Building your Vocabulary for the Stock Market

It’s nearly impossible to learn about stock market investment unless you manage to penetrate its language. Below are the most important terms you need to take to heart if you’re serious about understanding the stock market.

IPO

An IPO refers to an Initial Public Offering. It is an event in stock market investment that happens when a company sells stock to the public for the first time. The slang for an IPO is also “going public”.

Underwriter

The underwriter is not a single person but a bank or financial institution. It is another term for the group that’s handling all the paperwork and maneuvering the company’s IPO.

Difference between Market Cap and Share

A market cap is the principal amount of money you need to shell out to earn a share of stock in the company. A share, on the other hand, is an abstract representation of the investor’s ownership of the losses, profits and assets within a company. An investor is also called a “shareholder”.

Earnings per share

Theoretically, each share of the company’s stocks is equivalent to a monetary value. The earnings per share represent the profit that an investor is entitled to, depending on the number of shares he owns.

Ticker Symbol

On the floor, the ticker symbol is the two or three-letter-abbreviation that stands for a particular stock. For example, KO stands for “Cola Cola”.