100 Investing Terms You Should Know

Dwight
November 26, 2021
Saving & Investing
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All the jargon used in the industry can make investing seem scary and complicated. Which causes many to not invest and miss out on the power of compound interest. There are a lot of terms in investing, but I know you won’t let them stop you from investing. Below are the 100 investing terms you should know.

Market Terms

The stock market is a marketplace that trades securities, like stocks.

52 Week High: The highest price a security has been in the last 52 weeks.
52 Week Low: The lowest price a security has been in the last 52 weeks.
Appreciation: The increase in value of a security.
Average Volume: The average number of shares traded in a security over a certain period.
Bear Market: Market condition where stock prices expect to fall.
Blue Chip Stocks: Large industry-leading companies with stable financials offering stable dividend payments.
Bull Market: Market condition where stock prices expect to rise.
Buy: To purchase shares in a security from another investor.
Close: The price that a security ends the trading day at.
Deflation: The decrease in the price of goods that increase purchasing power.
Dividend: A part of a company’s earnings that pays shareholders with more stock or cash.
Dividend Yield: The percent of share price paid as dividends.
Dow Jones Industrial Average (DJIA): An index also referred to as Dow Jones or the Dow that tracks 30 large blue chips and is a gauge of health in the market and economy.
Financial Industry Regulatory Authority (FINRA): A non-profit organization that licenses and regulates brokerages.
High: The highest price a stock hit during the trading day.
Index: A basket of securities that represents and measures the performance of a specific market, sector, asset class, or investment strategy, such as the S&P 500 and NASDAQ 100.
Industry: A group of stocks within a sector that operates in the same business, such as semiconductors.
Inflation: The increase in the price of goods that decrease purchasing power.
IPO (Initial Public Offering): When a private company becomes a publicly traded company to raise money.
Low: The lowest price a stock hit during the trading day.
Market Price: The current price of a security.
NASDAQ 100: An index that tracks the 100 largest non-financial companies listed on the NASDAQ.
Open: The price that a security starts the trading day at.
Proxy: A shareholder’s vote on company decisions.
Recession: A period of declining economic activity over several months.
Return: The change in the price of a security.
S&P 500: An index that tracks the 500 largest companies by market cap in the United States.
Sector: A group of stocks in the same area of the economy, an example is the technology sector.
Securities Investor Protection Corporation (SIPC): A non-profit organization that protects investors against the loss of assets if their brokerage firm liquidates.
Sell: To sell shares in a security to another investor.
Share: A unit of ownership in a company.
Shareholder: A owner of shares in a company.
Shares Outstanding: The total number of shares in the market for a security.
Stock Exchange: A vendor of the stock market that lists securities for trading. The NYSE and NASDAQ are the largest in the world.
Stock Symbol: A 1-5 character alphabetic symbol that represents a publicly traded company on a stock exchange
Today’s Return: How much the price of a security changed today expressed as $ or %.
Total Return: How much the value of a security changed over a period, including appreciation and dividends expressed as $ or %.
US Securities and Exchange Commission (SEC): A US federal government agency created after the Wall Street Crash of 1929 to enforce the law against market manipulation.
Volatility: How fast the price of a security moves up and down.
Volume: The number of shares traded in a security.

Investment Types

The most common form of investments are securities. A security is a tradable financial asset.

Bond: A loan to a company or government funded by investors.
Commodity: A raw material used to make products that are bought and sold.
Cryptocurrency: A digital currency secured by cryptography and decentralized through the blockchain.
ETF (Exchange Traded Fund): An investment pool managed by a fund manager that purchases a basket of securities to cover a specific market, sector, asset class, or investment strategy and trades like a stock.
Hedge Fund: A private investment pool for high-net-worth individuals actively managed by a fund manager using high-risk strategies targeting to beat the market.
Index Fund: A type of mutual fund or ETF that is passively managed to track an index and match its return.
Mutual Fund: An investment pool managed by a fund manager that purchases a basket of securities to cover a specific market, sector, asset class, or investment strategy and bought and sold only at market close.
Trust Fund: A legal entity that holds property and assets on someone else’s behalf and is managed by a neutral third party common estate planning tool.
Real Estate: Real property such as land and buildings.
Real Estate Investment Trust (REIT): A company that finances, operates, or owns income-producing real estate.
Stock: A partial ownership of a company also known as equity.

Ways to Invest

To invest, you have to do so through a brokerage. A brokerage is a company that executes trades between investors, also referred to as a stockbroker.

Full-service broker: A licensed broker that executes trades and provides a large variety of services such as research, investment advice, tax tips, and retirement and estate planning.
Discount broker: A licensed broker that executes trades but does not provide investment advice.
Robo-advisor: A broker using software and algorithms to create your investment plan and manage your investments.

Retirement Accounts

The primary way to invest for retirement is to use a retirement account. A retirement account is a savings plan that allows you to invest for retirement with tax advantages like profits being tax-deferred or tax free.

401k: An employer sponsored retirement plan where contributions are tax deductible and withdrawals taxed at your tax rate when withdrawn.
HSA (Health Savings Account (HSA): A savings account for a high-deductible health plan (HDHP) used for qualified medical expenses and retirement that allows investing where contributions are tax deductible and withdrawals are tax free when used for medical expenses.
Traditional IRA: An individual retirement account where contributions are tax deductible and withdrawals taxed at your tax rate when withdrawn.
Roth 401(k): An employer sponsored retirement plan where contributions are not tax deductible and withdrawals are tax free.
Roth IRA: An individual retirement account where contributions are not tax deductible and withdrawals are tax free.

Portfolio Management

Every investment made is part of a portfolio. A portfolio is a collection of investments.

Annualized Rate of Return: The average annual return over a period of years.
Average Cost: The average price paid for a security.
Average Down: Purchasing more shares of a security already owned when the price is down.
Average Up: Purchasing more shares of a security already owned when the price is up.
Asset Allocation: The asset mix in a portfolio that reflects your investment goals.
Buy and Hold: A passive investment strategy where an investor buys stocks and holds them for the long term.
Capital Gain: Selling shares at a price higher than purchase price.
Capital Loss: Selling shares at a price lower than purchase price.
Diversification: Owning different securities to reduce the effects of volatility.
Dividend Investing: A strategy of buying securities that pay dividends to create passive income focusing on yield or growth.
Dividend Reinvestment Plan (DRIP): Dividends paid are reinvested to purchase additional shares.
Dollar Cost Averaging: Purchasing securities at regular intervals over a period, regardless of price.
Drawdown: The percentage drop of a security from the peak to the bottom.
Expense Ratio: The fee paid to the fund manager as a percent of the security value.
Growth Investing: A strategy of buying securities that have strong earnings growth.
Hedge: To limit risk by investing in opposing securities.
Investment Goal: What you want to grow money for and how much do you need to grow.
Investment Strategy: Principles followed to achieve your investment goals.
Investment Thesis: Why you believe in an investment and bought shares.
Long-Term Capital Gain: Selling shares owned longer than a year.
Maximum Drawdown (MDD): The maximum percentage drop of a security from the peak to the bottom before a new peak.
Risk Tolerance: How much volatility you can tolerate in your investments.
Short-Term Capital Gain: Selling shares owned less than a year.
Value Investing: A strategy of buying securities that are trading below their value.

Analysis Terms

When investing in stocks, the financial state of the company should be known. Stock analysis is looking at a company’s financials to determine the quality of the company to help make buying and selling decisions.

10-K: A report required by the SEC filed annually by a public company that shares comprehensive financial information.
Balance Sheet: A financial statement that shows a company’s assets, liabilities, and shareholder equity.
Buyback: A company purchases its own shares, therefore reducing the number of shares outstanding.
Capital Expenditures (CapEx): Money a company uses to expand or improve operations by maintaining, upgrading, and acquiring physical assets such as equipment, property, buildings, or technology.
Cash Flow: The movement of money in and out of a company.
Cash Flow Statement: A financial statement that shows a company’s sources and uses of cash.
Earnings Per Share (EPS): A company’s profit divided by its outstanding shares.
Enterprise Value: The total value of a company. (market cap + total debt – cash).
Free Cash Flow (FCF): The amount of cash a company has left after all expenses and expenditures are paid (cash flow – capital expenditures).
Income Statement: A financial statement also known as the profit-and-loss statement that shows a company’s income and expenses.
Market Capitalization (Market Cap): Current market value of a security (current price * total shares outstanding).
Payout Ratio: The percentage of earnings that is paid to shareholders as dividends.
Price-to-Earnings Ratio (P/E): The price paid for each $1 the company earns (share price/earnings per share).
Price-to-Earnings-to-Growth Ratio (PEG): The price paid for each $1 the company’s grows (price-to-earnings/earnings per share growth).
Shareholder Equity: An indicator of a company’s financial health, also known as net worth or book value (Total Assets – Total Liabilities).
Working Capital: A company’s operating liquidity available. (Current Assets – Current Liabilities
Valuation: An estimate of the value of a security.

Start Investing

See investing is scary and complicated. It takes some learning like everything else in life. Once you put your mind to it you can do it. Start investing to secure your future. If there are any terms you think should be excluded or included let me know in the comments.

Be WIZE with MONEY

Tip

Figure out what type of investor you are