Listening to people speak about investing can sound like a different language if you don’t understand what the different terms mean. Let’s talk about five of the most common investing terms!
Stocks/shares- these are simply a way of representing ownership of a company. You can buy shares on the stock market and each share represents a unit of ownership. When you buy shares, you are now a shareholder of that company.
IPO- Initial Public Offer. This is the first time that a company is listing on a stock exchange. This means that the general public will be able to purchase shares.
Dividends- When some companies make a profit, they pay their shareholders a percentage of that profit. The amount that gets paid out to each person depends on the amount of shares they own. Not all companies on the stock market pay dividends, so if that’s something that you’re interested in, make sure you do research on which companies do.
Capital gains- Capital gains are the profits you earn when you sell an investment for more than you paid for it. For example, if you buy a stock for $50 and sell it for $70, your capital gain is $20.
Compound interest- Compound interest is the process where your investment earns returns, and those returns generate additional earnings over time. It’s one of the most powerful tools for growing wealth.
There are MANY more investment terms that you need to know to understand the language of the stock market, but don’t be intimidated. There are many resources out there that break down this information so you can understand it.
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