2) What is a stock index?

An index has a number of different purposes . It can be used to measure the average performance of a group of stocks. An index is also used to perform analysis on the whole asset class of equities because the index serves as a market portfolio. The market portfolio is a tool to measure beta and systematic risk. There are two common types of indexes:

i) Price Weighted Average - This average is calculated using a simple average. Prices of stocks are added together and divided by the number of stocks comprising the average. The most famous price weighted average is the Dow Jones Industrial Average (DJIA). Another example is the Nikkei-Dow Jones Average in Japan.

ii) Market Capitalization Weighted Index - This index measures the daily percentage change in total market capitalization of each stock. The price changes of the companies with the highest market capitalizations dominate the performance of the index. Examples of this type of index include the TSE 300, the S&P 500, the Financial Times Actuary, and the FTSE 100 (London).

3) What is the difference between a stock and a bond?

Bonds represent a liability of a company while each share of stock represents ownership. Bonds always trade over-the-counter while stocks may be traded over-the-counter or on an organized stock exchange.

Stocks earn dividends and capital gains, while bonds earn interest and have the possibility of earning capital gains.

A bond is generally considered to be a safer investment than a stock.

4) What is cyclical stock?

A cyclical stock is a stock that is sensitive to changes in economic conditions.

5) When is a bond negotiable?

When it is in a form that can be transferred between two investors.

6) What types of mutual funds can an investor purchase?

Money market, mortgage, bond, real estate, dividend, balanced, growth, international, global and specialty funds. Specialty funds can include asset allocation funds, ethical funds, segregated funds, LSVCC's and speculative or hedging funds.