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What does the term Preferred Stock mean? Learning the Lingo of Investing

Many of us are involved in the stock market, sometimesindirectly. If you participate in a 401k or mutual fund,you are investing in stocks through a corporation.

We hear a lot about the volatility of the stock market aswell as the tremendous profits available there. But tomany of us, the stock market and how to invest thereis a big mystery.

For openers, stock investors seem to have their own speciallanguage and it's hard to understand what all thosemysterious terms mean. So let's take a few momentsand discuss what some of the more commonly usedstock market investing terms really mean.

STOCK - A stock is a small portion of a company. You canbuy one share of a stock, or 100 or 1000...as many as youwant. When you've purchased these, you become aSHAREHOLDER.

DIVIDEND - The 'payout' of your stock. It's a percentageof what the corporation earns that is given to you as ashareholder.

COMMON STOCK - These are the more common types of stocks,obviously. If you trade on the market, you're tradingcommon stocks. You get voting rights in the company anddividends if available.

PREFERRED STOCK - is the kind that is given to investors inthe company so it cannot be purchased on the open market.It does not carry voting rights but it is guaranteeddividends if there are dividends to be distributed toshareholders that year.

OPTIONS - Options are certificates that entitle a trader topurchase a stock at a given price for a limited time. It'slike locking in a great interest rate, only for stocks.

MUTUAL FUNDS - This service takes money from both you andother investors and compiles a large portfolio of stocks. Apercentage of the dividends goes to the mutual fund'sprocurers, and another percentage goes back to you.

BONDS - A bond is money lent for a specific purpose, likean improvement to a building. Bonds are paid back steadilyand at a fixed rate, so they are low-risk.

FUTURES - A contract to buy or sell a particular commodityor investment vehicle at a specific price.

COMMODITIES - A raw material, often agricultural, that istraded openly.

Obviously, this is just an introduction. Contact yourlocal professional to get a more detailed account and toventure some money in this exciting endeavor.