So you just watched ‘The Wolf of Wall Street’ for the eighth time and have a sudden urge to start investing. Yea, we get that.
Everyone starts somewhere, so if you’re a beginner investor, you’re in the right place.
Just to get it out of the way, this post is not financial advice! This is simply meant to help folks learn the lingo and get a bit more comfortable with the idea of putting their money to work with investment opportunities.
With that being said let’s get into it shall we…
Investing your hard earned money is an intimidating thought for a lot of people, especially for a beginner investor. And let’s be honest, we are in some volatile times, making the thought of playing the stock market even more daunting.
On the flip side, investing can potentially be a great way of putting your money to work and make money in your sleep while generating passive income over time to ultimately help secure your financial future.
This is the draw for beginner investors, but it’s important to understand some of the basics before diving right in.
So, without further delay, lets dive into the stock terms every beginner investor should know.
5 Stock Terms we feel every beginner investor should familiarize themselves with:
1. Annual Report:
An annual report is a comprehensive document that all publicly traded companies must publish each year. It provides a detailed overview of the company’s financial performance, management, and operations.
Additionally, annual reports include information such as income statements, balance sheet, cash flow and a letter from the CEO. These are extremely valuable for investors as it provides insight into a company’s overall financial health, revenue generation, operations, and future prospects.
Most of the time you can find a companies annual report directly on their website; but you can also check out AnnualReports.com which also provides access to most companies Annual Reports.
2. Dividend:
For beginner investors, this is perhaps one of the most important terms to know when wanting generate passive income through investing. Dividends are payments in the form of cash or additional shares by companies as a ‘reward’ to shareholders for their investment.
Depending on the company, dividends may pay out quarterly, bi-annually, or annually making this an attractive passive income investment strategy.
Check out this list from Bankrate to learn more about investing in dividends and 10-high dividend stocks you can invest in.
3. Market Capitalization (aka Stock Capitalization):
This term refers to the overall market value of a company. This number is calculated by multiplying a company’s current share price by the total number of outstanding shares.
As a beginner investor, knowing the market capitalization of a company gives you a strong indication of the size of the company and its importance within an industry to gauge its potential for growth.
4. Listing and Delisting:
This one is pretty self-explanatory, but still important to note as you explore investing.
Listing refers to the process of a company having their shares available for trade on the Stock Exchange, while delisting means a company is being removed from the Stock Exchange and can no longer be traded on the capital market.
5. Stock Split:
A stock split is a corporate action companies take to increase the number of outstanding shares. Existing shareholders will be issued additional shares of the stock, while the cost per share decreases, making it more attractive, affordable and accessible to a wider range of investors.
Understanding these five stock terms are a great jumping off point for anyone interested in investing their money and will serve you well in your research of the market and where to invest.
Or just use them to impress your in-laws during your next dinner conversation.
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