Stocks

Momentum

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Average Up

By averaging up the investor will increase the size of the stock. The immediate effects of this strategy are that first, the average cost of the stock the investor owns has a lower average cost than the current market price, and second, sustained interest in the acquisition of shares at a higher price may push…

Bonus Issue

Bonus issues are usually produced in a ratio determined by shares already owned by shareholders. Depending on each company’s policy, bonus issues can be limited to specific shareholders and/or to specific classes of shares. As no cash floats between investors, this is an accounting transaction. It capitalises on retained earnings and it can represent a…

Buy Back

Buybacks can be used by companies to purchase shares from their shareholders, and they can also be performed in derivatives and managed funds. A buyback can be used to either boost the price of shares by reducing supply or to protect the company from shareholders who might be looking for ways to achieve controlling stakes…

Average Down

By averaging down the investor gets more share per dollar. The effect of such purchases is that they bring the average price of the purchased shares down, closer to existing low level prices, rather than the previous higher costs. Averaging down can cover for losses, by bringing the price sufficiently low to make the said…

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Bull market

The term “bull market” is most often used to refer to the stock market, but is in fact applied to anything that is traded, including currencies, commodities and bonds.

Bear Market

Bear markets can be brief spells of falling prices, lasting as little as two months, or can span out over a decade or longer. Although the exact definition of a bear market is difficult to pat down, a bear market is often pronounced when prices decline by 20 per cent or more over two months…

Dividends

The term “dividend” refers to the amount paid out of a company’s profits to its shareholders. In Australia it is common practice to pay both an interim and a final dividend. Earnings not distributed in the form of dividends are retained in the business and help it to grow. They still belong to the shareholders…

Dividend imputation

Before 1 July 1987 corporate profits were subject to two lots of tax. Firstly, companies paid company tax on their earnings. Only the “after tax” earnings were then available for dividend declarations. Secondly, individual shareholders paid personal income tax on any dividends received by them, despite the fact that the companies paying them had already…