Stock market terms that every investor should know
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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.
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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.