Complete Guide to Basic Investing - Stocks, Bonds & Mutual Funds

Paper or Commercial Paper: Short-term obligations issued for terms of 2 to 270 days. Such investments are targeted to investors with large amounts of cash available on a short-term basis.

Par Value: The value of a security printed on the certificate.

Parking: Investing funds temporarily in short-term, safe havens while longer-term investment options are considered.

Partial Breach: A minor breach of contract that does not affect an agreement to a major extent. As a result, the contract is maintained. An example of a partial breach would be if a business is a day late in delivering some materials necessary for a contract. If a one day delay has no material affect on the ability of the other business to hold up its part of the bargain, then it is only a partial breach.

Partnership: A business, not-incorporated, where more than one person is a part-owner. A limited partnership will have partners who contribute money, but have no liability because they do not help run the business or make business decisions. A company where all partners share full responsibilities and profits are called a general partnership.

Patent: A legal claim to a new process or device that provides protection from theft by other companies or individuals for 17 years. Patents must be registered in order to be protected.

Penny Stock: A stock selling at less than one dollar, available through over- the-counter markets and considered a high risk investment. Some call any stock under $5 a penny stock.

Pension Fund: An investment fund established by a corporation or organization to manage retirement benefits and investments for its employees.

Percent: Based on the whole amount, divided into 100 parts. Each of the 100 parts is one percent.

Pink Sheet: Daily publication for The National Quotation Bureau for unlisted stocks, showing bid and ask prices by various market makers.

Piercing the Corporate Veil: The process of suing individuals involved in the management of a corporation. Since corporations generally shield individuals from liability, such action can only be taken if it can be proven that there is a good reason to disregard the corporate entity.

Point-of-Purchase Promotion: A piece of marketing literature that is placed in a store where a customer is likely to be making a purchase decision about a product.

Points: One point = 1% of the loan amount or price

Poison Pill: A resolution passed by a company's board of directors that makes it difficult or impossible to stage an unfriendly takeover.

Ponzi Scheme: An illegal pyramid marketing program in which the proceeds from new investors are used to payoff existing investors. The last wave of investors is left with nothing.

Portfolio: The investments owned by an investor or a mutual fund.

Position: The amount of money an individual has invested in a particular security; a company's stake. If you own 100 shares, then 100 shares is your position.

Positioning: The way a company wants to be perceived by its public. The position is supported by investments in advertising, direct marketing, and public relations.

Power of Acceptance: An individual's right and ability to accept or reject the terms of a contract.

Power of Attorney: Appointing an individual to make important decisions for another individual.

Premium: 1 - The extra amount an investor pays for a bond or preferred share of stock due to current interest rates. 2 - The price paid for an option. 3 - The payment on an insurance policy.

Preferred Stock: Stock issued with a guaranteed dividend. This non-voting stock, and shareholders can not force the company to pay the dividend of the company falls on to hard times.

Pre-paid Expense: Paying for an expense in advance, usually for tax or accounting reasons.

Price-Earnings Ratio (P/E ratio): Current share price divided by a stock's earnings per share. Stocks in similar industries often have similar P/E ratios. Any differences reflect investor anticipation of the company's prospects. Also called the multiple.

Prime Rate: The lowest interest rate that banks charge their best business customers for short-term unsecured loans. Also called the Federal Reserve Bank Rate, it is usually about 3% over the Federal Funds Rate.

Principal: 1. The amount of money invested or deposited in an account. Also the amount of money borrowed. 2. An owner or partner of a business.

Private Placement: Offering securities directly to private investors, rather than through a public offering.

Privileged Communication: Discussions that take place between an attorney and his/her client that may not be forcibly divulged in court proceedings.

Product Life Cycle: The stages through which a product progresses in the marketplace. This normally includes introduction, acceptance, growth, and maturity.

Profit Margin: The percentage of the selling price that is profit before overhead.

Profit Sharing Plan: A plan that provides for the division of a portion of the company's profits, part of which are generally deposited into a tax-deferred account. The funds are paid out when the employee retires or leaves the company.

Profit Taking: Lucky investors cash in their profits.

Progressive Tax: A type of tax that takes a larger proportion of income from those with higher Incomes.

Promotion-Marketing: Tactics that communicate product and company information to the public through such vehicles as newsletters, advertisements, sweepstakes, and brochures.

Proprietorship: A type of business that is con- trolled and managed by one person.

Prospecting: The marketing practice of seeking out and classifying potential clients in terms of their likelihood to buy.

Proxy: The right a shareholder gives another to represent their vote at a shareholder�s meeting.

Public Company: A company that you can buy a piece of by purchasing shares of their stock. This is what you do when you invest in the stock market.

Public Relations: Activities on behalf of a company or organization that increase the company's exposure in the community through media coverage, sponsorships, and community involvement.

Put: An option to sell a specific stock for a specified price within a set time frame.

Pyramid: An illegal investment practice that involves soliciting investors by promising them high returns, but then using their invested funds to pay earlier investors, rather than actually investing those funds in securities.

Prospectus: A document that describes an investment and fully discloses its risks, policies, and fees.