This week we continue with our education with investing in the stock market. Before you launch into the stock market, it is important to know the language and learn about the products. How well do you know the terms? Let’s see… Here are basic terms that you should know before you start investing.
Stock = Ownership of a company or corporation, represented by “shares” of stock that claim ownership on the company’s earnings and assets. If the business makes a profit you may be paid dividends.
Exchange (Market) = Where stocks in publicly traded companies are bought and sold. An example is the New York Stock Exchange (NYSE).
Ask = Lowest price a seller is willing to accept when selling a security (stock).
Bid = Highest price a buyer is willing to accept when purchasing a security.
Bond = A bond represents a part of a loan to an organization. As long as that organization does not go bankrupt you will be paid interest on the loan you have made.
Broker = Individual or a firm that brings together buyers and sellers but does not take a position on the stocks or bonds to be exchanged, for a fee which is called a commission.
Bear = Investor who believes the market as a whole or a particular stock will decline. A bear is the opposite of a Bull.
Bull = Investor who believes the general market or a particular stock is going to increase in price.
Dividend = Distribution of earnings paid to the shareholders on a quarterly or annual basis.
Interest rate = A bond will pay an amount to those who lent money to the organization. This is usually expressed as a percentage.
Spread = Difference between the Ask and the Bid.
Yield = Percentage of the stock price in relation to the dividend paid.
If you want to start dabbling with investments and stock markets, begin to learn the common investment terms. Next week we will continue our conversation about investing with learning about the different types of investment vehicles, such as stocks and bonds.
Remember our goal is to get Financial F.I.T. (Focused, Involved to Transform your life).
Until next week,