June 28, 2004
Dillution Lesson

We've got quite a few (well, ok, "most but not all") dollars in mutual funds, so I tend to at least pay a little attention to the market as things go by*. One of the most confusing terms I've come across is "earnings per dilluted share." I mean, what, do they stick them in a barrel of water or something? Well, turns out, not surprisingly, it doesn't work that way. Actually the concept is pretty simple, once someone explains it: stock options and things like them are not "real" shares, but could be. A statement including "dilluted" shares is simply figuring things as if all the "not-quite" shares were real shares. See? Simple!

* Since most of our savings is going into the stock market, I have desperately tried to get interested in finance. Unfortunately, once I get into the nuts-and-bolts, I find it all eye-crossingly dull. This from a guy who has read Pliny the Elder's Natural History! Occasionally I'll stumble across a book that's written well enough to be interesting to me (I'm currently working on Sowell's Basic Economics at the moment, and I'm finding it very enjoyable and informative), but I just don't bother with the magazines. Unless I can't sleep.

Posted by scott at June 28, 2004 09:04 AM

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Have you tried "Economics for Dummies"?

Posted by: Pat on June 28, 2004 12:24 PM
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