Here Are The Terms You Need To Know Before You Invest A Single Dollar


Let’s be real — unless you’ve been trained in finance, you might not be too jargon-savvy when it comes to investing and the stock world. That’s okay, because there’s a lot to know, and the thought of how a dividend affects yield is probably enough to make your mind explode. That’s if you even know what a dividend and yield are in the first place. (Don’t worry if that’s you, we’ve been there.) Bottom line: We’re about to make your life a whole lot easier. Here is the ultimate list of investing and stock terms you should know before you make an investment move:

Types Of Investments

Common Stock A type of stock that represents ownership in an organization. You’re in a position to earn more profit when the company’s stock is experiencing success, and to feel the loss when the company isn’t doing well. Basically, you could really score in return, or you could lose the money you invested.

Preferred Stock A type of stock that entitles the holder (you) to a fixed dividend. (A dividend is a portion of a company’s profits divvied out to participating investors or shareholders quarterly or annually.) With preferred stock, you’re less likely to win big on company earnings, but you’re more likely to receive some return compared to taking a risk that could leave you with nothing, which is what common stock is all about.

Stock Options A benefit, often provided by a company, given to an employee to buy stock within that particular company for a fixed or reduced price.

Bond A form of debt that an entity owes you. Basically, you loan money to a company, organization or even the government, and they’ll promise to pay you back with interest.

Mutual Fund An investment strategy that allows you and other investors to pool funds that all go toward a collection of stocks, bonds or other forms of investment.

Exchange-Traded Fund A type of investment that is publicly-traded on a stock exchange.

AnnuityA contract between you and an insurance company in which the company promises to pay you periodically after purchasing the annuity.


General Investing Terms

Ask To the lowest price a seller is willing to accept when selling a particular stock

Asset An investment, like a stock, bond, or annuity, that has the potential to earn you money.

Balance Sheet An open statement showing what holdings the company currently owns. You can use a balance sheet to decide what your options are and whether you should opt in.

BearAn investor or informed individual who believes that a particular market or stock will lose value.

Bear Market A falling or declining market.

BidThe absolute highest price an investor is willing to pay for an investment.

Blue Chip When referring to a company: Blue chip companies have record-high strength even in the face of economic adversity, and often invest in successful stock. When referring to a stock: stocks that are a part of a successful and financially sound company.

Broker An individual or company that is hired for fee or commission to buy and sell stock for investors.

Bull An investor or informed individual who believes that a particular market or stock will gain value.

Bull MarketA rising or succeeding market.

Capital Gain (Or Loss) The profit from the sale of a form of investment, like a stock.

Diversity Having varied types of investments.

Dividends A portion of a company’s profits divvied out to participating investors or shareholders quarterly or annually.

Dow Jones Industrial Average: A list of the top 30 blue chip companies; the most widely used U.S. Stock Market resource.

Earnings/Profit A company’s amount of income left after factoring all annual costs.

ExchangeA place where forms of investment, like stocks, are bought and sold.

Index A tool used to measure the progress of stocks with similar characteristics.

Margin Money purchased from a broker to buy stock.

Market Capitalization The market value of a company’s outstanding shares.

P/E Ratio How much money you’re paying for a certain amount of stock. For example, if your company reports a profit of $1 per share of a stock and the stock is now selling for $10, your P/E ratio is 10.

Spread The financial difference between ask and bid.

Volume The total number of shares traded within a market in a certain amount of time.

Yield The total return on an investment, usually represented as an annual percentage rate based off the investment’s initial cost and face value.