Beginner Investor? Here’s some terminology to help guide you.
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Common stock: A type of security that represents ownership in a corporation. Common stockholders may receive a share of the company's profits (dividends) and are entitled to voting rights.
Preferred stock: A type of security that ranks ahead of common stock in terms of dividends and claims on assets in the event of liquidation. Preferred stockholders do not have voting rights.
Dividend: A portion of a company's profits that is paid to its shareholders. Dividends can be paid in cash, stock, or other assets.
Capital gain: The profit made from the sale of an asset, such as a stock, bond, or real estate.
Capital loss: The loss made from the sale of an asset.
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Liquidity: The ability to easily convert an asset into cash without losing value.
Risk: The possibility of losing money on an investment.
Return: The profit or loss made on an investment.
Diversification: The practice of investing in a variety of assets to reduce risk.
Portfolio: A collection of investments.
Brokerage account: An account that is used to buy and sell stocks, bonds, and other investments.
Investment advisor: A professional who provides advice on investments.
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Beta: A measure of a stock's volatility relative to the market.
PE ratio: The price of a stock divided by its earnings per share.
Yield: The income generated by an investment, such as a dividend or interest.
Short selling: The practice of selling borrowed shares of stock in the hope that the price will fall and the shares can be bought back at a lower price.
Margin trading: The practice of borrowing money from a broker to buy stocks.
Options: A contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date.
Futures: A contract that obligates the buyer to buy an asset at a specified price on or before a specified date.