Investing Glossary: M

market capitalization; market cap; cap: The value of a company as measured by the total number of stock shares outstanding times the market price of each share. For example, if company ABC has 20 million shares outstanding, and each share is currently worth $100, then the market cap for ABC is $2 billion. In general, stocks are classified as large cap (over $5 billion), small cap (under $1 billion), or mid cap (anything in between).

market-value weighted index: A stock index where the effect of each stock on the index is in proportion to its market value.

megatrend : A major ongoing development that is expected to have significant implications for most (if not all) facets of society over an extended period of time. The aging of the American population is an example.

momentum : The perceived strength behind a price or volume movement in a security based on the rate of acceleration of that movement.

moving average : In technical analysis, a chart line that shows the average of a security’s price over a specified period of time, recalculated for each new data point. For example, a 30-day moving average will include yesterday’s price and those for the previous 29 days. Tomorrow’s moving average will include today’s price but will drop the price for the earliest date in yesterday’s average. The moving average is used to spot pricing trends by flattening out large fluctuations.

municipal bond; muni: A bond issued by a local or state government or agency. Munis generally raise money for public projects such as hospitals, roads, bridges, and sewer systems as well as general governmental operations. When you buy a muni, the interest is usually exempt from federal income tax.

mutual fund: A fund operated by an investment company that raises money from shareholders and invests that money in a group of assets in accordance with one or more stated objectives, such as income, growth, aggressive growth, and so on. A mutual fund may generally invest in stocks, bonds, options, futures, currencies, and money market securities in accordance with its stated parameters. All shareholders share equally in the income, gains, and losses generated by the fund.

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