Whether you are a beginning investor or are just getting into finance, understanding market lingo can leave you better positioned for the future.
Reading editorials ranging from ZeroHedge, Wall Street Journal or even Barron’s can become daunting with jargon. Investing terms can morph into their own coded language.
Not to fear, the world of investments is an ever-changing environment and knowing investing terms will put you at a great advantage. Below is a introductory list of 60 investing terms you need to know to gain a financial edge:
Active Trading Terminology:
Buy – A recommendation or action to purchase specific shares from a given company.
Sell – A reference to closing out a position on shares that were purchased. Typically calls to “sell” come from hitting a specific objective or to reduce losses occurred.
Bid – The price offer made to purchase a given stock that relates to what you’re willing to spend and how many shares purchased from that buy.
Ask – Inversely from a bid, this is the quote price a buyer is looking to get per share (almost always higher than a bid).
Quote – The latest data on a stock’s price that a buyer and seller actively agreed upon during transaction.
Returns – What is gained or lost through an investment over a specific time frame. These are typically views in returns on investment, equity and assets.
Execution – This is the action of buying or selling an order for a specific share of stocks.
Bear Market – A market where conditions have investors generally expect stock prices to decline. In this environment, selling increases and short selling is frequent.
Bull Market – A financial market environment where prices are rising or anticipated to rise. While typically referencing the stock market it can also be applied to bonds, commodities (gold) or currency.
Volatility – The statistical rate at which a stock increases or decreases. Typically refers to uncertainty or risk in changes of a stock.
Liquidity – The ability for investors to get in and out of a stock or given security. This measures how easy an individual or company can buy or sell at given prices in a market.
Credit Risk – The threat that a borrower may not meet obligations of a loan and a lender could experience loss on the principal or interest of a specific loan.
Fundamentals – Data (quantitative and qualitative) that signals to the financial value of a company, stock or currency. This references how stable or risky a business or asset is.
Yield – The amount of income from a return on an investment. This typically comes through dividends of a particular stock.
Rally – A continued rise in the price of the market that can also be focused on particular stocks and bonds. This movement varies depending on the market environment and duration.
Margin – The difference between the selling price of an investment and its cost of production. It can also be a reference to the revenue intake of a company and the overall expenses of business.
Dividend – A portion of a company’s earnings that is paid to shareholders (those who own stocks).
Capitalization – The book value (sum of stock, long-term debt and retained earnings) of a company that can influence a company’s value in a market.
Going Long – An expectation that a stock, commodity or currency will rise in value. Often an effort to purchase low and sell high.
Market Order – Instruction to execute, in rapid availability, a transaction at current market price. They operate with a bid price and an asking price.
Limit Order – An order to buy or sell at a designated price or at above the sale price. This method is more commonly used.
Good Till Cancelled (GTC) Order – An order placed to buy or sell a stock at a defined price will remain until it is either removed or executed by an investor.
Day Order – A given order that is only good for the hours the market is open on day placed.
Averaging Down – The process of purchasing more of a stock as the price goes downward.
Bid-Ask Spread – The amount in which the ask price is greater than the bid for a stock (asset). This is a reflection of supply and demand in a given market.
Day High and Low – An index of market trends comparing daily highs and lows in a given market.
Broker – An individual or firm that acts on behalf of an investor for an agreed fee or commission.
Hedge Funds – Investment firms that use “pooled funds” in order to employ diverse strategies in order to drive greater returns in a market.
Exchange – The location housing various investments that are traded in a market. These often cover securities, commodities and other financial transactions.
Sector – A selection of stocks that are within the same or connected business/industry.
Exchange Traded Funds (ETF) – A security that can be tracked on an index that holds assets (shares in stock, bonds, currency, gold) and is on a given stock exchange.
Initial Public Offering (IPO) – The first price offering of a private company’s stock that is publicly traded in a market.
Authorized Shares – The maximum amount of shares that a company can legally trade.
Secondary Offering – An issuance of a new stock that has already made an IPO. Usually if a company’s stock is rising, this is a method to sell more and raise greater capital.
Public Float – The regular shares that a company has issued that are available to be traded publicly.
Foreign Exchange – FOREX (FX) – The market in which currencies are traded.
Stock Symbol – Commonly a 1-3 characters from the alphabet representing a publicly traded company in a given stock exchange.
Portfolio – The series of investments an investor has (stocks, bonds, funds).
Day Trading – A practice in which an investor buys and sells stocks within a given trading day. The methodology for day trading varies by market and individual.
American Depository Receipts (ADR) – Certificates (receipts) for foreign stocks that trade in the U.S exchange markets.
Volume – The number of shares or select contracts that are traded in a market over a given time.
Close – The ending of a specific trading session in financial markets. (When you hear the bell ring).
Interest Rates – Amount charged by a lender to a borrow for the use of an asset.
Commodities – A basic good in commerce that is often used as a method to supplement goods or services. Commodities often are items like gold, oil, natural gas, grains, etc.
Futures – A financial contract that requires a buyer to purchase or sell an asset (often a physical commodity) at a given date and price in the future.
Bonds – A debt investment where money is loaned (often to a corporation or government) for a specific amount of time with an agreed upon fixed interest rate. Often used to raise money.
Securities – Represents a financial method of ownership of shares in stocks, bonds or rights of ownership (options).
Derivatives – A security that has a price that is dependent or valued from one or more assets. Considered a bet on a bet that can fluctuate depending on the underlying asset.
Blue Chip Stocks – Stocks from large, concretely established, financially stable companies that are considered to be able to provide reliable dividends.
Credit Agency – A company that assembles mass aggregates of data about businesses, governments and various individuals debts to score creditworthiness. [Ratings agencies Standard & Poor’s (S&P) and Fitch Ratings use the AAA to identify bonds with the highest credit quality, while Moody’s uses AAA is the top credit rating.]
New York Stock Exchange (NYSE) – A stock exchange in New York, NY considered one of the world’s largest list of securities.
Nasdaq – An American tech stock marketplace that is also used for buying and selling securities. Commonly featured are the world’s leading technology and biotechnology companies.
Dow Jones Industrial Average (DJIA) – A price average of thirty significant stocks traded on the New York Stock Exchange and the NASDAQ. Often referenced as “the Dow.”
S&P 500 – The Standard & Poor’s 500 index is a marketplace of 500 stocks that reflects large-cap American equities.
Russell 2000 – An index that measures 2,000 small-cap companies in the United States which consists of 3,000 of the biggest American stocks.
Monetary Policy – Actions of a central bank and other regulatory departments that determine money supply and interest rates.
Federal Reserve – The central bank of the U.S that influences monetary policy and credit conditions.
Treasury Department – A U.S government department that is directly responsible for printing money, collecting tax, managing government accounts, overseeing government debt and promoting economic growth domestically.
Quantitative Easing – A irregular monetary policy where a central bank buys government securities in a given market with the intent on lowering interest rates and driving up money supplies.
Negative Interest Rate Policy (NIRP) – A nuanced central bank policy where target interest rates, typically applied during deflationary periods, are negatively charged on an account held at a bank in order for depositors to keep their money in holding.
Agora Financial continues to offer top notch independent economic commentary on the world and how things work. As one of the leading publishers that houses economists like Jim Rickards, David Stockman and Nomi Prins to name a few, Agora Financial continues to offer honest, unconventional and unbiased analysis.
If you are looking to expand your personal index of investing terms, Investopedia offers a unique source for investing terms and resources with a vast financial dictionary.
Thanks for reading the Daily Reckoning and if you have found any value in this work be sure to sign up for our FREE e-letter The Daily Reckoning to get insights, analysis and commentary you will find nowhere else. We won’t give out your email and truly respect your privacy. CLICK HERE to sign up instantly.
This story originally appeared in the Daily Reckoning