Stock Market Terminology You Should Know
Choosing the Type of Account for your Needs
Stock market terminology is definitely a must if you plan to trade in the stock market. And, most investors today have chosen to trade in the stock market for a couple of reasons. First, some companies match the number of shares of their stock that an employee buys in what is called a 401K. This is a retirement account that can be built upon during the employee’s years of service with their employer, and in some cases money can be borrowed from these accounts. If a young person begins with a 401K early in their employment, they can accumulate a very substantial retirement income, which can be drawn on when they retire.
IRA’s
Another investment instrument is the Individual Retirement Account, known as an IRA. This account is beneficial from the following standpoint. Individuals under 50 years of age are allowed to deduct contributions to their IRA for a given year up to a maximum of $5,000, or whatever the actual amount of the contribution. For individuals over 50, they are allowed to deduct a maximum of $6,000, or the lesser amount which was contributed to their IRA account for that year. IRA’s can be in the form of Mutual Funds. Mutual Funds are made up of a number of stocks, usually chosen by a professional money manager based on the performance of the stocks chosen. However, there are self-directed IRA’s whereby the owner of the IRA chooses which stocks make up the account.
The Roth IRA is also usually made up of a number of stocks in a Mutual Fund. The greatest benefit of a Roth IRA is that, for example, a person in their 30’s opens a Roth IRA and contributes to it yearly until their retirement. By the time this person reaches retirement age, he/she will have amassed quite a good deal of money for their retirement goals. Even though one is not allowed to deduct the yearly contributions to the Roth IRA from their yearly income tax return, as with a traditional IRA, an individual never pays taxes on the money that is withdrawn at a future time, beginning as early as age 59-1/2 years old. It is mandatory, however, to begin drawing money from a Roth IRA at 70-1/2 years of age. But once again, the advantage to a Roth IRA…..no tax is paid on withdrawals from the account, ever.
STOCK TERMINOLOGY IN MAKING INVESTMENTS
The stock market is composed of many companies and industries from which to choose to invest your money. It is advisable to talk with a professional stock broker, at least at first, until all the terminologies of the market are understood. The stock market is potentially a risk for those just beginning. There is much money to be made, but a great deal of money that can be lost. The volatility of the market must be considered and how a sudden downturn can be devastating. A Bull Market is everyone’s delight; the Dow Jones average is up and everyone is profiting. On the other hand, an investor’s nightmare is a Bear Market, where there is no confidence and the Dow Jones is falling consistently.
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