Demystifying Wall Street Terms

Have you ever tried to read a business article and felt pretty much lost half way through because of all the special terms the writer used? Wall Street lingo, in particular, can be quite perplexing if you are new to the stock market. In this investment arena, the term "bear market" does not allude to a trade of large furry mammals. Neither does "black Monday" refer to the "coach-firing" day following the final Sunday of the NFL season. Wall Street is a fierce arena; there's quite a learning curve. So don't foolhardily jump into it until you at least understand the stock market basics. This article won't turn you into a pro investor overnight but only aims to simplify some interesting Wall Street terms all beginning investors should know. To categorize it academically, this is probably Wall Street 101, lesson 1.

Automatic Dividend Reinvestment - A stock investment plan in which shareholders allow their dividends to be automatically used to purchase more shares of stock instead of receiving a cash dividend payment

Bear Market - A declining market with a sharp, prolonged plunge in the price of stocks

Big Board - Nickname for the New York Stock Exchange

Black Monday - October 19, 1987 when the Dow Jones dropped over 500 points

Blue Chip - The common stock of a reputable company with a history of earnings growth and dividend increases

Bull Market - A thriving market with a huge, continuous rise in the price of stocks

Dividend - A portion of the company's profits usually rewarded to shareholders on a quarterly basis

DJIA - Dow Jones Industrial Average. The average of the stock prices, calculated from the prices of the 30 leading industrial stocks

Earnings Per Share - A company's net income divided by the number of outstanding shares

Index - A statistical benchmark that measures a whole market, based on a representative selection of stocks or bonds

IPO - Initial public offering, aka new issue. A company's offering of stock for sale to the public for the first time

Liquid Asset - Cash or any types of asset that can be quickly and conveniently converted into cash

Margin - A collateral or deposit a client gives to a broker in order to borrow from the broker to buy stocks

Market Order - An order to buy or sell a certain number of shares as soon as possible, at the best available current price

Outstanding Shares - Stock shares that have been purchased and held by investors (either the company's insiders or the public), but not the shares that have been repurchased by the company.

Point - A yardstick for measuring a price change. For a stock, 1 point means it moves up or down by $1. For a bond, on the other hand, 1 point indicates a higher amount of dollars. For example, 1 point for a bond with a face value of $1000 actually means a $10 price change.

SEC - Securities and Exchange Commission, a federal agency that oversees the sale of stocks, mutual fund shares, stockbrokers and financial advisers, etc.

Spread - The difference between an investor's bid and an issuer's requested price

Stock Split - Division of outstanding shares of stock, made by the company's board of directors. For example, in a 2 for 1 stock split, a shareholder with 1 share will get one additional share whereas a shareholder with 2 shares will end up with 4 shares. Accordingly, the price for each share will be halved. Many companies do this when they think their share price has become too high.

Stock Symbol - It's also known as a "ticker symbol," which is a series of letters, numbers or combinations of both assigned to a stock on a particular stock market for trading purposes. For example, in the U.S. stock market, the ticker symbol for Apple Inc. is AAPL, whereas the one for Microsoft is MSFT.

Street Name - Stocks that are held in the broker's name rather than the customer's.

Treasury Shares - Stock shares that have been repurchased by the company that had issued them in order to decrease the number of outstanding shares on the open market

Underwriter - An investment banker who buys shares of a new issue of stocks and sells them to investors in order to make a profit on the spread

Yield - AKA a dividend yield. It's a way to measure how much cash flow you are receiving from your investment on a stock. To calculate a dividend yield, divide the annual dividend per share by the price per share.

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Comments 21 comments

billyaustindillon profile image

billyaustindillon 6 years ago

Very useful descriptions on wall street terms.


anglnwu profile image

anglnwu 6 years ago

Thanks for explaining basic terminology of WS. As one who is quite ignorant of this particular area, it is very enlightening. Rated useful.


Om Paramapoonya profile image

Om Paramapoonya 6 years ago Author

Thanks, billy and anglnwu. I'm not a big investor myself, but I do enjoy writing on this topic every once in a while. :)


akirchner profile image

akirchner 6 years ago from Central Oregon

Great information, Om! Enjoyed learning about something I'm rather not informed at all about. Will share with my hubby (the numbers guy).


June 6 years ago

Darling,

It's very helpful for my damn job, big thanks ^_^


Om Paramapoonya profile image

Om Paramapoonya 6 years ago Author

@akirchner - Hi! Thanks for your visit. Hope "the numbers guy" will like this as well. :)

@June - Cool! Hmmm what an awesome friend I am :P


Woody Marx profile image

Woody Marx 6 years ago from Ontario, Canada

Someday I am sure to have enough money that these terms will be important to me...so I'll studying them now! :)


Om Paramapoonya profile image

Om Paramapoonya 6 years ago Author

Good thinking. I hope that someday will arrive soon. Thanks for visiting. :)


dawnM profile image

dawnM 6 years ago from THOUSAND OAKS

great article thanks for clerig up all of the terms that are so confusing.


Om Paramapoonya profile image

Om Paramapoonya 6 years ago Author

You're welcome. Thanks for dropping by :)


Money Glitch profile image

Money Glitch 6 years ago from Texas

One does need to know the Wall Street terms in order to be knowledgeable of what is going on.

Another financial term everyone should become familiar with is derivatives which means, "the money glitch that can either rip you off or make you filthy rich." Hehehe, just kidding with the definition. Thumbs up, take care! :)


Om Paramapoonya profile image

Om Paramapoonya 6 years ago Author

Hehehe thanks for dropping by and making me smile ;)


katiem2 profile image

katiem2 6 years ago from I'm outta here

Oh this is great, I feel like I'm walking around with a light bulb burning bright over my head, I KNOW now I know! Great review of the wall street terms, thanks for the great heads up! Peace :)


Om Paramapoonya profile image

Om Paramapoonya 6 years ago Author

Thanks, Katie. But I think you already are very bright. You have both a burning light bulb and a shiny halo of goodness over your head. hehehe ;-)


BenjaminB 6 years ago

Yes OM there was a time when terms like this baffled me, that is until I read your hub. I already knew most of them ,but you did clarify a few better for me. Thank you!


Om Paramapoonya profile image

Om Paramapoonya 6 years ago Author

Thanks for stopping by and commenting, BenB. :-)


ekenzy profile image

ekenzy 5 years ago

this is good. share this to all.


BkCreative profile image

BkCreative 5 years ago from Brooklyn, New York City

Great info - few people know that the Dow Jones is only 30 companies. We should know these basic terms. Not be financially educated is costly - which we are all finding out now.

Thanks for the list. Something all students should have. Rated up!


Om Paramapoonya profile image

Om Paramapoonya 5 years ago Author

Thanks a lot for the read and kind comment! :)


radharenu profile image

radharenu 3 years ago from India

Excellent informative post explaining the basic terminologies of WS in a very lucid manner. Very helpful for first timers. Thanks for sharing.


Om Paramapoonya profile image

Om Paramapoonya 3 years ago Author

@radharenu - Thanks a lot for your kind words. I surely hope this article can be helpful to stock market newbies out there.

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