Investing Terms School Didn’t Teach Us
Welcome to Part 1 of our series on Investing Terms School Didn’t Teach! In this exciting article, we dive deep into the world of common investing terms that were often overlooked during our educational journey. Brace yourself for a mind-expanding experience!
From the fundamentals of bonds and options to the intricacies of diversification and hedge funds, we leave no stone unturned. Fasten your seatbelts as we demystify these terms and ensure you’re well-equipped for your financial journey!
Remember, knowledge is power, and we want to empower you to take control of your financial future. Don’t let these investing terms remain a mystery any longer!
Dividends
Let’s start with “dividends”. Dividends are a share of a company’s profits that are distributed to its shareholders. Another way to think of this terminology is it is like getting a bonus for being a partial owner of the company. So, when you see the word “dividends”, think about the extra money in your pocket regardless if the company stock share price was positive or negative. If you were to think about this in banking terms, similar to the interest the bank pays on a money market or CDs.
Market Capitalization
Next up, “market capitalization”. This term refers to the total value of a company’s outstanding shares of stock. It’s a way to measure the size and worth of a company. So, when someone talks about a company’s market cap, they are essentially talking about its value. This is calculated by multiplying the stock price by the total outstanding shares.
Stock Indices
Moving on to “stock indices”. These are statistical measures used to track the performance of a group of stocks. They represent a specific portion of the market and are often used as benchmarks to compare the performance of investments. So, if you want to keep track of how well the market is doing, pay attention to stock indices. For example the Dow Jones keeps track of the 30 most capitalized companies in the US stock exchange. The S&P 500 keep track of the 500 most capitalized companies in the US Stock Exchange.
Bull & Bear Markets
Now, let’s talk about “bear and bull markets”. A bear market refers to a downward trend in the market, indicating a decline in stock prices. On the other hand, a bull market refers to an upward trend, indicating a rise in stock prices. Understanding these terms can help you navigate market trends and make informed investment decisions.
That’s it for today’s lesson on investing terms school didn’t teach. Stay tuned for Part 2, where we’ll uncover more hidden gems of the investment world.