Beginning Investor Investment Terms
Written by: Jonas Elmerraji
Over the course of the past two months, readers have brought to my attention that there is a steep learning curve for investment terminology. That's why the focus of this month's Beginning Investor column will be investment terminology. The world of finance can be complex. This article doesn't intend to provide an all-encompassing set of definitions, but rather, as a general guide to help you understand the most frequently
used financial terms. There's no way we could cover everything - and I'm sure that we wont - but this should clarify some things for those new to investing. This month, we'll be looking at stock-related words in particular.StockLet's start with the absolute basics. The most
common type of investment is in the form of
stock. Stock is an equity security - that is,
when you buy stock, you are purchasing a
piece of that company. You are part owner,
and therefore entitled to help select the people
who run the company from day to day.
Money is made from stocks either by dividends,
or capital gains.Annual Report / 10-KThe annual report can come in two forms,
the glossy annual report, which looks pretty,
and is relatively easy to read and comprehend,
and the 10-K, which is an official SEC
filing that is required of public companies.
The 10-K is a legal document, and is therefore
much more difficult to read, however, it
can provide much more information.Capital GainsThe sell price minus the purchase price of
stocks are referred to as capital gains.DividendA dividend is a per share payment that a
company has the option to declare.
Essentially, dividends are a way for a company
to share their profits with its owners, the
shareholders. Public companies are not
required to declare dividends.EPSThe term EPS refers to a company's earnings
per share for the fiscal year.EquityEquity is just a term to signify that a particular
type of security grants you partial ownership
of a company.LiabilitiesLiabilities are a company's debts of any kind.Market CapitalizationThe Market Capitalization, or Market Cap, is
the total number of shares outstanding (held
by investors) multiplied by the share price on
any given day.Mutual FundA Mutual Fund is an investment company
whose sole business is to purchase stock in
other companies, and turn a profit for their
own customers. When you buy a share of a
mutual fund, you're essentially buying into
each and every company that that particular
fund holds. Mutual funds are can be a good
investment for those who are new to investing. read more »
Beginning Investor Investment Terms
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