Stock investing has a ton of jargon that makes it hard to understand and get started in. This cheat sheet will break down the most common jargon so you can get started FAST.
So, you’ve decided you want to invest in stocks, but you have no idea where to begin. This guide is for you.
I’m going to get you up to speed on all the stock jargon, FAST.
Stock investing has so much jargon that it makes a simple process much harder than it needs to be. I’m going to break down that jargon so you can get past it and get to what matters: investing in stocks.
Let’s demystify some of this stock jargon right now to get you up to speed fast!
A person starts a company. If the company seems to be doing well and growing, they may decide to raise more money from the public to help it grow.
They contact a Wall Street firm that introduces the stock to the public through an IPO.
They create public stock in exchange for money from the public. This stock is a small piece of ownership of the company. They break it up into shares. Each share is a small piece of ownership in the company.
So you may hear someone say they are buying 15 “shares” of Microsoft of stock. They are buying 15 pieces of ownership in that company.
A stock is ownership in the company, basically. The value goes up and down depending on many factors we’ll talk about later.
They use to be literal papers back in the old days, but now everything is digital and you hold those shares through a brokerage company like Robinhood.
The idea of a stock broker has changed dramatically over the years. When I started tinkering with stock investing a stock broker was an actual person in an office you would call to purchase or sell shares of stock for you.
Today, my idea of a stock broker has changed a lot. I use Robinhood to buy and sell stocks mostly and they are considered a stock brokerage.
Today a stock brokerage for most people is simply a platform or app you use to buy or sell stocks.
They’ve gone from charging huge fees per trade to $0 with Robinhood.
A trade is an order to your broker to buy or sell a stock for you. It’s that simple.
IPO stand for initial public offering. This is when a company makes shares of it’s company stock available to the public.
This is generally the first time you can buy a share in the company.
A ticker symbol is a series of letters that represents a share of stock. For example if you want to buy Microsoft stock the ticker is MSFT. If you want to by a share of Apple stock the ticker is AAPL.
Wall Street is literally a street in New York city. It’s the home of the New York Stock Exchange and the headquarters of lots of big banks.
People refer to Wall Street for lots of things, but it’s just the primary and original location to buy and sell stocks.
A stock exchange is a place where people can buy or sell stocks. They literally use to be all people walking up to each other and trading on the spot.
Now they are much more digital. There still is physical people on the floor, but it’s drastically different now due to technology.
For us, all we need to do is, put an order in Robinhood on our phones and they take care of the rest. We no longer have to worry about going to a stock exchange to trade stocks.
Things have changed so much and have given us “normal” people much more power in the world of stocks.
Some companies return some of the profits back to their stock owners or “share holders”as cash. This usually happens quarterly. Not all companies do this however. Some return nothing. In this case you may invest just for increase in value of the stock.
This is someone who owns stock in a company. If you own the stock of a company you are a shareholder. Congrats, welcome to the club. :)
S&P 500 INDEX
This is a measurement of some of the top 500 stocks in the stock market. By tracking the S&P 500 Index you can get an idea of whether the stock market overall is going up or down. That’s the main use for the index.
DOW JONES INDUSTRIAL AVERAGE
The DOW Jones is another indicator of whether the stock market overall is going up or down. The DOW Jones tracks 30 hand selected “blue chip” type stocks.
The NASDAQ is another index that indicates whether the stock market is going up or down, but focuses on technology stocks. The NASDAQ will tell you whether technology stocks are going up and down rather than the entire stock market.
Blue chip stocks refers to the stock of companies who are reliable and consistent over many years.
Once seen as the ideal stock investment, they’re now considered slow and boring stocks by the younger generations, but still have their place in investing.
This is when the stock market is going up. The values of stocks are going up. They don’t go up everyday, but they go up in general more than they go down. Bull markets are a good time to own stocks because the value is going up!
A bear market is the opposite of a bull market. Stocks are for the most part stagnant or going down. This is not a fun time to own stocks, because they aren’t growing and possibly even going down in value.
Don’t buy one stock and hope it goes up. If it crashes and burns you’ve lost all of your value.
Diversifying means to own several different stocks of different types and different industries. If one industry or stock goes down you don’t lose all of your value.
Always diversify to reduce your risk of losing money rather than making money.
A portfolio is a group of stocks owned by someone. I have a portfolio in Robinhood of about 11 different stocks in my Badass Stock Portfolio.
When you buy stocks, you want to diversify a bit and a portfolio helps you to diversify rather than owning just one stock.
A stock rally is awesome. It’s when stocks are going up and fast in value. They are usually short term but they are fun when they happen.
A sector is an industry. Every stock is in a sector. For example, Apple, is in the technology sector. Pfizer is in the Pharmaceuticals sector.
You may hear that the tech sector is going up. That means stocks in the technology industry are gaining value.
If the stock market or stock is volatile, it means the stocks value is jumping up or down rapidly. There is more risk involved, but also more potential gains as well.
That means lets do this. Just kidding… ;)
Now that you know some stock investing lingo, you’ll be able to read about stocks and have a better understanding of what’s going on.
Look for more stock 101 guides coming up soon. I’ve got a lot to teach you!
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