Basic Stock Market and Investing Terms

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Basic Stock Market and Investing Terms

Here are a few basic investing terms you should know. You’ll hear and read these terms on the news, at work or on the web.

Blue-chip Stocks – Blue-chip Stocks are stocks of companies known for their long-established record of earning profits and paying dividends. Blue chips tend to be large, stable and well known companies. The term supposedly comes from poker, where the most valuable chips are blue.

Consumer Price Index – The Consumer Price Index or CPI reports price changes, on a monthly basis, in the cost of living for such items as food, housing transportation, entertainment, clothing and other miscellaneous expenses. It is used to adjust Social Security and is used by employers to determine cost-of-living wage and pension increases.

Dividends –  Income paid to investors holding a share of stock in a company. It is a portion of the company’s profits.

Composite Index – Malaysia stock market index. It is the average prices of 100 blue-chip stocks that are traded daily on the Bursa Malaysia.

Initial Public Offering (IPO) – The first time a company offers stock to the investing public. It is usually a new company that is looking to expand its business.

Price/Earnings Ratio (P/E Ratio) – The current price of a stock divided by the current earnings per share. It is a widely used statistic that tells investors how expensive a stock price is. It measures the level of confidence investors have in a company. The higher the P/E ratio, the more valuable the stock is considered.

Return – The percentage of profit you make on an investment.

Securities – The common name for stocks, bonds, mutual funds and other investment vehicles.

Volume – The number of lots or contracts traded during a specific period for a security or market. For example, you might hear that ABC company with volume 3000. That means that 3000 lots (3000 lots x 100 shares = 300,000 shares) of stock was traded that day. For FKLI and CPO contract, volume 3000 mean there were 3000 contracts was traded that day.

Yield – The amount a holder of an investment is paid each year for leaving his or her money invested in that instrument. Yield is usually stated as a percentage of the security’s price.