Stock market terms that every investor should know
The stock market can be a daunting place for beginners as there are so many terms and acronyms to learn. But don't worry, we're here to help.
In this article, we will discuss some of the most important stock market terms that every investor should know.
Bear market: A bear market is a period of time when stock prices are generally falling. A bear market is typically defined as a decline of 20% or more from a recent high.
Bull market: A bull market is a period of time when stock prices are generally rising. A bull market is typically defined as a rise of 20% or more from a recent low.
Dividend: A dividend is a portion of a company's earnings that is paid to shareholders. Dividends can be paid in cash or in stock.
Earnings per share (EPS): Earnings per share is a measure of a company's profitability. EPS is calculated by dividing a company's net income by the number of shares outstanding.
Exchange-traded fund (ETF): An ETF is a type of investment fund that trades on a stock exchange. ETFs typically track a particular index, such as the S&P 500.
Fiscal year: A fiscal year is a 12-month period that a company uses for accounting purposes. A fiscal year can start on any day of the year, but it is typically different from the calendar year.
Index: An index is a measure of the performance of a group of stocks. There are many different indexes, such as the S&P 500 and the Dow Jones Industrial Average.
Margin: Margin is the amount of money that a brokerage firm loans to a customer to buy stocks. Margin can be used to increase the buying power of a customer, but it also increases the risk of loss.
Market capitalisation: Market capitalization is the total value of a company's outstanding shares. Market capitalization is calculated by multiplying the number of shares outstanding by the current stock price.
Mutual fund: A mutual fund is a type of investment fund that pools money from investors and invests it in a variety of assets, such as stocks, bonds, and money market instruments.
Options: Options are a type of derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date.
Fundamental analysis: Fundamental analysis is a method of evaluating a company's worth by analysing its financial statements and other information about its operations.
Price-to-earnings ratio (P/E ratio): The P/E ratio is a measure of a company's valuation. The P/E ratio is calculated by dividing the stock price by the earnings per share.
Return on investment (ROI): ROI is a measure of the profitability of an investment. ROI is calculated by dividing the net profit from an investment by the amount of money invested.
Short selling: Short selling is a strategy where an investor sells a stock that they do not own. The investor hopes to buy the stock back at a lower price in the future and make a profit.
Stock: A stock is a share of ownership in a company. When you buy a stock, you are essentially buying a piece of the company.
Trading: Trading is the buying and selling of stocks. Traders typically buy and sell stocks in the short term, hoping to make a profit on short-term price movements.
Yield: Yield is a measure of the income that an investment generates. Yield is typically expressed as a percentage of the investment's value.
These are just a few of the most common stock market terms that every investor should know. By understanding these terms, you will be better equipped to make informed investment decisions.