Stock Tips 101: Stock Market Terms on Investing
The stock market is a pretty complicated place. We usually get to hear news about stock market, how it is performing, currency exchange rates, and other business-related matters. All an average individual can do is wonder how do some people outside the industry gets to understand the market when these people are not even involved in the stock market.
The most likely answer to this is that these people knew some stock market terms. Since the stock market involves trading and investing, it is important to know the commonly used stock market terms on investing to provide an idea to any average individual.
The following are some of the stock market terms commonly found in investing jargons and stock tips:
- Blue Chip – This refers to a company with a history of strong revenues, habitually increasing dividends, and an outstanding balance sheet. Blue Chip stocks are usually from high-profile companies.
- Book Value – Refers to the value of a company, provided that assets and common stock equity are combined together and all liabilities are deducted.
- Dividend – refers to the share of a company’s profit that is granted back to the investors. The method of payment is either quarterly or annually.
- Market Capitalization – Also referred to as market cap, is a method of assessing the value of a company by multiplying the number of shares by the stock market price.
- P/E Ratio – simply refers to the ratio of a share’s price to earnings. It is useful in providing an indication of the share’s value.
- Spread – One of the most common stock market terms, this refers to the difference between the Ask (lowest price that a seller can accept) and the Bid (the highest price that a buyer is willing to pay).
- Yield – This is the percentage of a dividend paid against the stock price. For instance, if an individual receives a $4 dividend on a $40 per share stock, his yield is 10 percent.
Those mentioned above are just some of the most commonly used terms in stock market investing. There are more highly technical terms in the industry that may give an average person a headache. Nonetheless, having knowledge of these common stock market terms will be a good advantage for anyone, whatever field they may belong.
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