15 Essential Stock Market Terminologies You Should Know
Investing in the stock market can be an exciting and rewarding experience. However, to be a successful investor, you must first understand the language of the stock market. In this article, we will discuss 15 essential stock market terminologies that you should know. In our previous post, Basic Stock Market Terminology For Beginners Part I, we have already discussed the commonly known terminologies. Here is a list of another 15 essential Stock Market Terminologies
1. Dividend
A dividend is a portion of a company's profits that is distributed to its shareholders. This distribution can be made in the form of cash or additional shares.
2. Market Capitalization
Market capitalization refers to the total value of a company's outstanding shares of stock. It is calculated by multiplying the company's share price by the number of outstanding shares.
3. Earnings Per Share (EPS)
Earnings per share (EPS) is a company's profit divided by its outstanding shares of stock. It is a measure of a company's profitability and is an important metric for investors.
4. Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio is a valuation ratio that compares a company's current stock price to its earnings per share. A high P/E ratio can indicate that a company is overvalued, while a low P/E ratio can suggest that a company is undervalued.
5. Market Order
A market order is an order to buy or sell a stock at the best available current price. It is executed immediately and is not subject to price restrictions.
6. Limit Order
A limit order is an order to buy or sell a stock at a specified price or better. It is executed only if the stock's market price reaches the specified price.
7. Stop Loss Order
A stop-loss order is an order to sell a stock if its price drops to a specified level. It is designed to limit an investor's losses in case of a sudden drop in the stock's price.
8. Blue-Chip Stocks
Blue-chip stocks are stocks of large, well-established companies that have a long track record of stability and reliability. They are generally considered to be safe investments.
9. Growth Stocks
Growth stocks are stocks of companies that are expected to grow at a faster rate than the overall market. They typically reinvest their profits back into the business to fuel growth.
10. Value Stocks
Value stocks are stocks of companies that are considered to be undervalued by the market. They may have low P/E ratios or low price-to-book ratios.
11. Index Funds
An index fund is a type of mutual fund or exchange-traded fund (ETF) that tracks the performance of a specific market index, such as the S&P 500.
12. Exchange-Traded Fund (ETF)
An exchange-traded fund (ETF) is a type of investment fund that trades on a stock exchange like a stock. It is designed to track the performance of a specific index or group of assets.
13. Mutual Fund
A mutual fund is a type of investment fund that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.
14. Sector
A sector refers to a group of companies that operate in the same industry. For example, the technology sector includes companies like Apple, Google, and Microsoft.
15. Diversification
Diversification is a strategy of investing in a variety of different assets in order to reduce risk. It can be achieved through investing in different stocks
