Learn the Language: Stock Market

Published on: Aug 25, 2020fb-roundtwitter-roundemail-round
FSL Investing Art

S&P, NASDAQ, DJIA...WTF? Lots of jargon and spiky line graphs make the world of investing a confusing place. But if you want to start growing your money — and afford to stop working someday — you have to learn the language. We Skimm’d the top terms you need to know to build up your financial confidence. And your net worth. You’re welcome.

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.

Bear Market: Opposite of a bull. The market’s going down, and investors are nervous. Fun memory trick: Bears attack their prey by swiping their claws down.

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.

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. Bulls attack prey by thrusting their horns up...like prices in a bull market. No bullsh*t.

Dow Jones Industrial Average (DJIA): 30 respected US stocks investors watch to gauge overall market performance. A group of Wall Street Journal editors 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 yard sticks 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.

NASDAQ: The world’s largest totally digital stock exchange. Fancy. Also a nickname for the Nasdaq Composite — Mark Zuckerberg’s fav index (probably), which tracks over 3,000 (mostly) tech stocks.

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: 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.

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.