Are you looking for a stock market term and wondering what it means?
If you are new to the market and investing this page has been designed to explain the most commonly used words in the stock market scene. From P/E Ratio to share splits this is where you will find the meanings. Just scroll down to find one of many commonly used terms and their meanings. Everything is in alphabetical order.
Annualized return: The return that is made, represented over a year. For example, if you return 10% in one month, that equates to 120% annualized return.( You multiply 10 by 12, being the number of months in the year.
At limit (order): An instruction given by a client to buy or sell, placing a limit on the highest price to be paid or the lowest price at which to sell.
Averaging down: Buying more of a share as it's price falls in order to establish a lower overall average entry price.
Basis point: A measurement for describing small fluctuations in financial instruments: one basis point is one-hundredth of one percent (0.01%).
Bear: Someone who expects prices to fall.
Bear market: A period of generally declining prices.
Bid price: The highest price that buyers are willing to pay for a stock at a given moment.
Blue chip shares: Shares in leading companies that are considered to be of high quality in terms of market position, earnings, dividend record and financial strength.
Bonus issue: When the company gives to each stock holder, free of charge, a number of new stocks for each stock they already own. After the bonus issue, the company's stock price will fall to reflect the number of new stocks issued.
Bull: Someone who expects prices to rise.
Bull Market: A period of generally rising prices.
Capital Gain: The profit between the price payed for a stock and the price received for the sale.
Capital loss: The loss between the price payed for the stock and the price received for it's sale.
Capitalization: The market value of a company, found by multiplying the number of ordinary shares outstanding by the current price of the stock.
Cum dividend: Stocks that are trading with the dividend ('cum' being the Latin word for 'with').
Diversification: Spreading a portfolio over a number of securities or sectors with the objective of reducing risk.
Dividend: The part of company profits distributed to stock holders.
Dividend coverage: An indicator of how much after-tax profit is being used to finance dividends.
Dividend payout: The proportion of the annual operating profit after tax that is payed out in dividends to stock holders.
Dividend per share: This is the amount of dividends payed in the last year, divided by the number of shares outstanding.
Dividend reinvestment plan (DRP): A plan whereby stock holders' dividends can cheaply and easily be automatically reinvested in further stocks in the company.
Dividend yield: Dividends per share divided by the share price.
Dollar cost averaging: Technique for accumulating stocks at lower risk by periodically purchasing equal dollar amounts of stock.
Earnings Per Share (EPS): This measure expresses how many cents the company is earning for every share held. It is the net profit for shareholders (after tax) divided by the number of ordinary shares outstanding.
Equity: A synonym for a stock, or the interest or value, which an owner has in an asset.
Ex dividend: Stocks that are trading without the dividend.
Ex dividend date: The date when stocks change from being quoted cum dividend to ex dividend.
Final dividend: This is the dividend payed by a company to it's stock holders out of profits at the end of the financial year.
Float: The initial raising of capital by putting a company's stocks on offer to the public.
Fundamental analysis: A method of predicting the behaviour of a company's stocks by looking at fundamental information about the company such as financial health, sales and earnings figures, and dividends.
Industrial stocks: Stocks of company's engaged in the production or sale of goods and services, as apposed to resource stocks.
Initial Public Offering(IPO): The first sale of stocks of a company to the public.
Inside information: This is confidential information not available to the public.
Intangible asset: An asset that has no tangible form, such as trademarks, goodwill and copyrights.
Limit order: An order to buy or sell at a specific price. The order can be executed by the broker only at the price or a more advantageous one.
Liquidity: Refers to the availability of stock in a company, which is evidenced by a presence of buyers and sellers for a stock.
Listed stocks: Stocks which have an official listing on one of the world's recognized stock markets.
Long (position): Owning a stock.
Market order: An instruction given by a client to buy or sell immediately at the best market price currently available.
Net Tangible Asset Backing (NTA): A company's asset minus its liabilities and intangible assets, divided by the number of ordinary shares outstanding.
Offer price: The lowest price that sellers are willing to accept for a stock at a given moment, also called the ask price.
Ordinary stocks: Stocks which represent an ownership interest in a company.
Paper trading: Hypothetical trading on paper, without the use of actual capital.
Payment date: Date on which a dividend is payed to stockholders.
Portfolio: A selection of stocks chosen according to the investors individual goals.
Preference shares: Shares that have preferential rights over ordinary shares to dividends and claim on assets.
Prospectus: A legal document issued by a company wanting to issue shares to the public (listing), outlining the history, operations and financial situation of the company.
Price/Earnings ratio (P/E): A fundamental measure of the attractiveness of a particular stock. It is the current price of an ordinary stock divided by the earnings per share, and is used to measure how highly a stock is valued.
Record Date: Official date used to determine eligibility for a dividend.
Resource stocks: Stocks of companies engaged in mining, energy and commodity related activities, as opposed to industrial stocks.
Rights issue: A method of raising additional capital. A privilege is granted to stock holders to buy new stocks in the company usually below the market price.
Scrip: Stock certificate that is evidence of ownership.
Settlement: In relation to stocks it is the arrangement between broking houses for the payment or receipt of cash or shares.
Share: A unit of equity in a company.
Share split: Increasing a companies shares outstanding by splitting the par value of existing shares and distributing additional shares pro rata to share holders.
Short(position): Selling securities that are not owned, with the intention of buying them back (covering) later at a lower price.
Short selling: A risky and speculative practice involving the sale of a stock that the seller doesn't possess. The seller is effectively betting that the price of the stock is going to fall and that they will be able to buy the stock back at a lower price.
Speculator: An individual who accepts high risks in an attempt to earn quick profits.
Spread: The difference between the bid price and the ask price (buy price and sell price)
Stag: An investor who buys shares in an IPO, with the intention of immediately selling the shares for a profit when the shares list.
Takeover: The acquisition of a controlling interest in a company by another company or individual.
Technical analysis: An attempt to predict market and share behaviour by studying the past history of price movements and trading volumes. The techniques are graphically and statistically based and are concerned with the mathematics and collective psychology of the market.
Trader: An investor who actively buys and sells stocks in a relatively short period of time.
Turnover/volume: The number of stocks in a company bought and sold on the stock market.
Underwriter: A financial institution that assists in the issue of new securities by agreeing to purchase any unsold securities, thereby guaranteeing that they will be fully subscribed.
Volatility: The tendency for prices of a particular stock to fluctuate.
Yield: The annual income from a stock expressed as a percentage of it's current market price.