Money·4 min read

Skimm'tionary: Investing Terms to Know

Skimm'tionary_ Investing Terms to Know
Design: theSkimm | Photo: Getty Images
September 24, 2021

Jargon can make the investing world a confusing place. But if you want to start growing your money, you need to speak the language. We Skimm’d the top terms you need to know to up your financial confidence. And your net worth. You’re welcome.

Bear Market: Opposite of a bull. Prices are going down for a sustained period of time (usually at least 20% from a recent high), and investors are nervous.

Blue Chip: In poker, blue chips are worth the most. In investing, blue chips are stable companies (Coca-Cola, Disney) with a rep for making people money. Yes, please.

Related: The Best Investment Account for Every Money Goal

Bonds: A loan investors give to a gov or company. In return, you get an IOU to get paid back the face value of that bond. Plus interest.

Bull Market: The kind everyone likes. Prices are going up, up, up. And investors are feeling good.

Compounding Returns: When your investments start earning money, then that new, bigger amount earns even more money. Like magic, but real. The sooner you invest, the more time compounding has to make you rich.

Dow Jones Industrial Average (DJIA): 30 respected blue-chip stocks investors watch to gauge overall market performance. A committee of reps from Standard & Poor's and the Wall Street Journal decide which companies are in or out. If you hear "the market’s up," the Dow is probably having a nice day.

Index: A group of investments used to ballpark how the broader market is doing. Basically, the yardsticks of the investing world. Names you should know: the Dow, S&P 500, and Nasdaq.

Initial Public Offering (IPO): A private company’s big debut on Wall Street. Once a private biz goes public, anyone can buy its stock.

Investing: How your money has babies. You buy an asset (think: a stock, bond or fund) today with the expectation that it will increase in value over time. The goal: to grow your $$$ and meet big goals like retirement.

Nasdaq: A totally digital stock exchange. Also a nickname for the Nasdaq Composite, Mark Zuckerberg’s fav index (probably) because it tracks more than 3,000 stocks, including big tech names like Facebook, Microsoft, and Apple.

New York Stock Exchange (NYSE): Stock market HQ. The NYSE is the biggest marketplace to buy and sell stocks and bonds. Trades go down electronically and via stockbrokers who work at 11 Wall St.

Portfolio: All the investments you own (stocks, bonds, real estate, cash, etc.). Make yours like you would a donut: fat and well-rounded.

S&P 500: An index that tracks the value of 500 big US company stocks. Like the Dow Jones index, it’s a good indicator of what kind of day your friends who work in finance had.

Stock Buyback: Aka a share repurchase, or when a company buys outstanding shares of its own stock. Because leaving fewer shares available to the public increases their value (artificially, some argue). And makes existing shareholders instantly richer.

Stock Market: Where anyone can buy and sell shares of publicly-held companies.

Stocks: A tiny slice of ownership in a company. When the company is doing well, you get a piece of the pie. And vice versa.

Stock Split: Wall Street’s version of a BOGO deal. When a company wants to attract new investors, it can lower its price per share by increasing the number of shares available. Current investors still own the same dollar amount. Think: if you have one $100 share and the stock splits in two, you now own two $50 shares. Same, but different.

Volatility: The market has a hard time controlling its emotions. Volatility measures the frequency and severity of the market’s short-term mood (er, price) swings.

Yield: Ugly word, beautiful meaning. It’s the money you earn from an investment over time, written with a % sign. Includes interest and dividends. Very rewarding.

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