📖 Helpful Terms

Market vocabulary, in plain English

Stock / ShareA small piece of ownership in a company. Own a share and you own a sliver of the business, its profits, and its future.

Common StockThe usual kind of share. It carries a vote and full upside if the company grows, but sits last in line if the company is wound up.

Preferred StockA share that pays a fixed dividend and gets paid before common stock, but usually has no vote and less upside. Part stock, part bond.

Bull MarketA stretch of generally rising prices and optimism. "Bullish" means you expect prices to go up.

Bear MarketA stretch of falling prices — commonly a drop of 20% or more from a recent high. "Bearish" means you expect declines.

DividendA slice of profit a company pays out to shareholders, usually every quarter. Not all companies pay one.

Dividend YieldThe annual dividend as a percentage of the share price — a $2 dividend on a $50 stock is a 4% yield.

EPS (Earnings Per Share)A company's profit divided by its shares — the earnings attached to one share. Rising EPS is a good sign.

P/E RatioPrice ÷ earnings per share. How many dollars you pay for each $1 of yearly earnings. Judge it against peers and history.

Market CapitalizationShare price × total shares — the price tag on the whole company. The right way to compare company sizes.

Blue ChipA large, well-established, financially sound company with a long record — think household names that have weathered many cycles.

IndexA basket that tracks a slice of the market, like the S&P 500 or Dow. Used as a scoreboard for how "the market" is doing.

S&P 500An index of about 500 large U.S. companies — the most-watched gauge of the overall U.S. stock market.

ETF (Exchange-Traded Fund)A basket of many stocks (or bonds) you can buy and sell like a single stock. A cheap, easy way to own a whole index.

Mutual FundA pooled fund that owns many holdings, priced once a day after the close. Like an ETF's older cousin.

BondA loan to a company or government that pays interest and returns the principal at maturity. Generally steadier than stocks.

DiversificationSpreading money across many holdings so no single loser sinks you. "Don't put all your eggs in one basket."

PortfolioThe whole collection of investments you own, taken together.

VolatilityHow much and how fast a price swings. High volatility means bigger ups and downs — more risk, and sometimes more opportunity.

BetaA measure of how much a stock moves relative to the market. Beta above 1 swings more than the market; below 1, less.

Growth vs. ValueGrowth stocks are fast-growing and pricier; value stocks look cheap relative to earnings or assets. Two classic styles.

Ticker SymbolA company's short code on the exchange — like AAPL or KO. How you look up and trade a stock.

Bid & AskThe bid is the highest price buyers offer; the ask is the lowest price sellers accept. The gap is the "spread."

Broker / BrokerageThe firm (Fidelity, Schwab, Vanguard…) that holds your account and places your trades.

IPO (Initial Public Offering)When a private company first sells shares to the public and begins trading on an exchange.

Stock SplitDividing each share into more shares (e.g. 2-for-1). The price drops proportionally — you own more shares of the same pie, not more value.

BuybackA company repurchasing its own shares, which shrinks the share count and lifts earnings per share. An alternative to paying a dividend.

Capital GainThe profit when you sell an investment for more than you paid. Held over a year, it's usually taxed at a lower "long-term" rate.

Cost BasisWhat you originally paid for an investment — the starting point for figuring your gain or loss at sale.

Dollar-Cost AveragingInvesting a fixed amount on a regular schedule, buying more shares when prices are low and fewer when high. Removes the guesswork of timing.

Compound GrowthEarnings building on earlier earnings — the snowball effect that makes long time horizons so powerful.

Rule of 72A shortcut: 72 ÷ the growth rate ≈ the years for something to double. At 8% a year, about 9 years.

MoatA durable competitive advantage — a brand, network, or cost edge — that protects a company's profits from rivals.

Options (Call & Put)Contracts to buy (a call) or sell (a put) a stock at a set price by a set date. Advanced tools — powerful and risky.

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