Investing and Trading Terms

- Asset: Any resource owned by an individual or entity that has economic value and can provide future benefits.

- Bear Market: A market condition characterized by declining prices, typically by 20% or more from recent highs.

- Bond: A fixed-income investment representing a loan made by an investor to a borrower, usually corporate or governmental.

- Bull Market: A market condition where prices are rising or are expected to rise, typically by 20% or more from recent lows.

- Capital Gain: The profit earned from the sale of an asset when its selling price exceeds its purchase price.

- Dividend: A portion of a company's earnings distributed to shareholders, usually in cash or additional shares.

- Diversification: The practice of spreading investments across various assets to reduce risk.

- ETF (Exchange-Traded Fund): A type of fund that tracks an index, commodity, or basket of assets and is traded on stock exchanges like individual stocks.

- Fundamental Analysis: A method of evaluating a security by examining related economic and financial factors to determine its intrinsic value.

- Growth Stock: Shares in a company expected to grow at an above-average rate compared to other companies.

- Index Fund: A mutual fund or ETF designed to follow certain preset rules so that the fund can track a specified index.

- Inflation: The rate at which the general level of prices for goods and services rises, eroding purchasing power.

- Investment Portfolio: A collection of financial assets such as stocks, bonds, commodities, and cash equivalents held by an investor.

- IPO (Initial Public Offering): The process through which a private company offers shares to the public for the first time.

- Market Capitalization: The total market value of a company's outstanding shares, calculated by multiplying the share price by the total number of shares.

- Mutual Fund: An investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks and/or bonds.

- NAV (Net Asset Value): The total value of a mutual fund's assets minus its liabilities, often used to determine the price per share of the fund.

- Options: Financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before a specified date.

- P/E Ratio (Price-to-Earnings Ratio): A valuation ratio calculated by dividing the current share price by its earnings per share (EPS), used to assess stock value.

- Portfolio Diversification: The strategy of investing in different asset classes or sectors to reduce overall risk in an investment portfolio.

- Rebalancing: The process of realigning the weightings of a portfolio's assets back to their original target allocations after market fluctuations.

- Risk Tolerance: An investor's ability and willingness to withstand losses in their investment portfolio without panic selling.

- ROE (Return on Equity): A measure of financial performance calculated by dividing net income by shareholder's equity, indicating how effectively management uses equity financing.

- Securities: Financial instruments that represent ownership positions in stocks (equities), creditor relationships with governmental bodies and corporations (bonds), or rights to ownership as represented by an option.

- Short Selling: The practice of selling borrowed securities with the intention of buying them back later at a lower price for profit.

- Stock: A type of security that signifies ownership in a corporation and represents a claim on part of the company's assets and earnings.

- Stock Exchange: A marketplace where stocks are bought and sold, providing liquidity and transparency for investors.

- Technical Analysis: An evaluation method that uses historical price data and trading volume patterns to forecast future price movements in stocks or markets.

- Treasury Bonds: Long-term debt securities issued by the U.S. Department of the Treasury with maturities ranging from 10 to 30 years.

- Volatility: A statistical measure of the dispersion of returns for a given security or market index, often associated with risk levels.

- Yield: The income generated from an investment, typically expressed as a percentage based on the investment's cost or current market value.

These terms provide a foundational understanding for anyone looking to delve into investing.