All The Lingo, You Need To Know
Whether you're a Wall Street pro or just a beginner, when finding a stock, there's always a list of factors to consider before buying. The reason we're writing this article is because we understand how easy it is to get lost in the vocabulary of the stock market. When a reader hears the terms EPS, P/E ratio, R2D2, Float, and...... wait, one of those isn't right...... Well, anyway, now you get the point.
And don't worry, if you're already a pro with these terms, we have a more advanced article, we'll link to.
Today we are going to give you a crash course in all the vocabulary you need to know when investing in the stock market. After reading, you'll be able to apply your knowledge to stock picking or even just be able to impress your parents the next time you have dinner.
There's an unlimited amount of complicated financial words the Wall Street guys use to try to sound smart, but here at The Bull Pen, we like to give you the words you'll actually need and use. (They still make you sound cool!) To make it easier, we organized all the key terms into categories.
Fundamentals- The key factors to look at when picking a stock include, but are not limited to:
EPS- Stands for Earnings Per Share. This is the company's total net profit divided by its total common outstanding shares. Example: If a company has 100 shares of stock available to investors, and $200 in earnings, the EPS would be $2. 200 divided by 100
P/E Ratio- This one is tricky. This is the Price to Earnings ratio; Which means how overvalued a company is, in relation to its earnings per year. Example: If a company has an EPS of $5, and a stock price of $50, its P/E would be 10x. [50 divided by 5].
Market Cap (itilzation)- This term is the total value of the company in the stock market. Its found by taking the total number of shares, and multiplying it by each share price. Example: If a company has 100 shares, and each share is $50, the Market Cap is $5,000.
Dividend Yield- This term describes the dividend (explained below) as a percentage to show you how good of a deal you're getting. For example, if a company's share price is $10, and they pay a total of $1.00 per year, the yield would be 10%. The dividend is giving you back 10% of your money per year for absolutely nothing!
Stock Market Words- These are words you'll see a lot on your stock market journey.
Float- is just a fancy way to say the total number of outstanding shares. So if Google has 10,000 outstanding shares, you could say "Google's float is 10,000" to sound smarter than your friends.
Volume- is the total number of shares being bought or sold at any given moment. Volume can come in an average of any time period, 10 days, 3 months, a year, or just a day. So if a company's 10-day average volume is 50,000, it means about 50,000 shares were either bought or sold on any given day.
Dividend- is free money a company pays you when you own shares of that company. Now we know what you're thinking..... Free money in the stock market? No way. But it's true. Companies will use this to encourage people to support them and buy their stock. Some companies pay a lot of money, some pay a little, and some don't do it at all. For example, Apple will pay you 23 cents for each share you own, per quarter. Most companies pay dividends monthly or quarterly.
Everyday Terms- These are terms you'll hear all over the place. Better know them so you can always be one step ahead in conversation.
Bull and Bear Market- There are technical rules for each of these terms, but for our purposes, just remember a Bull Market is when stocks go up, and a Bear Market is when stocks go down. This means a bull market raises the stakes by making you more money (no pun intended).
Blue Chip Stock- Is a stock that is extremely unlikely to fail. These stocks are safe places to hide money because even though the stock may go down; Blue chips are rock-solid companies that will always bounce back. Example below.
FAANG- Is an acronym standing for Facebook, Apple, Amazon, Netflix, and Google. The biggest tech companies in the world. All of which were widely regarded as blue-chip stocks.
Great job! Now know all the basic stock market terms to begin your financial journey. Now when someone mentions a bull market, you'll know they aren't talking about the deli.
Don't worry if you think you'll forget some of these terms, you can always come back and refresh yourself. You'll pick it up in no time. If you have any questions about a term, feel free to leave a comment!
How'd we do?
-We hope this article has helped. If it did... Let us know! We are always looking for feedback and are happy to connect with readers whether it's by email or by comments on the article. Thanks for reading, and as always, let the bulls run! 🐃🐃
DOW Jones= 30,672.62 NASDAQ= 11,223.74 S&P 500= 3,792.78
What are index prices when you are reading this article?
Published on 6/23/22. Read important disclosures listed in header. This is not financial advice, simply education. Do not take this article as personalized financial advice; we do not know any given individuals personal situation and do not intend to be the deciding factor in any financial decisions.