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The fund grows primarily as individual share prices climb. Growth stocks are companies that tend to increase in value due to growing earnings. Value stocks are companies lower in price in relation to their fundamentals. Stocks are categorized by market capitalization – either large, mid, or small. Large-cap stocks are much more heavily traded and are generally an indication of a more stable company. Small-cap stocks are usually newer companies looking to grow; so, they can be much more volatile compared to large caps.
This may reduce your overall average cost of investing. Stocks should be considered an important part of any investor’s portfolio. They bear a greater amount of risk when compared to CDs, preferred stock, and bonds. However, with the greater risk comes the greater potential for reward.
Equity fund – A mutual fund/collective fund in which the money is invested primarily in common and/or preferred stock. Stock funds may vary, depending on the fund’s investment objective. Dividend reinvest NAV – Dividends paid to the shareholder of record that are automatically invested in more shares of the security or mutual fund that are purchased at the security’s net asset value. Capital – The funds invested in a company on a long-term basis and obtained by issuing preferred or common stock, by retaining a portion of the company’s earnings from date of incorporation and by long-term borrowing.
Then we’ll jump into the more advanced terms that you may still have questions about. Just keep in mind that the more you know, the more you can leverage your knowledge into profit. The basic stock trading terms are your starting point for this growth. If you are an active investor, knowing these stock terms will help you see additional pathways for increasing your cash flow. When there’s a term you don’t understand, you can go down that proverbial rabbit hole and learn a whole new way of trading. These shares give holders voting rights in the activities of the company.
The possibility that the market value of a bond or bond fund will decrease due to rising interest rates. When interest rates go up, bond prices usually go down, and vice versa. The general upward price movement of goods and services in an economy.
Financial Terms Starting with #
Investment company – A corporation, trust or partnership that invests pooled shareholder dollars in securities appropriate to the organization’s objective. Mutual funds, closed-end funds and unit investment trusts are the three types of investment companies. Blue chip – A high-quality, relatively low-risk investment; the term usually refers to stocks of large, well-established companies that have performed well over a long period. The term Blue Chip is borrowed from poker, where the blue chips are the most valuable.
- Valuation – An estimate of the value or worth of a company; the price investors assign to an individual stock.
- If a lot of buyers and sellers are actively trading stock, you’ll generally find it easier to enter and exit a position.
- Where specific advice is necessary or appropriate, please consult with a qualified tax advisor, CPA, financial planner or investment manager.
- Federal Reserve Board – The governing board of the Federal Reserve System, it regulates the nation’s money supply by setting the discount rate, tightening or easing the availability of credit in the economy.
- The loss in the value of an investment, calculated by the difference between the purchase price and the net sales price.
- The 30-day yield should be regarded as an estimate of investment income and may not equal the fund’s actual income distribution rate.
A delta-neutral ratio spread in which more options are sold than bought. A front spread will increase in value if volatility decreases. A transaction that solely involves the exchange of two different currencies on a specific future date at a fixed rate agreed upon on the inception of the contract covering the exchange. The relationship of the cost of feed, expressed as a ratio to the sale price of animals, such as the corn-hog ratio. These serve as indicators of the profit margin or lack of profit in feeding animals to market weight. A person with trading privileges at an exchange with an electronic trading facility who trades electronically for his or her own account, often at a trading arcade.
A government agency created by congress in 1934 to regulate the securities industry and to help protect investors. The SEC is responsible for ensuring that the securities markets operate fairly and honestly. This may also refer to the repayment of a bond on or before the agreed upon pay-off date. An unmanaged, free float-adjusted, market capitalization-weighted index. The index is designed to measure the performance of the stocks in developed markets outside the United States and Canada. Alpha, beta, and R-squared are modern-portfolio-theory measures of a fund’s relative risk, based on a least-squares regression of a fund’s excess returns on the excess returns of a market index.
- Those grades of a commodity that have been officially approved by an exchange as deliverable in settlement of a futures contract.
- In case you’re curious though, once you indicate an interest in buying or selling a certain stock, a broker finds a buyer or seller on your behalf.
- The degree of security that an investor has against a bond being called, usually measured by the number of years between today and the call date.
- Sometimes, even just a growth slowdown is enough to send prices sharply lower, as investors fear that long-term growth potential is waning.
- An executed trade cancelled by an exchange that is considered to have been executed in error.
- Small caps are often considered to offer more growth potential than large and mid caps, but they may come with more risk.
This list of the most common stock market terms will help you understand what’s going on with trading talk you hear. If you’re ready to start investing like a real Wall Street wolf, then you better know the most common stock market terms and what they mean. A buy stop order is entered at a stop price above the current market price.
On the back end, it’s a little more complicated, but you don’t have to worry about any of it. In case you’re curious though, once you indicate an interest in buying or selling a certain stock, a broker finds a buyer or seller on your behalf. Market makers used to pack onto the floor of the stock exchange and fight through the frenzied mob of other stock brokers until they connected with a willing party to the transaction. Today, most matchmaking between buyers and sellers is done electronically. They’re traded electronically but transactions are less transparent than the major exchanges.
Study of basic, underlying factors that will affect the supply and demand of the commodity being traded in futures contracts. The price, specified in the option contract, at which the underlying futures contract, security, or commodity will move from seller to buyer. Commodities located in exchange-approved storage for which receipts may be used in making delivery on futures contracts. In the cotton trade, the term refers to cotton certified for delivery.
New York Stock Exchange The oldest and largest exchange with the strictest company standards. American Stock Exchange The second largest exchange with less stringent requirements allowing for younger smaller companies to be listed. Regional Stock Exchange Stocks traded to investors who are living in a specific geographical area. They are used to hedge risk or to exchange a floating rate of return for fixed rate of return. For example, futures contracts with cash settlement are derivatives of the price of a commodity or the value of an index and options on futures are derivatives of futures contracts. A strategy involving the simultaneous purchase and sale of options of the same class and expiration date but different strike prices.
If a company is healthy, the total assets will be larger than the total liabilities. What is left over is the residual amount left to the owners, known as shareholders’ equity. Larger U.S.-based stocks are traded on a public exchange, such as the New York Stock Exchange or NASDAQ. As of Q1 2022, the NYSE had 7,417 listings with a market capitalization totaling around $53 trillion, making it the biggest stock exchange in the world by market cap. Despite the myriad complexities of the stock market, learninghow to buy stockis not difficult. You can go online or onto an app on your phone, search for a company, and place your trade.
An index is a benchmark used as a reference marker for traders and investors. The Dow Jones Industrial Average and S&P 500 are examples of indexes (also spelled ‘indices’). A high refers to a stock or index reaching a greater price point than it had previously reached. 52-week highs and all-time highs can be bullish signals for traders. Execution is what it’s called when your buy or sell order reaches completion. If you put in an order to sell 100 shares, your order executes when all 100 shares are sold.
The degree to which the https://trading-market.org/ is efficient depends on the quality of information reflected in market prices. A spread between two call options or two put options with different strike prices and different expiration dates. A provision of a futures contract that provides the short with flexibility in regard to timing, location, quantity, or quality in the delivery process.
40 stock market termss also get categorized by the total worth of all their shares, which is called market capitalization. Companies with the biggest market capitalizations are called large-cap stocks, with mid-cap and small-cap stocks representing successively smaller companies. A common investment strategy for picking stocks is to focus on either growth or value stocks, or to seek a mixture of the two since their returns tend to follow a cycle of strength and weakness. While stocks have historically outperformed bonds over the long term, stock prices fluctuate and can go down, sometimes quite dramatically. Stocks and stock funds, such as mutual funds and exchange-traded funds , can be an important component of your portfolio.
A share certificate entitles the individual named in the certificate, to be the owner of the specified number of shares. Penny stock – A stock with a very low price, typically less than $5 per share. Value stock – Typically an overlooked or underpriced company that is growing at slower rates. It determines the annualized standard deviation of the excess returns between the portfolio and the benchmark.