Glossary
Stock market terminology
A plain-English glossary of the terms you'll actually encounter — from P/E ratio and ETF to moat and volatility. Each entry links to a deeper guide when one exists.
A
- Ask
- The lowest price a seller is currently willing to accept for a share.
B
- Bear market
- A period when prices fall 20% or more from recent highs. Sentiment turns cautious; opportunities appear for long-term buyers.
- Beta
- A measure of how much a stock moves relative to the market. Beta of 1 tracks the market; above 1 is more volatile, below 1 less.
- Bid
- The highest price a buyer is currently willing to pay for a share.
- Blue-chip stock
- A large, established, financially sound company with a long history of reliable performance — often a beginner favorite.
- Bond
- A loan you make to a company or government in exchange for regular interest payments and your money back at maturity.
- Book value
- A company's assets minus its liabilities — what would theoretically be left for shareholders if it were liquidated.
- Broker
- A licensed platform that executes your buy and sell orders in the market.
- Bull market
- A sustained period of rising prices — often 20% or more above recent lows — usually driven by optimism and strong fundamentals.
C
- Capital gain
- The profit made when you sell an investment for more than you paid. Long-term gains are typically taxed at lower rates than short-term.
- Compound interest
- Interest earned on both your original investment and the interest it has already generated. The single biggest force in long-term investing. Read the full guide →
D
- Dollar-cost averaging (DCA)
- Investing a fixed amount on a regular schedule regardless of price — reduces the risk of buying at a bad moment. Read the full guide →
- Diversification
- Spreading investments across many assets so one bad outcome doesn't sink the portfolio. Read the full guide →
- Dividend
- A cash payment a company sends to shareholders, usually quarterly, from its profits. Read the full guide →
- Dividend yield
- Annual dividend divided by share price, expressed as a percentage. Higher isn't always better — always check sustainability.
E
- EPS (earnings per share)
- A company's profit divided by the number of shares outstanding — a per-share view of profitability. Read the full guide →
- ETF (exchange-traded fund)
- A fund holding many stocks or bonds that trades like a single share — instant diversification in one ticker. Read the full guide →
- Expense ratio
- The annual fee a fund charges, expressed as a percentage. Low fees compound into large differences over decades.
- Economic moat
- A durable advantage — brand, scale, network, patents — that protects a company's profits from competitors.
F
- Free cash flow (FCF)
- Cash a business generates after paying to run and grow itself — often a truer signal of health than reported earnings. Read the full guide →
- Fundamental analysis
- Studying a company's financials and business to estimate what its shares are actually worth. Read the full guide →
G
- Growth investing
- Focus on companies expected to grow revenue and profit faster than average, often paying little in dividends. Read the full guide →
I
- Index
- A basket of stocks used to measure a market or segment — e.g. the S&P 500 tracks 500 large US companies.
- Index fund
- A fund that mirrors an index rather than trying to beat it. Low cost, broadly diversified, and consistent.
- IPO (initial public offering)
- The first time a private company sells shares to the public. Often volatile in the early months.
L
- Liquidity
- How easily an asset can be bought or sold without moving its price. Large stocks are liquid; small ones often aren't.
M
- Market capitalization
- Share price × number of shares outstanding. The total market value of a company.
O
- Options
- Contracts giving the right, not the obligation, to buy or sell a stock at a set price. Powerful, complex, and easy to lose money in.
P
- P/E ratio (price-to-earnings)
- Share price divided by earnings per share — a rough sense of how expensive a stock is relative to its profits. Read the full guide →
- Portfolio
- The full collection of investments you hold across all your accounts.
R
- Recession
- A period of broad economic contraction. Markets often fall before and rise before the recession officially ends.
- Risk tolerance
- How much value-swing you can accept without panicking. Honest self-assessment matters more than any formula.
S
- S&P 500
- An index of 500 of the largest US companies, weighted by market cap. Widely used as "the US market".
- Short selling
- Betting that a stock's price will fall by borrowing and selling shares, then buying them back later. Losses are theoretically unlimited.
- Spread
- The gap between the bid and ask. Tight spreads mean cheap trading; wide spreads signal low liquidity or high volatility.
- Stock
- A financial security representing ownership in a company. Prices reflect the market's best guess at that company's future. Read the full guide →
T
- Technical analysis
- Studying price charts and trading patterns to guess where prices might go next. Read the full guide →
- Ticker symbol
- A short code identifying a stock on the exchange, like AAPL or MSFT.
- Total return
- Price change plus dividends. The correct way to compare investments over time.
V
- Value investing
- Buying companies for less than you believe they're worth, and holding until price catches up. Read the full guide →
- Volatility
- How much a price moves up and down. High volatility isn't the same as high risk — it's the price of admission to higher long-term returns.
- Volume
- The number of shares traded in a given period. Rising volume often signals conviction behind a price move.
Y
- Yield
- The income an investment produces relative to its price, expressed as a percentage.