Investing Terms to Know

February 4, 2022

Investing can be confusing when there is a lot of jargon. You need to speak the language if you want to start growing your wealth. We compiled the most important words you should know. Enjoy!

Compounding Returns: If you invest and it makes money, that new, larger amount makes even more money. Almost like magic. Investments made sooner have a better chance of compounding into wealth.

Bear Market: The polar opposite of a bull market. Investors are nervous when prices are dropping for an extended period of time (usually at least 20% from a recent high).

Blue Chip: The most valuable chip in poker is the blue chip. A blue chip company (Coca-Cola, Disney) is a company that has a reputation for making money for investors. Count me in.

Bonds: Investors lend money to a government or company. An IOU is issued back to you in exchange for getting paid the face value of the bond. It also comes with interest.

Bull Market: An all-time favorite. The price keeps climbing up. The market is happy.

Dow Jones Industrial Average (DJIA): A benchmark index of 30 blue-chip stocks that investors monitor for market trends. The committee that decides which companies are in or out is made up of Standard & Poor’s and Wall Street Journal representatives. The Dow usually has a good day when you hear “the market’s up.”

Index: A collection of investments used as a proxy for general market performance. In essence, an investment yardstick. Dow Jones, S&P 500, and Nasdaq are some names you should know.

Initial Public Offering (IPO): The big debut on Wall Street for a private company. A private company can become publicly traded once it becomes public.

Investing: Making your money grow. When you buy an asset (such as a stock, bond, or fund) today, you expect it to gain value over time. Growing your money is key to reaching big dreams, like retirement.

Nasdaq: A digitally based stock exchange. The Nasdaq Composite is also known as NASDAQ because its stocks, which include big tech names like Facebook, Microsoft, and Apple, track more than 3,000 stocks.

New York Stock Exchange (NYSE): The headquarters of the stock market. It is the largest market for buying and selling stocks and bonds. Traders carry out their transactions electronically and via brokers at 11 Wall St.

Portfolio: Your entire investment portfolio (stocks, bonds, real estate, cash, etc.). Make yours fat and balanced like a donut.

S&P 500: A stock market index that tracks the performance of 500 major US companies. A good indicator of what your colleagues in the finance industry had a day like is the Dow Jones index.

Stock Buyback: Also known as shares repurchased, or when a company buys its own shares. There is a theory that limiting the number of publicly available shares increases their value (artificially, some argue). Consequently, existing shareholders become richer instantly. 

Stock Market: A market where shares of publicly held companies can be bought and sold.

Stock: A stock is a small share of ownership in a company. The company pays you a portion of its profits when things are going well. It’s the same the other way around.

Stock Split: a BOGO deal on Wall Street. By increasing the number of shares available, a company may lower its price per share to attract new investors. Current investors retain the same dollar value per share. Imagine you own one $100 share of stock and it splits into two $50 shares if the stock splits in half. The situation is similar but different.

Volatility: Markets find it difficult to control their emotions. A measure of volatility is how frequently and how severe short-term mood swings (or price swings) are.

Yield: A beautiful meaning from an ugly word. You earn a percentage of your investment over time. That includes dividends and interest. The benefits are tremendous.

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