Stock Market Game Vocabulary Flashcards
common stock/equity
a security that represents ownership in a company; sold by the company to the investors in the form of shares
bond/debt
a debt investment with which the investor loans money to a company for a specified period of time and interest rate (i.e. if you own a GE Corporate Bond you have technically lent GE money and will be paid back with interest after a specific time period)
long position
the net ownership position of a particular security; if you own 500 shares of AAPL, you are said to be “long 500 shares”
short position
when you sell something you don’t own yet with belief you can borrow it to cover the sale, then purchase it later at a lower price that you sold it for; you will then use the purchased shares to return the shares you borrowed
bull market
a market in which prices are rising (buy orders exceed sell orders)
bear market
a market in which prices are dropping (sell orders exceed buy orders)
mutual fund
a professionally managed group of assets which investors can buy in the form of shares in the fund; usually very well diversified
diversification
a wide variety of securities within a given portfolio; this is done to minimize risk as a “diversified” investor will not be overly exposed to any company/market/industry type downturn
industry type/sector
a group of companies that share the same or related products/ or services (i.e. Ford and GM would both be in the automotive sector)
ticker symbol
an abbreviated way of identifying stocks; all stock trades are entered using ticker symbols; as a general rule of thumb, all stocks listed on the NYSE have 3 letter ticker symbols (i.e. Prudential = PRU), all stocks listed on the NASDAQ have 4 letter symbols (i.e. Apple - AAPL)
earnings
the amount of money a company makes from selling its goods and/or services after paying expenses and taxes
earnings per share (EPS)
the total earnings of a company divided by the number of shares outstanding
price/earnings ratio (P/E)
a ratio that compares a stock’s price to its earnings; lower P/E ratios are preferable as it implies higher earnings compared to the price (ex. AAPL is priced at $341 and earns $18 per share (EPS) so 341/18 has a P/E of 18.94)
beta
a measure that compares a particular investment’s riskiness to that of the market as a whole; a beta of 1 means the investment equally risky as the market, less than 1 means the investment is less risky than the market, greater than 1 means more risky than market; obviously, lower betas are preferable if your risk tolerance is zero
initial public offering (IPO)
when a company issues common stock in the form of shares to the public for the first time in order to raise capital
