Glossary of Stock Trading and Investment Terminology

Blue chip companies are nationally known companies whose dividends are deemed to be reliable. Blue chip companies issue blue chip stocks, generally high priced but with low yield. Although blue chips are considered to be stable, some companies still fall beyond expectations, like telecommunications companies crashing during the dot.com years. Blue chip stocks are listed in Standard & Poor's ASX 20 with prices usually following the S&P500.

“Borrowing to invest” refers to borrowing money from a lender or financial institution to buy shares, bonds or managed funds. It is similar to taking out a mortgage to buy a house, land or any other property. This is a common practice among the investors and considered as an effective financial strategy as long as the entire procedure is managed properly. The whole idea of “borrowing to invest” is to invest more money in the market (stock market or managed funds) to increase profitability.

“Time Decay” is a vital factor for just any trader when it comes to warrant trading. It is important to keep in mind that a majority of the warrants usually experience the greatest time decay during the last third of their lifetime considering the fact that warrants lose their value as they move towards their expiry date.

Dividend Reinvestment Plans allows shareholders to use their dividends to buy more fully paid ordinary shares instead of getting cash for their dividends. There are many companies out there that offer the investors to get enrolled in Dividend Plans instead of receiving cash- an option that gives the investors an opportunity to acquire newly created shares. However, some companies also offer a combination of shares and cash.