Investments & Financial Planning

REIT stands for Real Estate Investment Trust, which is a publicly traded closed-end investment company that invests in a managed, diversified portfolio of real estate or real estate mortgages. The income is tax-free to the trust as long as it meets certain requirements. Like mutual funds, REITs are conduits through which earnings pass to shareholders. REITs are readily sold on the New York and American stock exchanges and thus are much more marketable than other types of real estate investments. REITs offer a good way to invest in real estate, but the investor and or his advisor should carefully screen for performance, stability, fees, costs and outlook.

SIPC stands for Securities Investments Protection Corporation and insures each account up to $500,000 for stocks and funds and $100,000 for cash. Many brokerage firms carry additional insurance.

Price Earnings Ratio is the price of the stock divided by the earnings (usually projected) per share.

You get the ratio by dividing the number 1 by the Standard and Poors' 500 Index dividend yield. The higher the ratio, the higher is the risk.

You get this ratio by dividing the company's actual cash flow by the amount of dividends to be paid. If the company’s ratio is 2 or higher, then cash flow is double the dividend payout and is usually a sign of a sound company.

The index represents 500 companies selected by a special committee which add or subtract companies based on their dominance in various industry sectors. The companies are primarily large-capitalization stocks traded on the New York Stock Exchange, and comprise the majority of the market’s value.

The index consists of 3,000 stocks comprising 98% of the total equity market capitalization. The Russell 3000 consists of the Russell 1000 (large-cap index) and the Russell 2000 (bottom 2000 stocks which are small-cap stocks). The indexes are based purely on size and not dependent upon subjective committee selections.

Nasdaq stands for the National Association of Securities Dealers Automated Quotation System. Over the counter dealers are linked with the purchasers and sellers of securities with this system. This index is based on companies in the National Market System which covers stocks that are not on an exchange, but rather are traded over the counter. The Nasdaq is not an organization, but an intangible market for the purchase and sale of securities not listed by the organized exchanges like the New York Stock Exchange (NYSE) or the American Stock Exchange (AMEX).

The Wilshire 5000 Total Market Index, or more simply the Wilshire 5000, is a market-capitalization-weighted index of the market value of all stocks actively traded in the United States. Currently, the index contains over 4,100 components.[1] The index is intended to measure the performance of most publicly traded companies headquartered in the United States, with readily available price data, (Bulletin Board/penny stocks and stocks of extremely small companies are excluded). Hence, the index includes a majority of the common stocks and REITs traded primarily through New York Stock Exchange, NASDAQ, or the American Stock Exchange. Limited Partnerships and ADRs are not included. It can be tracked by following the ticker W5000.