Stock Market Investment Terms

Here are some of the terms related to the business of investing. Knowing some of the terminology can help even the beginning trader successfully discuss investment philosophies as well. Listed below are stock market terms that will help you when speaking with someone else in the business:

Basic terms – These stock market terms reflect common ideas and descriptions that are used every day. Such stock market terms portray types of people and general stock market basics.

• Ask – This is the lowest price that a seller will accept when selling a stock.
• Bear – This refers to an investor who believes the stock market or a particular
          stock is declining. This is the opposite of a Bull.
• Bid – This is the highest price that a buyer is willing to pay for a stock.
• Broker – A person that buys or sells stocks, bonds, commodities and such
          in exchange for a fee which is called
          a commission.
• Bull – An investor who believes the whole
          market or one individual stock is
          going to increase in price. This is
          the opposite of a Bear.
• Dow Jones Industrial Average – This
          is a compilation of the 30 most
          traded blue chip stocks. This list
          is the most widely used for
          analyzing stock market indexes.
• NASDAQ – This is a stock exchange consisting primarily of technology
           companies.
• PSEi – Philippine Stock Exchange composite index; comprises of all publicly
          traded companies in the Philippines.
• Stock – This is the smallest measurable unit of ownership in a company. Shares
          fall into either the common or preferred categories; companies issue shares
          of stock in order to raise capital without borrowing money.

Investing terms – These words and phrases reflect stock market terms for
          various stock market strategies. These stock market terms are used
          to describe specific conditions or analysis.

• Blue Chip – This term describes a company with a history of strong earning,
          traditionally increasing dividends and an outstanding balance sheet. Blue
          Chip stocks include Phil. Long Distance Telephone, Jollibee Foods,
          San Miguel Corporation, Metropolitan Bank, Exxon-Mobile, Coca-
          Cola and Wal-Mart.
• Book Value - This is the value of a company if assets and common stock
          equity are added together and all liabilities are subtracted. There is
          little correlation between the book value and the market value. Book
          value is used in such fundamental analysis measurements as Price to
          Book ratio.
• Dividend – This is the portion of a company’s profit that is given back to
          the investors. Such payments are made on either an annual or quarterly
          basis.
• Fundamental Analysis – A method of predicting the behavior of a company’s
         stocks by looking at fundamental information about the company such as
         financial health, sales and earnings figures, and dividends. It is the means
         by which the investor can research the financial information that determines
         the strength or weakness of the company.
• Market Capitalization – A company's market capitalization, also known as
         its market cap, is calculated by taking the number of outstanding shares
         of stock multiplied by the current price per share.
• P/E Ratio – This widely used analysis tool of Price to Earnings ratio
         measures now you pay for each dollar of corporate earnings.
         For example, if you have $30 stocks that report a profit of
         $2 per share, your P/E ratio is 15; $30 per share divided by
         $2 earnings per share equals 15. In this ratio the lower the
         P/E ratio, the better.
• Spread: This stock market term reflects the difference between the
         Ask and the Bid.
• Technical Analysis – Using charts and charting techniques and
         indicators (such as prices, volume, moving averages, stochastics, etc.)
         to evaluate future likely price movement.
• Yield – This is the percentage of a dividend paid against the stock price.
         For example, if you receive a $3 dividend on a $30 per share stock,
         your yield is 10%.

Conclusion

It is much easier to discuss the stock market if you understand some of the basic stock market terms. There is a large variety of stock market terms and learning them will not only help in your conversations but also to better comprehend the tools available for technical analysis.