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Stock Wise

Stock Market Dictionary

Your guide to financial words and phrases.

4

401(k)
Basics
A retirement savings account offered by your employer, often with free matching money.

E.g., "Your company matches 50% of your contributions up to 6% of salary. Free money you shouldn't leave on the table!"

A

Asset
Company Finance
Anything a company owns that has value, like cash, buildings, or equipment.

E.g., "A company's assets are listed on its balance sheet."

Asset Allocation
Basics
The practice of dividing investments among different asset categories like stocks, bonds, and cash.

E.g., "A balanced asset allocation might be 70% stocks and 30% bonds."

B

Bear Market
Market Trends
A market condition where stocks are not doing well, and their value has dropped or is going down.

E.g., "It's tougher to make a profit in a bear market."

Beta
Advanced
A measure of a stock's volatility compared to the overall market.

E.g., "A beta of 1.5 means the stock moves 50% more than the market."

Bitcoin
Advanced
The first and most popular cryptocurrency. A digital currency you can use to buy things or hold as an investment.

E.g., "Many people buy Bitcoin hoping its value will increase over time."

Broker
Basics
A person or firm that executes buy and sell orders for investors.

E.g., "I use Robinhood as my online broker to trade stocks."

Bull Market
Market Trends
A market condition where the value of stocks is on the rise over a prolonged period.

E.g., "Investors were happy during the bull market as their portfolios grew."

C

Capital Gain
Trading
The profit you make when you sell an investment for more than you paid for it.

E.g., "If you buy a stock for $50 and sell it for $75, your capital gain is $25."

Certificate of Deposit (CD)
Basics
A savings account where you agree to leave your money untouched for a set period (like 6 months or 1 year) in exchange for a higher interest rate.

E.g., "You put $1,000 in a 1-year CD at 5% interest. You can't touch it for a year, but you'll earn $50 guaranteed - better than a regular savings account!"

Compound Interest
Basics
When your money earns returns, and those returns earn returns too. Like a snowball rolling down a hill, getting bigger and faster.

E.g., "Invest $1,000 at 10% annual return. Year 1: $1,100. Year 2: $1,210 (earning on the $100 gain too!)"

Crash
Market Trends
A sudden and significant drop in the price of many stocks. It’s like a balloon that all of a sudden loses its air.

E.g., "The stock market crash of 1929 was a major historical event."

Cryptocurrency
Advanced
Digital money that exists only online and uses encryption for security. Not controlled by any government or bank.

E.g., "Bitcoin and Ethereum are examples of cryptocurrencies."

D

Daily High
Trading
The highest price reached by a stock during a single trading day.

E.g., "The stock's daily high was $152.50 before it closed lower."

Daily Low
Trading
The lowest price reached by a stock during a single trading day.

E.g., "The daily low for the tech company was surprisingly stable."

Day Trading
Trading
The practice of buying and selling securities within the same trading day.

E.g., "Day trading requires constant market monitoring and quick decisions."

Diversification
Basics
An investment strategy of spreading your money across different types of investments to reduce risk.

E.g., "Diversification is important so that you don't have all your eggs in one basket."

Dividend
Company Finance
A bonus payment some companies give to people who own their stock. It's like the company sharing a slice of its profits with you, just for being a part-owner."

E.g., "Some companies pay a dividend to their shareholders every quarter."

Dollar-Cost Averaging
Basics
Investing the same amount of money regularly, regardless of whether prices are high or low.

E.g., "Investing $200 every month in an ETF, buying more shares when prices drop and fewer when they rise."

E

ETF (Exchange-Traded Fund):
Basics
It's like a pre-made basket of different stocks that you can buy or sell with a single click, just like an individual stock. It’s an easy way to own a small piece of many companies at once

E.g., "The SPDR S&P 500 ETF (SPY) is one of the most popular ETFs."

Earnings
Company Finance
The money that is left over after a company pays all its bills. This is also called net income or net profit.

E.g., "The company's strong earnings report caused the stock price to rise."

Earnings Per Share
Company Finance
A company's profit divided by the number of outstanding shares.

E.g., "Microsoft reported earnings per share of $3.05 last quarter."

Earnings Per Share (EPS)
Company Finance
How much profit a company makes divided by the number of shares. Shows how profitable each share is.

E.g., "If a company makes $1 million profit and has 1 million shares, the EPS is $1."

Emergency Fund
Basics
Money saved for unexpected expenses, typically 3-6 months of living expenses in a savings account.

E.g., "If your monthly expenses are $2,000, aim for $6,000-$12,000 in a high-yield savings account for emergencies."

Exchange Traded Fund (ETF)
Trading
Like an index fund, but trades on the stock market like a regular stock. You can buy and sell it anytime during market hours.

E.g., "SPY is an ETF that tracks the S&P 500 and can be traded throughout the day."

Expense Ratio
Basics
The annual fee charged by mutual funds and ETFs, expressed as a percentage of your investment.

E.g., "A 0.05% expense ratio means you pay $5 annually for every $10,000 invested. Lower is better!"

I

IPO (Initial Public Offering)
Basics
A company's first time offering shares to the public to buy.

E.g., "The tech startup is planning its IPO for next year."

Index Fund
Trading
A type of investment that tracks a group of stocks, like the S&P 500. Instead of picking individual stocks, you own a little bit of everything in the index.

E.g., "An S&P 500 index fund owns shares of all 500 companies in that index."

Index Fund
Basics
A fund that buys all the stocks in a market index (like S&P 500), giving you instant diversification.

E.g., "An S&P 500 index fund owns pieces of all 500 largest U.S. companies in one simple investment."

L

Liabilities
Company Finance
Anything that costs you money, or money you have to pay out.

E.g., "A company must manage its assets and liabilities carefully."

Long Term Growth
Basics
When you invest money and leave it alone for years (5+ years), letting it grow slowly and steadily over time.

E.g., "Buying stocks at age 20 and holding them until age 40 is long term growth - you give your money time to multiply."

M

Market Cap
Basics
"This is the total price tag of a company on the stock market. It's calculated by multiplying the stock price by the total number of stocks available. It tells you if you're looking at a giant company or a smaller one."

E.g., "Apple has a market cap of over $3 trillion."

Mutual Fund
Basics
"Think of it as a big investment club. Lots of people pool their money, and a professional manager invests it for them in a variety of different stocks and bonds."

E.g., "The Vanguard S&P 500 mutual fund tracks the performance of 500 large companies."

N

New York Stock Exchange (NYSE)
Basics
The oldest and largest stock exchange in the United States, located on Wall Street.

E.g., "Many of the world's biggest companies are listed on the NYSE."

O

Options
Advanced
Financial contracts that give the holder the right to buy or sell an asset at a specific price.

E.g., "I bought call options on Tesla, betting the price would rise."

P

P/E Ratio
Company Finance
Price-to-earnings ratio - a valuation ratio comparing a company's current share price to its per-share earnings.

E.g., "Tesla's P/E ratio is 50, meaning investors pay $50 for every $1 of earnings."

Penny Stock
Trading
A very cheap stock, typically selling for less than $5.00 a share (the original definition was less than $1.00).

E.g., "Penny stocks are considered very risky investments."

Portfolio
Advanced
A collection of all the investments owned by an individual or institution.

E.g., "It's wise to review your investment portfolio regularly."

R

Roth IRA
Basics
A retirement account where you pay taxes now but withdraw tax-free in retirement.

E.g., "Contribute $6,000 of after-tax money. In 30 years, withdraw $50,000+ completely tax-free!"

S

Shareholder
Basics
A person or entity that owns at least one share of a company's stock.

E.g., "As a shareholder, you get to vote on certain company decisions."

Short Selling
Advanced
Selling securities that you don't own, hoping to buy them back later at a lower price.

E.g., "Investors who short sold GameStop lost billions in 2021."

Short Term Growth
Trading
Trying to make money quickly by buying and selling investments within days, weeks, or months.

E.g., "Buying a stock on Monday and selling it Friday for a quick profit is short term growth - it's faster but riskier."

Stock
Basics
A share in the ownership of a company, representing a claim on part of the company's assets and earnings.

E.g., "I bought 100 stocks of Apple Inc."

Stock
Basics
A share of a company. It represents a small piece of ownership in that company.

E.g., "She decided to buy stock in a company she believes in."

Stock Certificate
Basics
A document that states you are the owner of a share of a company. Mostly digital now.

E.g., "In the past, investors received physical stock certificates."

Stockbroker
Trading
A person who is an expert about stocks that can help other people choose which stocks to buy.

E.g., "My stockbroker advised me to diversify my investments."

Stop Loss
Trading
An order to sell a security when it reaches a certain price, used to limit losses.

E.g., "I set a stop loss at $90 to protect against further drops."

T

Ticker Symbol
Trading
A shortened, unique series of letters assigned to a security for trading purposes. Ex: AAPL for Apple Inc.

E.g., "To find a stock, you just need to know its ticker symbol."

Trade
Trading
The buying or selling of a stock.

E.g., "He made a successful trade, selling the stock for more than he paid."

V

Volatility
Market Trends
How much a stock's price goes up and down. High volatility means big price swings, low volatility means the price stays steady.

E.g., "Tech stocks often have high volatility, while utility stocks tend to have low volatility."

Volume
Trading
The number of shares traded in a security during a given period.

E.g., "Apple had unusually high volume today with 100 million shares traded."

W

Wall Street
Basics
A famous street in New York City that is the historic heart of the financial district.

E.g., "Wall Street is often used to refer to the entire U.S. financial industry."

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