Help! What Does All This Wall Street Jargon Mean?

I'm often hesitant to speak to some groups of new investors because I'm afraid of making their heads explode with Wall Street jargon, and I certainly don't mean to confuse anyone -- it just happens. I may scratch my head trying to understand a room full of doctors talking about medical terms, and frustration may prevent me from learning. When it comes to investing, it is technical, but you should not give up understanding -- it can be easy if you ask the right person to explain it to you.

Understanding the jargon of the market is going to be highly important as we move further away from the recession of 2008 -- volatility is coming back. Some may recall that in early February, the US stock market dropped by about 4% in a single day. Granted, the market is higher so the loss wasn't as impactful as it was in 2008, however, don't expect this to be a one-off: the market is going to be volatile in the near term since it simply can't stay on the rise uninterrupted forever.

If you want to know where to start, consider the following terms as bare-bones basics. And if you want to keep learning, keep coming back to GradMoney -- we would love to help you understand and elaborate on anything you'd like. 

Stocks

Stock, an individual unit of which is called a share, (basically) represents an ownership stake in a company. If you gobble up more than half of a company's shares, you're the majority owner; all of them, and you own the company outright. Stock is also called equity: just as you can have equity in a house, you can have equity in a company. Shares often come with additional goodies: they commonly confer voting rights in elections to the company's board and on issues of company policy. Also common are dividends: cash payments the company makes to shareholders on a monthly, quarterly, annual or when-they're-feeling-flush basis. These payments are made on a per-share basis; votes are counted the same way.

Bonds

Bonds are a different story. They are essentially loans the company takes out from bondholders, who can be retail investors – the little guy, you and me – or whoever else: pension funds, central banks, and sovereign wealth funds are big bond buyers. Bonds don't give their holders an ownership stake; they represent a debt owed by the company, which makes interest or "coupon" payments until the bond has matured – expired, essentially. Then the company pays back the face value. (This is a generic example; the exact terms vary.)

1 2 3 4
View single page >> |

Disclosure: None.

Disclaimer: 

All data and information provided on this site is strictly the author’s opinion and does not constitute any financial, legal or other type ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.