Dow Theory Forecasts

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Income Bond

A bond that promises to pay interest only when earned by the firm. Income bonds are typically exchanged for outstanding bonds of a bankrupt company being reorganized. Also known as an adjustment bond.

Income Statement

A financial document that shows the income streams of a firm. This report starts with a company's sales, or revenues, and deducts (adds) expenses (other income) from that figure to reach net income. The income statement published in an annual report will typically cover an entire year (usually several years' worth will be presented), while the income statement published in a quarterly report will typically cover one quarter, or three months (typically, two quarters will be presented).

Income Stream

A term used to describe the cash flow or earnings generating ability of a firm.

Indenture

A written agreement between an issuer and bondholders, which outlines the terms, conditions, and repayment provisions concerning the debt.

Index Fund

A mutual fund which attempts to mimic the price performance of a specific stock index, such as the Standard & Poor's 500 Index. This fund typically holds the same securities as those comprising the targeted index and should provide a return similar to that of the index.

Individual Investor

A person who manages and invests his/her own investment account.

Inside Information

Information about a company that is not known to the investing public and is only known to "insiders," such as officers, directors, or major shareholders of a particular firm. Although the exact legal definitions of an "insider" and "inside information" are less than clear cut at all times, using inside information to buy or sell stock is illegal.

Institutional Investor

A very large, typically financially sophisticated investor, such as a mutual fund, insurance company, or corporate investment account.

Intangible Assets

Assets owned by a firm that lack an actual physical presence, such as patents and goodwill.

Inventory

The value of raw materials, goods in progress, or completed goods that a company owns and holds for resale.

Inventory Turnover Ratio

A ratio that measures how effectively a firm is putting its inventory resources to work generating sales. A low turnover ratio may indicate that firm is carrying obsolete products in inventory and/or that its investment in inventory is excessive. Some analysts substitute cost of goods sold for sales in this equation, as they feel that it is more accurate.

Investing Styles or Strategies

There are many styles or strategies of investing. Many often come in and out of vogue. An investor needs to determine what style(s) or strategy(ies) best meets his or her investment needs. Many of the following styles are not mutually exclusive and may be combined.

Dollar Cost Averaging — An investment approach whereby an investor invests a fixed amount in the same security at regular intervals.

Fundamental — An approach that focuses on the underlying financial characteristics of a firm, such as its market valuation, balance sheet strength, and earnings generating ability.

Global — An approach that combines international and domestic stocks in the same portfolio.

Growth — An approach that focuses on firms that are rapidly expending their sales and earnings.

Income — An approach that focuses on stocks that have high dividend yields and/or fixed income investments, such as bonds.

Long-Term Investing — An investment approach that assumes an investment horizon of three or more years.

Sector Investing — An approach that focuses on securities in certain market sectors, such as energy, health care, or financial services.

Short-Term Investing — An approach that assumes an investment horizon of less than three years.

Speculative — An approach that focuses on higher risk securities that have the potential for greater returns.

Technical — An approach that focuses on a security's price, price trend, and volume patterns.

Value — An approach that focuses on uncovering securities priced below the true value of the company.

Investment Adviser

A person or company who sells investment advice for a fee and is registered with the SEC under the Investment Advisers Act.

Investment Club

Individual investors who organize into a group for the purpose of pooling their money, research energy, and investing acumen to invest in securities.

Investment Company

A company or trust that invests its capital in other companies. See Closed-End Investment Company, Open-End Investment Company and REIT.

Investment Grade

A term referring to a top grade, best-rated bond. A "blue-chip" stock might also be referred to as investment grade.

Investor Relations Department

A division at most publicly-traded firms that handles all requests by the investing public for corporate information.

IPO

"Initial Public Offering," which is a company's initial sale of stock to the public.

IRA

"Individual Retirement Account," which is a personal retirement investment program for employed persons.

Keogh Plan

A personal retirement program for self-employed people.