Investment Terms for Beginning Investors

Have you ever been confused by the jargon used on Wall Street? Let’s translate some esoteric stock market terms into plain English.

Blue chips

Stocks that have a history of consistently reliable dividend payments, issued by huge corporations with solid management. In addition, a nickname for the Dow Jones Industrial Average, which includes 30 companies that usually deserve such a label.

Hedge

A position you take with your money or investments to try and counteract or control your losses. An investor who owns a lot of bank stocks, for example, might hedge by also investing significantly in utilities shares. The two industries have little, if any, relationship, so if stocks suffer in one industry, the other might not be hurt.

Moving average

This is simply the average, per-share price of a stock within a set period – it could be 50 days, 100 days or 200 days. Stock market indices like the Dow and Nasdaq have moving averages, too, measured in the same way.

Thin trading

A period when the market has relatively few buyers and sellers. The months of August and December commonly see light trading, as summer vacations and holidays impact the volume of buy and sell orders that traders process. The phenomenon also can apply to individual stocks or stock market sectors.

Volatility

The price movement of a stock (or a stock index). Some stocks are not very volatile; others are. Thinly traded stocks might see more significant price swings than others.

Yield

This is often confused with the return of a stock, but it is not the same. Yield is a measure of dividend from a dividend-paying stock, and you figure it out by dividing the yearly dividend payment by the initial price you paid for the shares. Say you buy shares of a firm for $10 and they yield $0.45 annually. Your yield is 4.5%.

Jeremy Swank, CHFC may be reached at (419) 522-6636 ext. 101 or JSwank@TheStrategicWealthGroup.com.


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