How to Speak Stock Market

The stock market is a confusing and convoluted mass of numbers and strange jargon that kind of makes it feel like a special money club you’re not invited to.

ASX is in, you out, FOOL!

For example, news.com.au writes; “Benchmark U.S. crude added 22 cents to $37.26 per barrel in electronic trading on the New York Mercantile Exchange.”

You what, mate? Why are you putting your money into a barrel of oil? Use a piggy-bank at the very least.

In an attempt to clear up some of the confusion, allow me to sherpa you up the financial everest that is the stock market. Stay close and try not to look down, the fall can be deadly.

Yikes.


Shares


Let’s start with the basics. Shares are essentially pieces of a company that can be bought or sold on the stock market. These pieces represent a portion of the companies assets and earnings.

So if you own shares in, lets say, Apple, you own part of all of their stuff.

When Apple does well, their stocks increase in value and in turn, you’ve earned money on your investment. Look at you go!

Cha-ching!


Stock Broker


Someone that buys or sells stock for you in exchange for a commission. Think of them as a real-life stock market sherpa. They know what they’re doing…assuming they’re good.


Stock Exchange


A place where stocks are bought and sold. The one you’ll hear the most about in Australia is the Australian Securities Exchange, or ASX.

When the market is doing well, good times are had here, when it’s bad, not so much.


Blue Chip Stocks


Big companies that have a good track record in terms of performance. In Australia, these are companies like BHB Billiton, Commonwealth Bank and ANZ.

These are generally seen as a low risk investments, so if you’re ready to take a dip in the stock market pool, it’s a good place to start.


Dividend


A term favoured by many stock-jockey fat-cats, a dividend is a portion of a companies earnings that are passed on to shareholders on a quarterly or yearly basis.

So if the company you invested in is making mad coin, they’ll pass a bit of that on to you, but not all companies will do this.

And we could all use a few dividends in our lives, AMIRIGHT!?

You said it, sister.


Initial Public Offering (IPO)


The first sale of shares by a company on the stock market.

If the stock market were a school, and the children were companies selling stock, the new kid in class would be presenting an IPO on his first day.

This ones paying out!


Portfolio


If you own stocks, regardless of the quantity, congratulations my friend, you got yourself a portfolio.

A portfolio of stocks can range from just one to, well, there’s no limit. Go wild.


Volatility


This refers to the movement in the price of stock on the market.

If stock is volatile, it’s daily price changes dramatically. The term can also be used to describe the market as a whole.

For example; “The market was as volatile as the needle on Homer’s lie detector test.”

Dang.