Stock Market Terms You Need To Know Before Investing

Investing in the stock market is a clever way to build wealth over time, but it can also be unnerving for beginners. One of the biggest hurdles for new investors is understanding the jargon and terminology used in the stock market. It is vital to have a detailed knowledge of the market’s trends and terms.


A stock denotes a share of a company. When you purchase a stock, you become a shareholder in that company and can vote on certain company matters and receive a portion of the profits. You can buy as many company stocks as you wish for the price it sells for. You can find many softwares that can help you narrow stocks to invest in and money management today.


An index is a benchmark that measures the performance of a specific group of stocks. For example, the S&P 500 tracks the performance of the 500 publicly traded companies in the United States.


A portfolio is a compilation of investments owned by an individual or institution. A well-diversified portfolio should contain a mix of stocks from different revenue companies, bonds, and other asset classes to help manage risk.


Volatility refers to the amount of uncertainty or risk associated with the price of a stock. A volatile stock experiences large price swings over a short period, while a less volatile stock tends to move slowly and steadily.


A dividend is an amount a company gives its shareholders out of its profits. The majority of the time, dividends are paid in cash but can also be distributed in the form of additional shares of stock.

Bull and Bear Markets

A bull market means rising stock prices, while a bear market depicts falling stock prices. These terms sum up the direction of the stock market. Ideally, a person is supposed to buy stocks in a bear market and sell when the graph is rising.

P/E Ratio

The price-to-earnings (P/E) ratio is a metric that approximates a company’s stock price to its gains per share. A high P/E ratio may indicate that a stock is exaggerated, while a low P/E ratio may indicate that a stock is undervalued.

While this list is not exhaustive, it covers some of the most important terms you need to know before investing. By familiarizing yourself with these terms, you can make more informed investment decisions and understand the risks and rewards associated with investing in the stock market. Remember to research and seek the advice of a financial professional before making any investment decisions.