Ask
: The lowest price a seller is willing to accept when
selling a security (stock).
Bear: An investor who believes the market as a whole or a
particular stock will decline. A bear is the opposite of a Bull.
Bid: The highest price a buyer is willing to accept when
purchasing a security.
Blue Chip: A company that has a history of solid earnings,
regular and increasing dividends, and an impeccable balance sheet. Examples:
Coca-Cola, Berkshire Hathaway, & Gillette. We have an entire subject area
dedicated to Blue Chip stocks! Go Here.
Book Value: The value of the company if all liabilities were
subtracted from assets and common stock equity. The book value has very little
relation to the market value. In industries in the technology sector, this
number is almost always miniscule compared to market capitalization.
Broker: A person that buys or sells an investment vehicle
for you (securities, bonds, commodities, etc.,) in exchange for a fee which is
called a commission.
Bull: An investor who believes the general market or a
particular stock is going to increase in price.
Dividend: A portion of a company's income that is paid out
to shareholders on a quarterly or annual basis. Dividends are declared by the
Board of Directors.
Dow Jones Industrial Average: The Dow Jones Industrial
Average (or DJIA for short) is by far the most popular and widely used gauge of
the U.S. Stock Market. It consists of a price-weighted list of 30 highly-traded
Blue Chip companies.
Market Capitalization: A company's market capitalization (or
"market cap" as it s frequently called) is calculated by taking the
number of outstanding shares of stock multiplied by the current
price-per-share.
NASDAQ: A stock exchange where mostly shares of technology
companies such as Microsoft and Cisco are traded. An exchange is a place where
options, futures, and shares in stocks, bonds, indexes, and commodities are
traded. The most famous in the United States is the New York Stock Exchange.
P/E Ratio: How much money you are paying for $1 of the
company's earnings. In other words, if a company is reporting a profit of $2
per share, and the stock is selling for $20 per share, the P/E ratio is 10
because you are paying ten-times earnings ($20 per share divided by $2 per
share earnings = 10 P/E.)
Spread: The difference between the Ask and the Bid.
Stock: Stock is ownership. A business is divided up into
shares of stock and parts of the company (the shares) are sold to investors to
raise money. For more information, check out the investing lessons.
Yield: When a company pays a dividend the yield is the
percentage of the stock price in relation to the dividend paid. In other words,
if a stock is trading for $10 and pays a dividend of $0.50, the yield is 5%,
because for every $10 you invest, you would receive 5% back annually in the
form of a fifty-cent dividend.
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