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Stock Market Terms Defined and Decoded

Have you ever been confused by the jargon used on Wall Street? Wouldn’t it be nice to have stock market terms defined in plain English?

In today’s article, I’m pulling back the curtain and decoding some industry jargon so you can be better informed about what’s going on in the market and about your investments.

What are Blue Chips?

Stocks that have a history of consistently strong 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. 

What does Hedge mean?

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 may not be hurt. 

What’s the 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. 

What is Thin Trading?

A period when the market has relatively few buyers and sellers.

The months of August and December commonly see thin trading, as summer vacations and holidays impact the volume of buy and sell orders that traders process.

The phenomenon can also apply to certain stocks or stock market sectors.

Related: “Sell in May and Go Away”

What does Volatility mean?

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

Related: Market Cycles and Retirement: Sequence of Return Risk in Portfolios

What’s a 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%. 

Stock Market Terms Defined in Plain English

Hopefully, this clears up a little of that jargon. Having stock market terms defined in plain English is a great way to keep yourself educated, up-to-date, and informed about your investments.

I am happy to clarify more, and I am ready to use my insight to help you establish a clear path toward the pursuit of your financial goals. 

If you’re thinking of making changes to your retirement plans or need help navigating your own personal situation, please be sure to contact our office before making any changes.