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Investing FAQs

  1.

    What exactly is a portfolio? Is it something I can carry around?

  2. What is the difference between a global fund and an international fund?

  3. What is the difference between a blend fund and a balanced fund?

  4. What does "buy and hold" mean?

  5. What happens if I maintain a short position in a stock that is delisted and declares bankruptcy?

  6. How do you find out the price of a mutual fund?

  7. What is mutual fund timing, and why is it so bad?

  8. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed to be lower than ask prices?

  9. What is late-day trading? Why is it any different from buying and selling stocks in the after-hours market?

  10. If I am American, can I buy a foreign mutual fund?

  11. What does it mean when people say they "beat the market"? How do they know they have done so?

  12. How does the government influence the securities market?

  13. I own some stock warrants. How do I exercise them?

  14. Can you short sell stocks that are trading below $5? My broker says that I can't.

  15. If the price of the bond falls, does that mean the company won't pay me the par value?

  16. Please explain what a short seller is on the hook for when he or she shorts a stock (i.e. dividends, rights offerings, etc.).

  17. What are soft dollars?

  18. What is a DRIP?

  19. Why can you short sell an ETF but not an index fund?

  20. What's the difference between a stop and a limit order?

  21. Can a stock lose all its value? How would this affect a long or short position?

  22. What is the difference between stated annual return and effective annual return?

  23. Why do interest rates tend to have an inverse relationship with bond prices?

  24. What is a Ginnie Mae security?

  25. What is a mutual fund's NAV?

  26. What is the difference between a buy-side analyst and a sell-side analyst?

  27. What is a CUSIP number?

  28. If a stock is delisted, do shareholders still own the stock?

  29. What is arbitrage?

  30. What is a pure play?

  31. Is a company allowed to reduce its dividends?

  32. How can I buy an S&P 500 fund?

  33. If I buy a $1,000 bond with a coupon of 10% and a maturity in 10 years, will I receive $100 each year regardless of what the yield is?

  34. Is it possible to short sell a bond?

  35. What is a tranche?

  36. What is a "socially responsible" mutual fund?

  37. What is the difference between yield and return?

  38. What's the difference between absolute P/E ratio and relative P/E ratio?

  39. A corporate bond I own has just been called by the issuer. How can a company legally take away my bond? How do these call provisions work?

  40. Is it possible for a company to have a positive cash flow and a negative net income?

  41. I have discovered that a bond I am interested in has a sinking fund. What does this mean?

  42. Do hedge funds and mutual funds invest in commodities in high inflation environments?

  43. Which option is better on a mutual fund: a growth option or a dividend reinvestment option?

  44. How do I take qualitative factors into consideration when using fundamental analysis?

  45. What does the saying "What's good for Wall Street is bad for Main Street" mean?

  46. What's the difference between old- and new-economy stocks?

  47. Is technical analysis used only to analyze stocks?

  48. What are "I Bonds" and how can I buy them?

  49. I've come into a large amount of money. Should I invest it or pay off my mortgage?

  50. Why would a person choose a mutual fund over an individual stock?

  51. Are IPOs available to short sell immediately upon trading, or is there a time limit that must pass before short sales are accepted?

  52. What is an efficient market and how does it affect individual investors?

  53. What is the best way to save for private school expenses? A 529 plan, a Coverdell ESA or a mutual fund?

  54. Can a stock have a negative price-to-earnings (P/E) ratio?

  55. Are ETFs required to pay out a percentage of income as dividends?

  56. What happens to the voting rights on shares when the shares are used in a short sale transaction?

  57. Can a stop-loss order be used to protect a short sale transaction?

  58. How do stock splits affect short sellers?

  59. How can you lose more money than you invest shorting a stock? If you have no money left in your account, how do you pay it back?

  60. Why do you need a margin account to short sell stocks?

  61. What is the ideal number of stocks to have in a portfolio?

  62. Does the party loaning shares in a short sale transaction benefit in any way other than from the interest earned on the loan?

  63. If I short sell $5,000 worth of stock and the stock becomes worthless, I have made $5,000 with a very small investment. Isn't the return here much greater than 100%?

  64. What happens when the lender of the borrowed shares in a short sale transaction wants to sell his/her shares?

  65. What investments are available to someone with no earned income?

  66. Can stocks be traded on more than one exchange, such as, for example, on both the Nasdaq and the NYSE?

  67. How does a point change in a major index effect its equivalent exchange-traded fund?

  68. What are the minimum margin requirements for a short sale account?

  69. When short selling a stock, how long does a short seller have before covering?

  70. Why does my broker allow me to enter only day orders for short selling?

  71. Which is better a cash dividend or a stock dividend?

  72. What do people mean when they say debt is a relatively cheaper form of finance than equity?

  73. What does the law say about non-U.S. citizens buying stocks of U.S. companies? Are there any restrictions?

  74. Stocks with high P/E ratios can be overpriced. Is a stock with a lower P/E always a better investment than a stock with a higher one?

  75. What is the difference between convertible and reverse convertible bonds?

  76. Short selling vs. purchasing a put option: how do the payoffs differ?

  77. What is a basis point (BPS)?

  78. My certificate of deposit (CD) has just matured and I plan to contribute $10,000 of it to my current Roth IRA account. The person doing my taxes can't tell me why I can't make such a large contribution except for my low income - I am a disabled veteran on

  79. Do long-term bonds have a greater interest rate risk than short-term bonds?

  80. What is a good book on creating a trust that would qualify as the beneficiary for an IRA?

  81. What is the difference between a company's book value per share and its intrinsic value per share?

  82. Can investment real estate be purchased within an IRA and, if so, are there any pitfalls?

  83. How can I hedge against rising diesel prices?

  84. Why do companies issue debt and bonds? Can't they just borrow from the bank?

  85. What are the risks of investing in a bond?

  86. I live in the U.S. How can I trade stocks in China and India?

  87. What's the difference between net present value and internal rate of return? How are they used?

  88. What is a spider and why should I buy one?

  89. What is a convertible bond?

  90. How is the value of the S&P 500 calculated?

  91. Do convertible bonds have voting rights?

  92. I earn more than the income limit for both a Roth and Traditional IRA deduction. Should I contribute anyway?

  93. What does 'froth' mean in terms of the real estate market?

  94. What are the components of the risk premium for investments?

  95. I want to invest in equities, but I don't have much money. Is there a minimum number of shares I must buy?

  96. Which is a better measure for capital budgeting, IRR or NPV?

  97. How do I measure option liquidity?

  98. What is the difference between a merger and a takeover?

  99. What do the "BxA" numbers on my brokerage's trading screen mean?

  100. Why do commercial bills have higher yields than T-bills?

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