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Hey, I’m Sam, Market Analyst at eToro, and here are nine investing terms every investor needs to know.
As you probably know, investing can involve a lot of terms which may sound unfamiliar or even weird the first time you come across them.
In this video we’re going to go over nine terms that you might have heard but weren’t really sure what they meant.
Let’s start off with Capital Markets.
Capital Markets are financial markets that bring together buyers and sellers to trade or invest in stocks, crypto, commodities, currencies and other financial assets.
This gives the opportunity for firms to expand and for people like you and me to invest in their potential success and possibly gain wealth over time.
Investment portfolio.
An investment portfolio is simply a collection of an individual’s investments. It is the place investors can see their own holdings and track their movement and exposure. These assets could range from stocks, bonds, commodities, cash, crypto to various ETFs.
Did I forget anything?
Index
An index is a basket of securities like stocks, commodities, or other financial assets that gather in one place.
This basket represents and measures the performance of a specific market or sector.
The most famous index is the S&P 500 which represents the US 500 largest market cap companies.
IPO
IPO, or Initial Public Offering, is where a private company turns public by selling its shares on a stock exchange, making them available to the general public.
Companies turn to IPOs to raise capital in order to grow or cash out. This gives investors a chance to get into the stock market and invest or trade public companies’ shares.
Dividends
A dividend is a distribution of a company’s profit in the form of a payment made by the company to its shareholders.
Dividend payments are decided by the board of directors of a company. They’re made quarterly or semi-annually and may take the form of cash payments or stock reinvestments.
Volatility
Volatility is the rate at which an asset increases or decreases in value over a period of time.
With higher volatility, in theory, the higher the risk for the investor.
However, with higher risk and volatility, there is also a potential for more reward. While some investors welcome volatility, other investors, who are more risk averse, choose to avoid it.
Where are you on this spectrum?
Bull markets versus bear markets
When a market moves a significant amount from a recent high or low peak, people tend to use terminology like, we are in a bullish or bearish market.
Usually, people talk about a bull or bear market when the market moves 20% or more between high or low peaks.
Going long versus going short
Going long, or taking a long position, refers to investors owning an asset because they believe that its price will appreciate in value in the future.
Going short, or taking a short position, is when investors believe the price of an asset will depreciate in value over time.
This will help you distinguish between the two:
Going Long may be referred to as opening a BUY position, while Going Short may be referred to as short selling or opening a SELL position.
Stop loss
A stop-loss order is a buy/sell order placed to limit the losses in case the price moves against your trade.
For instance, if you have Google stock at 100 and you want to limit the loss to 5 %, your stop loss will be at 95, and the system automatically will sell the stock as soon as the stock comes to 95.
That’s it for today. You can come back to this video anytime you want to refresh your memory, or jump to the next video to deepen your investing knowledge. See you soon!