Glossary of Investment Terms

Market Capitalization (Market Cap)—the market value of all common shares outstanding for a company, calculated by multiplying the recent price of a stock by the number of common shares outstanding. Large Cap stocks have market values of more than $5 billion. Mid Cap stocks have market values of from $1 billion to $5 billion. Small Cap stocks have market values of less than $1 billion. (When there are multiple classes of common stock, which often sell at different prices, the number of shares of each class is multiplied by the applicable price.)

Market-Capitalization Weighted Average—a stock price index weighted by the value of all shares outstanding for each stock. In such an index, large stocks get proportionately more weight than small stocks.

Median—the middle value in an ordered series of numbers. As an example, if you ranked a number of stocks in order based on stock price from high to low, the stock price in the middle would be the median.

Median Price-Earnings (P/E) Ratio—(as shown on the top of a Value Line company report)—is the average annual P/E ratio of a stock over the past 10 years, with certain statistical adjustments made for unusually low or high ratios.

Merchandise Trade Balance—the difference between U.S. Exports of goods and U.S. Imports of goods. Published monthly by the Commerce Department.

Mid Cap—a market capitalization (stock price times shares outstanding) of from $1 billion to $5 billion.

Money Supply—Federal Reserve measures of money outstanding. The Federal Reserve is able to influence increases or decreases in the size of the money supply. If money supply grows significantly faster than overall economic growth for an extended period of time, higher rates of inflation often follow. If money supply grows too slowly, economic growth is inhibited.

Mutual Fund—An investment fund operated by an investment company that continually offers new shares and stands ready to redeem existing shares from the owners. Also called an open-end investment company.