Commonly Used Terms In Stock Market?

There are certain phrases that are intermittently connected with a specific industry. For instance, if you are not too aware of the dog industry, you will have no idea what Fido, mongrel, pooch, whelp, flag, ruff, crabbing, hackney, etc., means. The list can go on and on, and you wouldn’t understand a thing. Similarly, you will find different industry-specific jargon related to the stock market. Now, if you want to become an invested investor, knowing about these terminologies will aid you in the long run.

Why is understanding the stock market terms important?

You will often observe experts and novices talk about the stock market in terms of market breadth, yield, bear market, crash, correction, etc. Now, if you have no idea about it, you will find yourself confused. It is vital that you know about these terminologies if you want to deal in stock market tradings.

Expanding your knowledge base will aid you to excel in the learning curve of the stock market. Knowing about them doesn’t guarantee a profit. But, it will definitely assist you in making better decisions. It is the best way to gauge the market without taking assistance from others.

Take a look at some of the essential stock market lingos.

  • Dividend

When you buy the shares of a plumbic-held company, then you may get the dividend. It is a reward that the business organization gives to the shareholders from their profits. Now, this is not compulsory, and not every company offers dividends. You can also get dividends in the form of stocks, cash, or any other type of securities. It is why you must be careful while buying stocks. This can generate a substantial amount of passive income.

  • Bear market

The bear market is the term given into the market when there is an overall decline in the value of the stocks. However, the market cannot be considered bearish if the prices do not decline by 20%. During this time, the economy falters, and unemployment spreads across the country. There are various factors that can lead to the development of the bear market. It can be due to political upheavals, economic depression, rumors, natural disasters, etc. Furthermore, the investors seem to pull out, and fewer trades occur. The opposite of the bear market is the bull market.

  • Trend

Trend is basically the indication in which the stock market is moving. For instance, if the market has been witnessing a decline in the rate of stock values, then you can say that there is a downward trend. Similarly, if the market exhibits an increase in the price of the stocks, there is an upward trend. However, there are no particular time limitations when it comes to trends. It can stay for a few days or months.

  • Bull market

The bull market is actually the market condition in which the price of the stocks increases substantially. During this period, the economy thrives, and there is a high employment rate. Moreover, investors seem optimistic and conduct more tradings than before. The opposite of the bull market is the bear market.

  • Sell/buy/hold

The “buy”, “sell”, “hold” terms are the simplest to understand. In the world of the stock market, buy refers to the purchasing of stocks in return for a considerable amount of money. It also insinuates the recommendation of analysts to purchase specific stocks.

Now, sell indicates the selling of the stocks you already have in exchange for money. It also refers to the recommendation of the analysts to sell a particular stock.

Hold means that you do not have to buy or sell stocks. It just implies that you need to let the specific phase pass before you make any tradings.

  • Portfolio

A portfolio is a term used to define the investments that you have made as an investor. It can include as low as only one stock, and it can also point to various types of stocks and other financial securities. In order to attain a minimal risk, diversification of the investment portfolio is a must.

  • Underweight

It is vital that you understand that an investment portfolio is often based on the standard ones. In this case, the term “underweight” means that you are lacking in the amount for a particular security in your overall investments. For instance, the benchmark portfolio for the banking sector is 15%, but you have 10% of banking stocks. It means that your portfolio is now 5% underweight with regards to the banking stocks. It is the opposite of overweight.

  • Overweight

Most of the investment portfolio are made keeping in mind the benchmark portfolios. Here, the jargon “overweight” means that a solo investor has particular security in an extra amount. For instance, the benchmark portfolio for banking stocks is 15%, and you have 20% of it. This means that your portfolio is now 5% overweight when it comes to the banking sector. It is the opposite of underweight.

  • Assets

Assets include anything that a business organization owns on paper. It is not only limited to currency but can also refer to technology, patents, land, etc. It is a reflection of the status of a company. The more assets a firm has, the more value will its shares have in the market.

  • Benchmark

Are you wondering what a bentradingchmark is? It is the standard, which is used to determine the performance of a stock. Several market indexes are used as benchmarks. For example – the S&P 500, the Dow Jones Industrial Average, NSE Nifty, etc., are some popular benchmarks. With this, you can gain an idea about the performance of a specific stock.

  • Price-to-Earnings Ratio

The price-to-earnings or the P/E ratio is the ratio of the latest price of the shares of the firm to the amount it earns per share.

These are some of the terms that are extensively used in the stock market. A comprehensive understanding of these jargons will help you to make crucial decisions regarding investments. It will help you to come to terms with the inner mechanizations of this industry. Next time, you won’t feel out of place when other investors start discussing the market.