s continue our path toward stock term education by looking at “dividends” and “dividend yields”.

Dividends 

It's funny to think of people in terms of how much they are worth, but in finance, our monetary worth is calculated all the time.  A person's financial worth, or net worth, is a tool used in finance to determine the dangers or benefits a bank, credit card, or lending company may experience in lending a person money.  In personal finance, calculating and keeping track of your own net worth can help you get on track, stay on track or attain financial goals, so net worth becomes as important a tool for individuals as it is for financial institutions.

How is Net Worth Calculated?

So you've made the decision to start investing in stocks, money is burning a hole in your wallet, and you're itching to get started.  In your mind's eye, you see a version of you dressed in a power suit elbowing your way through a room filled with financial types waving your fists in the air and shouting to "sell, sell, sell!"

Before you dash off to Wall Street, take a few more minutes here in front of your computer (dressed in your pjs and bunny slippers), and consider the types of stock brokers out there who can assist you with your leap into the world of investing in stocks.

If you are just entering the stock market, the many details involved in stock trade can be confusing and overwhelming.  Fortunately, just a little knowledge can help you invest wisely.  However, before investing, you should brush up on some stock market terms, including “stock market indices.”  Let’s look at the definition of stock market indices, the indices available, and what indices can do for your investments.

What are Stock Market Indices?

Melinda takes a look at the different kinds of retirement accounts and the differences between them. Whether it's a 401(k), a Roth IRA, or one of the many other retirement accounts, there's probably an option that applies to your situation. Generally speaking they all have significant tax advantages over regular investments, so let's dig in and see which ones make sense for you.

Last week we took a look at compound interest and how that affects how quickly your money grows. But comparing potential banks, savings accounts, and CDs based on compound interest rates can be much easier by checking out the Annual Percentage Yield (APY).

If you're anything like me, running a Google search and trying to get basic info on a topic can end up driving you bonkers. Take stocks, for example.  Google "stocks," or even "simple stock explanation," and you get over six million matches when all you really wanted were some solid facts in plain English.  Like Denzel Washington in Philadephia, I say: "Explain it to me like I'm a six year old." 

In fourth grade, a banker came to my classroom to teach my class about compound interest. I was fascinated. First, I was shocked that a bank would pay me money to keep it safe, and second, I loved learning how I could make more money if my interest was compounded.  I memorized every single thing that would be on our compound interest test, and I did really well.  My mom even hung my A+ test on the refrigerator for a few days. 

When it comes to investing, we're all a little like Adam Sandler's character in "The Wedding Singer," who said, "I'm a big fan of money. ...I have a little. I keep it in a jar on top of my refrigerator. I'd like to put more in that jar."

If you're ready to put a bit more in that "jar," here are four things for you to think about that will help you to plan how to take the plunge into investing. (Believe it or not, it's easier than you think!)

We instinctively know what assets and liabilities are, but defining them precisely can help us make better financial decisions. We've looked at assets already, so let's take a look at liabilities.

A liability is a financial term for an obligation to pay something in the future, which typically takes the all-too-familiar form of debt. Anything that you are required to repay at some point becomes a financial liability, including these examples: