Whether you are stuck understanding a forecast report or are listening to a podcast talking about stocks that are worth investing in, some stock market terms can seem difficult to remember.

At the same time, it is important to learn these terms, as knowing them by heart will ensure you can make informed decisions. There is ample stock vocabulary for beginners that is not only easy to remember but easy to understand as well. Here are some terms to familiarize yourself with.

15 Stock Market Terms To Help Beginners Make Better Decisions

1. Averaging Down

It is the strategy of buying more shares of an existing stock that you own even after the stock has lost its value in the market. These shares are additional stocks that help in maintaining a sustainable portfolio.

2. Beta

It acts as a measure of an asset’s volatility in the current market. The parameter is used to check the stock’s relative position when the market is constantly on the move.

3. Blockchain

A system of distributed databases used for record-keeping for transactions made in cryptocurrencies. These transactions are recorded across multiple computers and are spread across the entire network of involved computers.

4. Buyback

When a company repurchases its outstanding shares present in the stock market. This is usually done to decrease the number of shares of the company that are already present in the market and provide profits to the investors in the company. Buyback usually results in the prices of existing shares increasing.

5. Capitalization

The total value of a company’s outstanding shares. It is also known as market capitalization or market cap and is used as an indicative measure of the company’s size. It involves publicly traded shares and restricted shares that company insiders and management hold.

6. Capital Gains

It refers to the profit one earns from selling their stock holdings at a higher price during the trading period. For instance, imagine you bought stocks at the original price of $5 and sold them for $7.02. Then, you had a capital gain of $2.02 on the stock.

7. Debt-to-Equity Ratio

The D/E ratio is a clear depiction of debts a company has when compared to its assets. The D/E ratio calculates a company’s total debt by its shareholder equity. A company with a higher D/E ratio usually takes longer and finds it challenging to cover the liabilities before becoming debt-free.

8. Diversification

A tried and tested investment strategy that involves buying and investing in shares of different companies from different industries to always keep the portfolio in profits. This strategy can cushion against market dynamics.

9. Dividend Yield

The financial ratio measures the influx of cash dividends that were paid to the shareholders compared to the value of the market on a per-share basis. The dividend yield is calculated by dividing the dividend per share by the share’s market price. The resultant is then multiplied by 100. It can also be understood as a dividend expressed as a percentage.

10. Dollar-Cost Averaging

The practice of investing a fixed dollar towards a share regularly, irrespective of the share’s price. It is regarded as an excellent strategy to practice discipline while trading and developing a less stressful approach.

11. Economic Bubble

A situation in which an asset’s price rapidly increases to an extent where it exceeds the fundamental value of the asset. It is also known as a financial bubble.

12. Equal Weight Rating

The stock has the potential to perform in line with or along the line of something similar to the benchmark that exceeds the index that is being used for comparison.

13. Futures

A type of derivative contract agreement that makes the selling of an asset or stock at a set date and a set price. It is also a regarded risk management strategy that helps protect and offset any potential losses in other investments.

14. Going Long

Buying stocks with the expectation that their prices will eventually rise, resulting in profits.

15. Going Short

The act of selling stock to gain profits before the stock’s price falls. When a trader goes short, they borrow an asset and sell it with the hope of purchasing it later at a lower price.

Parting words

Getting accustomed to the stock market can seem daunting initially, but regular practice and ensuring you can understand the stock market terms will help you navigate through the market. These terms are used in everyday conversations related to the market. With that in mind, learning and understanding these terms will also help you make informed decisions and make the most (profits) from your portfolio.