One of the most complicated parts of stock market investing is the fact that so much of the financial universe is steeped in jargon. Jargon is a type of language that is completely unique to that particular field. Professional sports use a significant amount of jargon, as do certain jobs. In investing, the amount of jargon is staggering and if you don't know what others are talking about, you could miss out on an amazing opportunity. One important piece of jargon that you may hear once you start to learn about the exciting world of stock trading is a value stock. Before we define a value stock, let's take a look at how stock trading works.

To make money in stock trading, the key is to find a company that is on the brink of making it big, buy their stock when it is still inexpensive and then sit back and watch that company make it big. When they do, their stock price will skyrocket and that small investment you made will be worth much, much more than it was when you bought it. This leads to a whole host of interesting stock investment strategies that many people try to employ to find that next big thing.

This brings us to the world of value stocks. A value stock is defined as a stock that seems to be worth less than it should be, based on a breakdown of what the company is worth right now and what it is likely to be worth in the future. What's holding this stock back from being worth what it should? It could be any number of things, but an investor looking to buy value stocks hopes that these companies will break through and make it big in the coming months and that those stocks will be worth much, much more in the near future.

How does one find a value stock? The key to discovering value stocks lies in the dividend yield. Don't let these complex terms scare you; a dividend yield is a simple mathematical calculation that can help you find the stocks that are about to hit it big. To figure out a company's dividend yield, you look at how much a company pays out each year in stock dividends compared to the price of the stock in the first place. In essence, you are looking at how much profit, percentage-wise, you would make off the stock. The companies that have the highest dividend yield are thought to be the best value stocks on the market.

This style of investing has even given birth to a whole philosophy when it comes to picking stocks. Known as ‘The Dogs of the Dow', it is a method of picking stocks that millions of people swear by. With The Dogs of the Dow, you simply pick out the top ten stocks at the beginning of each and every year that have the highest dividend yield and buy stock in them. You wait until the end of that year to change your investment. Many people believe that this simple investment plan can pay off, and since vital statistics like dividend yield are public knowledge, it only takes a few seconds to decide which stocks to buy. Does this method always work? Of course not, if it did, it would be the only investing anyone would ever need to do. With any kind of stock trading, there are risks involved and the chance of loss is always possible, but value stocks can pay off in a big way if you do your research first.