Understanding the terminology used when it comes to stocks, investing, and even Wall Street is challenging to many people. Below are some terms we hear quite often summarized in order to help you.
Blue Chips: Stocks that have a history of consistently strong dividend payments, issued by big corporations with solid management. It’s also a nickname for the Dow Jones Industrial Average, which includes 30 companies.
Hedge: A position you take with your money or investments to try and counteract or control your losses. An investor who owns a lot of bank stocks, for example, might hedge by also investing significantly in utilities shares. The two industries have little, if any, relationship, so if stocks suffer in one industry, the other may not be hurt.
Moving Average: This is simply the average, per-share price of a stock within a set period – it could be 50 days, 100 days, or 200 days. The Dow Jones and Nasdaq also have moving averages that are measured in the same way.
Thin Trading: A period when the market has relatively few buyers and sellers. The months of August and December commonly see thin trading, as summer vacations and holidays impact the volume of buy and sell orders that traders process. The phenomenon can also apply to certain stocks or stock market sectors.
Volatility: The price movement of a stock (or a stock index). Some stocks are not very volatile, others are. Thinly traded stocks may see greater price swings than others.
Yield: This is often confused with the return of a stock, but it is not the same. Yield is a measure of dividend from a dividend-paying stock, and you figure it out by dividing the yearly dividend payment by the initial price you paid for the shares. Say you buy shares of a firm for $10 and they yield $0.45 annually. Your yield is 4.5%.
Hopefully, this clears up a little of that stock market jargon. Although this is a fairly short list, there is much more to learn about. If you have any questions regarding any financial topic, reach out to a financial professional for expert help.