A stock market glossary in plain English
Short, plain-English definitions of common stock market and investing terms, from bear market to yield.
Financial news uses a lot of shorthand. This glossary explains common terms in a line or two each. Where we have a full guide on a topic, the term links to it.
A to B
Asset. Anything with value that can be owned, such as cash, shares, bonds, property or gold.
Bear market. A long, broad fall in prices. It is often described as a drop of 20% or more from a recent high.
Bid and ask. The bid is the highest price a buyer is offering right now. The ask is the lowest price a seller will accept. The gap between them is the spread.
Blue chip. A large, well-established company with a long record of steady business.
Bond. A loan to a government or company. The borrower pays interest and returns the money on a set date.
Bull market. A long, broad rise in prices.
C to D
Capital gain. The profit when you sell an investment for more than you paid. A capital loss is the reverse.
Central bank. The institution that sets a country's key interest rate, such as the Federal Reserve in the US or the Bank of Canada.
Correction. A drop of about 10% from a recent high. It is smaller than a bear market.
Diversification. Spreading money across many investments so that one bad result does less damage.
Dividend. A cash payment a company makes to its shareholders, usually from profits.
Dow Jones. A US index of 30 large companies. See What is the Dow Jones.
E to G
Earnings. A company's profit over a period, usually a quarter or a year.
Earnings season. The weeks each quarter when most large companies report their results.
ETF. An exchange-traded fund: a basket of investments that trades on an exchange like a single stock. See What an ETF is.
Exchange. A marketplace where shares are bought and sold, such as the New York Stock Exchange or the Toronto Stock Exchange.
Exchange rate. The price of one currency in another. See What moves the Canadian dollar.
GDP. Gross domestic product: the total value of goods and services an economy produces.
Growth stock. Shares of a company expected to grow faster than average. These often pay little or no dividend.
H to L
Hedge. An investment made to reduce the risk of another one.
Index. A list of stocks turned into a single number that tracks how they are doing as a group. See What is the S&P 500.
Index fund. A fund that simply tries to match an index rather than beat it.
Inflation. A general rise in prices, which means each dollar buys a little less.
Interest rate. The cost of borrowing money, shown as a yearly percentage. See How interest rates move stock prices.
IPO. An initial public offering: the first time a company sells its shares to the public.
Liquidity. How easily something can be bought or sold without changing its price much.
M to O
Market capitalization. The total value of a company's shares: the share price times the number of shares. Often shortened to market cap.
Mutual fund. A pooled fund run by a manager. Unlike an ETF, it is usually bought and sold once a day at a set price.
Nasdaq. A US stock exchange, and the name of an index weighted toward technology companies. See What is the Nasdaq.
Order types. A market order buys or sells right away at the current price. A limit order only goes through at the price you set or better.
P to R
P/E ratio. The share price divided by earnings per share. It shows how much investors pay for each dollar of profit. See What a P/E ratio is.
Recession. A broad, lasting drop in economic activity. See What a recession is.
Portfolio. All the investments a person or fund holds.
Rebalancing. Buying and selling to bring a portfolio back to its intended mix.
Return. What an investment gains or loses over a period, including any dividends or interest.
Risk. The chance that an investment loses value or does worse than expected.
S to T
Safe haven. An asset people buy for safety in uncertain times, such as government bonds or gold. See Why gold goes up when people are worried.
Sector. A group of companies in the same line of business, such as banks, energy or technology.
Share. A small piece of ownership in a company. Also called a stock.
Short selling. Borrowing shares and selling them, hoping to buy them back later at a lower price.
Stock split. When a company divides each share into several cheaper ones. The total value you own does not change.
Ticker. The short code used to identify a stock on an exchange.
TSX. Short for the S&P/TSX Composite Index, the main measure of the Canadian stock market. See What is the TSX.
V to Y
Valuation. An estimate of what a company or share is worth, often using measures like the P/E ratio.
Volatility. How much and how quickly prices swing up and down.
Volume. The number of shares traded over a period.
Yield. The yearly income from an investment, shown as a percentage of its price. For a bond, it is the interest return; for a stock, the dividend return.
Yield curve. A line showing bond yields from short to long maturities. When short-term yields are higher than long-term ones, the curve is called inverted.
This is general information, not investment advice.
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