The Guide to Basic Stock Terms

A few weeks ago we made an article about the basic, what are stocks and the types of stocks that are out there on the market. This article will hopefully clear up some vocabulary that you did not understand and will also include the basic stock terminology that people in the business world use. This will be somewhat of a guide to new stock terms that you may or may not already know about as well. Spending hours on the internet or watching YouTube videos just to compile yourself with things you don’t even need to know is just wasting your time. If you want to know the basics, I have compiled a list of terms that will hopefully allow you to understand the stock market and its endeavors. 

  • Private Company– A company owned by a person, family, or small group of investors that does not sell stock to the public.
  • Publicly Traded Company– A company that has sold stock to the public.
  • Initial Public Offering (IPO)– The 1st time a company sells stock to the public.
  • New York Stock Exchange (NYSE)– Considered the largest equities-based exchange in the world, based on the total market capitalization of its listed securities. Also known as “The Big Board”.
  • Shares– Units of ownership interest in a corporation or financial asset.

  • Standard And Poor’s 500 (S&P 500)– A market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The index is widely regarded as the best gauge of large-cap U.S. equities.
  • Dow Jones Industrial Average– Commonly referred to as just the “Dow,” was created by Wall Street Journal editor Charles Dow and got its name from Dow and his business partner Edward Jones. Consists of 30 large capitalization, publicly-traded companies.
  • NASDAQ– A global electronic marketplace for buying and selling stocks, as well as the benchmark index for U.S. technology stocks. Commenced operations on February 8, 1971. The term, “Nasdaq” is also used to refer to the Nasdaq Composite, an index of more than 3,000 stocks listed on the Nasdaq exchange.
  • Stock– Also called equities or shares, give you ownership in a company.
  • Stock Market– Collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies take place.

  • Market Capitalization– The total dollar market value of a company’s outstanding shares. Calculated by multiplying a company’s shares outstanding by the current market price of one share.
  • SMALL CAP STOCK– A stock issued by a company with a capitalization of $2 Billion or less.
  • MID CAP STOCK– A stock issued by a company with a capitalization between $2 billion and $10 billion.
  • LARGE CAP STOCK– A stock issued by a company with a capitalization of more than $10 billion.
  • Ticker Symbol – An arrangement of letters representing particular securities (Stocks) listed on an exchange or otherwise traded publicly. Every publicly traded company has one.

  • Quote– The last price at which a security (Stock) has traded.
  • Market Order– A request by an investor to buy or sell a security (Stock) at the best available price (No price is specified) in the current market. It is widely considered the fastest and most reliable way to enter or exit a trade.
  • Dividend– The distribution of a portion of the company’s earnings (Profits) paid to a class of its shareholders. Some companies pay one, some don’t.
  • Volume– The number of shares traded in a stock or an entire market during a given period of time.
  • Limit Order– A type of order to purchase or sell a stock either at, below or above a specified price. By this order, the investor is guaranteed to pay that price or less.

  • Bull (Bullish)- An investor who thinks the market, a specific security or an industry is poised to rise.
  • Bear (Bearish)– An investor who thinks the market, a specific security or an industry is poised to fall.
  • Earnings Per Share (EPS)- Calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.
  • Beta– A measure of the volatility, or risk, of an individual stock in comparison to risk of the entire market.
  • PE Ratio (Price Earnings)- The ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). Also sometimes known as the price multiple or the earnings multiple.

  • Buying On Margin– The purchase of an asset (Stock) by using leverage and borrowing the balance from a bank or broker. As of 2019, an investor is required to fund at least 50 percent of a security’s (Stock) purchase price with cash. The investor may borrow the remaining 50 percent from a broker or a dealer.
  • Spread- The gap between the bid and the ask prices of a stock, bond or commodity.
  • Mutual Fund (Stock)– A type of financial vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments, and other assets. Managed by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors.
  • Stock Split- A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts. The most common split ratios are 2-for-1 or 3-for-1.
  • Shares Outstanding– A company’s stock currently held by all its shareholders, including by institutional investors and restricted shares owned by the company’s officers and insiders.

Thank you so much for reading! 

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