Penny Stocks Terms to be familiar with

Many investors are tired of CD rates which you don’t even stay ahead of inflation when you invest in a certificate of deposit. The same can be said of savings account rates which aren’t paying much more deposit interest. On the flip side of things if you borrow money, like have a mortgage, right now current mortgage rates are extremely low.

Sometimes this leads investors to trade penny stocks.

When you open a brokerage account to invest in a mutual fund or to invest directly in stocks you should know what you’re doing, just like searching for the best CD rates at banks or credit unions. So you should turn to a cash account is a type of brokerage account in which the investor must pay the full amount for securities purchased, you can also find brokers firms advertising CD rates though brokered CD rates might not be as high as bank CD rates.

This type of order guarantees that the order will be executed, but does not guarantee the execution price.Even if the brokerage firm notifies you that you have a certain number of days to cover the shortfall, it still may sell your securities before then.

Diversification can’t guarantee that your investments won’t suffer if the market drops.A buy stop order is entered at a stop price above the current market price.

Stocks seem to be the only game in town, savings rates are so low even retirees or people saving for retirement won’t earn much interest. Savings rates aren’t expected to go higher for another couple of years, like at the end of 2014.

Diversification can be neatly summed up as, Don’t put all your eggs in one basket. The most common types of orders are market orders, limit orders, and stop-loss orders.For example, if you buy on margin and the value of your securities declines, your brokerage firm can require you to deposit cash or securities to your account immediately.

Having a “long” position in a security means that you own the security.On the other hand, investing involves taking on some degree of risk.Investors generally use a sell stop order to limit a loss or protect a profit on a stock they own.As with any other loan, you will incur interest costs when you buy securities on margin.

You’ll also want to understand the fees associated with the buying, selling, and holding the investment.There are risks involved in purchasing securities on margin.Stocks, bonds, and mutual funds are the most common asset categories.If the price drops, you can buy the stock at the lower price and make a profit.

A sell stop order is entered at a stop price below the current market price.You could lose your “principal,” which is the amount you’ve invested.Before you make any investment, understand the risks of the investment and make sure the risks are appropriate for you.

A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher.When investing, you have a greater chance of losing your money than when you save.In a cash account, you are not allowed to borrow funds from your broker to pay for transactions in the account.That’s true even if you purchase your investments through a bank.Treasury securities.

A margin account is a type of brokerage account in which your brokerage firm can lend you money to buy securities, with the securities in your portfolio serving as collateral for the loan.If the price of the stock rises and you buy it back later at the higher price, you will incur a loss.A limit order is an order to buy or sell a security at a specific price or better.Example: An investor wants to purchase shares of ABC stock for no more than.

The investor could submit a limit order for this amount and this order will only execute if the price of ABC stock is $10 or lower.The opposite of a “long” position is a “short” position.Some investors may include these asset categories within a portfolio.Investments in these asset categories typically have category-specific risks.

However, it is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed.A stop order, also referred to as a stop-loss order is an order to buy or sell a stock once the price of the stock reaches the specified price, known as the stop price.Investors generally use a buy stop order to limit a loss or protect a profit on a stock that they have sold short.

Investors who sell short believe the price of the stock will decrease in value.Investors maintain “long” security positions in the expectation that the stock will rise in value in the future.A market order is an order to buy or sell a security immediately.

A market order generally will execute at or near the current bid (for a sell order) or ask (for a buy order) price.Other asset categories include real estate, precious metals and other commodities, and private equity.These are among the asset categories you would likely choose from when investing in a retirement savings program or a college savings plan.

It can also sell any of the securities in your account to cover any shortfall, without informing you in advance.But when you invest, you also have the opportunity to earn more money.A brokerage firm may at any time change the threshold at which customers are subject to a margin call.

But it can improve the chances that you won’t lose money, or that if you do, it won’t be as much as if you weren’t diversified.The idea is that if one investment loses money, the other investments will make up for those losses.

When the stop price is reached, a stop order becomes a market order.A “short” position is generally the sale of a stock you do not own.Unlike FDIC-insured deposits, the money you invest in securities, mutual funds, and other similar investments are not federally insured.The brokerage firm decides which of your securities to sell.