Investing Terms for Beginners
Are you at a point in your young life that you are now thinking about investing? If so it’s a great plan. Starting as soon as you can and invest for 40 years you could see your money be worth hundreds of thousands of dollars if not millions.
Most people even today choose not to invest in the stock market.
There several reason they don’t. Most people are too afraid to invest because they are afraid of loosing what they put in. Which is called your principle, or your initial investment. Which understand there is some risk. But, there is also risk in just putting it into a saving account or under mattress.
Another reason people choose not to invest, is because they don’t have the knowledge of how to invest.
The thing is you don’t have to know everything about investing. But, you should know and understand enough so that you can make an educated decision on using a Financial Advisor.
So to start the learning process I have listed some investing terms that you need to know and understand what they are. You may never actually sell or buy a share of stock yourself, but it will be good if you know what your Financial Advisor is telling you. Below are Investing Terms for Beginners.
The lowest price a seller is willing to accept when selling a security (stock).
An investor who believes the market as a whole or a particular stock will decline. A bear is the opposite of a Bull.
An investor who believes the market as a whole or a particular stock will rise. A bull is the opposite of a Bear.
When most stock prices are rising over several months.
When most stock prices are falling our several months.
The highest price a buyer is willing to accept when purchasing a security (stock).
A company that has a history of solid earnings, regular and increasing dividends, and an impeccable balance sheet.
The value of a company if all liabilities were subtracted from total assets.
A person that buys or sells an investment for you in exchange for a fee called commission.
A portion of a company’s profits that is paid out to shareholders on a quarterly or annual basis. The Board of Directors of the company declares dividends. It is not mandatory to declare dividends on common stock even though the company is making good profits.
DOW JONES INDUSTRIAL AVERAGE (DJIA)
It is the most popular and widely used measure of the U.S. Stock Market. It consists of a price-weighted list of 30 highly-traded Blue Chip companies. The Dow is watched by investors as an indicator of the health and direction of the stock market.
EARNINGS / PROFIT
That portion of income left over after meeting all costs, overhead and taxes during a reporting period. This is called the Bottom Line. When a company is making money, it is said to be “in the black”. When a company is losing money, it is “in the red”.
INCOME / REVENUE / SALES
What a company earns for the goods they produce, or the services they provide. It is not the same as profit.
Also known as “market cap”. It is calculated by multiplying the current price per share with the number of shares outstanding.
An investment company that combines the money from a large group of investors to buy stocks and other investments.
How much money you are paying for $1 of the company’s earnings. In other words, if a company reports a profit of $4 per share, and the stock is selling for $40 per share, the P/E ratio is 10 because you are paying ten-times earnings ($40 per share divided by $4 per share earnings = 10 P/E).
Registered Investment Advisor (RIA)
A financial investment advisor that has been through certain training, and that agrees to abide by certain rules, including ensuring that recommendations, and trades made on your behalf are in your best interest.
Includes stocks, bonds, and bank deposits.
The difference between Ask and Bid.
If you own a stock, you own part of the company. A stock is evidenced by a paper certificate.
The number of shares of stock traded in a day.
When a company pays a dividend the yield is the percentage of dividend over the stock price. In other words, if a stock is trading for $10 and pays a dividend of $0.50, the yield is 5%, because for every $10 you invest, you would receive 5% back annually being $ 0.50
Above are Investing Terms for Beginners. Leave a commit or a question and I will get back with you.