When I started my journey in the stock market, I didn’t understand lots of the jargon they had in the stock market such as IPO’s, bullish, penny stocks, etc. As you continue to begin your journey using my guide and having a list of low-cost stocks to buy, I think this is the perfect time to learn the terminology of the stock market. So in the future, as you continue to research and analyze stocks, you’ll understand what top investors, like me, have to say about certain stocks.
Bearish
When people say the stock market is bearish, they are saying that the stock market is on a downwards trend signifying that the stock market is losing money. So when people say a stock is bearish, it means that its price is plummeting.
Bullish
When people say the stock is bullish, they are conveying that the stock market is on an upwards trend showing that the stock market is making a profit. So when people say a stock is bullish, it means that its price is increasing.
Annual Report
What a company prepares every year for investors is an annual report where it shows everything related to money about the company. It shows its profit, revenue, management, and strategy to help investors decide whether this company is worth a buy or not.
Broker
A person who advises, buys, and sells investments for you is a broker. A broker is a legitimate job where you get paid through commission for helping a person invest.
Dividends
I mentioned dividends in my guide to investing in the stock market, but I’ll recap what they exactly are. Dividends are free money given to investors of that company to attract more people to invest in them and to thank investors for investing in their company. Note that not all companies give dividends.
Dividend Investing
There is also an investment strategy called dividend investing where investors look for stocks that pay high dividends so they can get free money. Ideally, it’s not a bad strategy, but make sure the company is reliable to be invested in.
Bid
When you bid, you think about trying to pay for something at a certain price in an auction. The concept is quite similar in the stock market, a bid is the amount of money you are willing to pay for a stock price.
Ask
Another term similar to bid that is used in the stock market is the ask price. The ask price is the lowest price that the seller will give for you to buy from the seller. Think of it as asking for the lowest price possible.
Spread
The word that makes the ask price and bid a mathematical equation is spread. Spread is the bid minus the ask price. For instance, if the seller is willing to sell it for $15 while the buyer is willing to buy it for $12, the spread is $3.
Day Trading
A concept of investing is day trading. It is where an investor buys and sells stocks constantly throughout the day until the stock market closes. People who practice this concept are often called active investors.
Initial Public Offering (IPO)
A very common term that appears in the stock market when a company is trying to go public is Initial Public Offering (IPO). IPO’s are new stocks offered by a company that was originally private or is brand new that goes public. These companies raise money for their company through IPO’s
Leveraging
Leveraging is another concept in investing stocks, it is known to be very risky. It is when you borrow shares from someone and try to sell those shares at a higher price so that you can keep the extra money you gained and give the rest of the money back. It’s a very complicated process and highly not recommended.
Volatility
Volatility is an important word to understand the daily movement of stocks. It measures the price movement of a certain stock. So high-volatile stocks move up and down daily with a wide range of trading. In contrast, low-volatile stocks grow constantly without sudden up and down movements.
Volume
When people ask how much volume of this stock you’ll buy. They are asking how many shares will you buying from a company. So buying 1,000 shares from a company is a big volume while 10 shares are a small volume.
Yield
Yield refers to the measure of return you get from an investment that comes as the payment of a dividend from a company. So if you buy a share for $100 and you get a return of $5, you yielded 5%.
Exchange-Traded Funds (ETF’s aka Index Funds)
They’re exactly like stocks that you can buy and sell, but instead, you invest in tons of companies based on the sector the index fund comes from.
Hedge & Mutual Funds
These funds are completely different and you have to open separate investment accounts to invest in a variety of stocks.
Blue Chip Stocks
Now, let’s talk about certain types of stock and the first one is Blue Chip Stocks. They are stocks from large companies that consistently offer significant amounts of dividends to their investors. This is where dividend investing comes into play and dividend investors buy these stocks just because of their large dividends.
Penny Stocks
Lastly, let’s talk about Penny Stocks. They are stocks that trade at $5 or less and some investors make millions of dollars just investing in penny stocks. As a beginner, they’re a good choice to invest in to slowly start making money.
Conclusion
As an investor, knowing your stock market terms will really help make you a better investor. So I encourage you to remember these terms so that you won’t be confused when you research the stock market.
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