It is important for anyone who wants to invest in stocks to learn the terminologies and understand them before investing.
In this post, you’ll learn about the common terms used in the world of stocks. Let’s get to learn about them so you won’t get stuck.
Common Terms Used in Stocks and Stock Trading
- A share in the ownership of a company. Owning stock represents a claim on part of the company’s assets and earnings.
- A series of letters representing a particular publicly traded company’s stock on a stock exchange.
- A portion of a company’s earnings is distributed to shareholders, usually in the form of cash or additional shares.
Market Capitalization (Market Cap):
- The total value of a company’s outstanding shares of stock is calculated by multiplying the stock’s current market price by the total number of shares.
- A financial market characterized by rising prices and investor confidence is often associated with optimism and positive economic conditions.
- A financial market characterized by falling prices and investor pessimism is often associated with economic downturns.
Earnings Per Share (EPS):
- A company’s profit is divided by its number of outstanding shares, providing a measure of its profitability on a per-share basis.
P/E Ratio (Price-to-Earnings Ratio):
- A valuation ratio is calculated by dividing the market price per share by the earnings per share, helping investors assess a stock’s relative value.
Blue Chip Stock:
- Shares of well-established and financially stable companies with a history of reliable performance. Blue chip stocks are generally considered safer investments.
- The degree of variation in the trading price of a financial instrument, such as a stock. High volatility indicates significant price fluctuations.
Understanding these terms is essential for anyone involved in stock investing or trading. It’s important to conduct thorough research and stay informed about the financial markets to make informed investment decisions.