Excessive acronyms can be a useful tool for alienating readers in written communication. Even well-intentioned authors frequently overestimate how acquainted their readers are with these acronyms, which causes uncertainty and confusion. However, do not worry! This article tries to make the top 20 stock market abbreviations simpler so that beginners can confidently begin their investing journey.
Table of Contents:
- Understanding Stock Market Abbreviations
- List of Common Stock Market Abbreviations
- Div Yld
- P/E Ratio
- Stock Ticker
- Stock Symbol Lookup
Understanding Stock Market Abbreviations
Numerous acronyms are used frequently in the realm of investing. Everything seems to be shortened, from organizations to securities. This might seem intimidating to a beginner investor. Untrained individuals may perceive the stock market as a complex organism with its own distinct language, set of norms, and economy.
Young investors may dismiss the stock market as a scam or think that only experienced investors can make money in the financial markets as a result of this perception of intricacy. That is not, however, the case. The 20 most popular stock market abbreviations that novice investors will run into are listed alphabetically in this piece.
List of Common Stock Market Abbreviations
All-time high (ATH) is a term used by traders to indicate a security that is currently being traded at its highest price ever. To illustrate, if Apple’s stock is trading at $150 per share, and this is the highest price it has ever traded at, it would be said to be trading at its ATH.
Business-to-business (B2B) refers to a type of transaction or business that is conducted between two businesses. An example of this is Palantir, a US-based company that develops software systems for other businesses or institutions such as the US Government or the National Health Service (UK). This is an example of a B2B business model.
Dollar-cost averaging (DCA) is an investment strategy designed to minimize the impact of market volatility on investors. This strategy involves investing a consistent and regular amount into the market at specific intervals. By doing so, the average price at which an investor purchases a security is reduced, thus mitigating the impact of market volatility.
The Dow Jones Industrial Average (DJIA) is a well-known index that monitors the performance of 30 large publicly traded companies across the major US exchanges.
Dividend yield is a metric that informs investors of the amount of cash they can expect to receive from their dividends. For instance, if a stock trading for $100 has a 5% dividend yield, investors can anticipate receiving $5 per year in dividends from owning that stock.
Earnings per share (EPS) is a financial measure used to evaluate a company’s profitability. The higher the EPS, the more profitable the company is considered to be. It is calculated by dividing a company’s net profit by the total number of outstanding shares.
Exchange-traded funds (ETFs) have gained popularity in the stock market as a type of fund that trades on stock exchanges like other stocks. Similar to mutual funds, ETFs buy assets such as stocks, and investors can purchase shares of the ETF in the hopes that its value will increase based on the assets purchased. Essentially, ETFs can be viewed as baskets of stocks that allow investors to purchase shares in a diversified portfolio of securities, rather than buying individual stocks.
Initial public offering (IPO) is the process by which a company goes public and sells its shares on one of the exchanges. After completion of this process, companies can sell their shares to the general public. An IPO marks the first time that the public can purchase a company’s shares on the public market. For instance, on December 9th, 2020, Airbnb had its IPO, which was the first day the public could buy shares in Airbnb.
Mutual funds are similar to the previously mentioned ETFs and can be seen as a portfolio of stocks in which investors can invest. Unlike ETFs, mutual funds cannot be bought and sold like individual shares. Investors are required to wait until the end of the trading day to sell or close their positions in a mutual fund.
The National Association of Securities Dealers Automated Quotation (NASDAQ) is a US stock market that is regulated by the SEC. It hosts over 3000 companies, including some of the world’s most prominent technology companies such as Apple, Google, and Microsoft.
The New York Stock Exchange (NYSE) is a stock exchange situated in New York City. As its name implies, it is the largest stock exchange globally, based on the total market capitalization of all its listed securities.
OTC (over-the-counter) refers to how companies that are not listed on major exchanges like the NASDAQ or NYSE trade. Such companies trade directly between two parties without the supervision of an exchange. These markets are decentralized and do not have a physical location. Typically, the companies that trade here are those with low market capitalization or penny stocks.
The price-to-earnings ratio (P/E ratio) is a financial metric that is similar to the earnings per share mentioned earlier. Investors use this calculation to determine whether a company is undervalued or overvalued.
Return on investment (ROI) is a profitability metric that investors use to determine how much money they have made or may make from an investment. It is a simple calculation used to evaluate the performance of an investment. For instance, if an investor puts in $100 today and sells it for $125 tomorrow, the ROI would be 25%.
Standard & Poor’s is a company that produces stock market indices that serve as investment benchmarks. These indices are helpful in monitoring the performance of specific sectors. For instance, the S&P 500 index tracks the top 500 companies in the United States. Investors utilize the S&P 500 as a general gauge of the US stock market’s performance.
The Securities and Exchange Commission (SEC) is an autonomous federal agency responsible for upholding order and equity in the US financial markets. The SEC’s primary objective is to safeguard investors and guarantee the organized operation of the US financial markets.
Stop-loss is a risk mitigation mechanism utilized by traders when trading in the markets. The stop-loss is designed to automatically close positions that fall below a specified level. For example, if a trader purchases a company’s share at $100 with the expectation of selling it for $110, they may set a stop-loss at $98. This limits their maximum loss on the trade to $2 because once the share price falls to $98, the stop-loss will trigger, and the position will automatically close.
A stock ticker, also known as a stock symbol or ticker symbol, is a sequence of characters (1-4 on the NASDAQ or 1-5 on the NYSE) that identify securities on publicly traded markets. For instance, Apple’s ticker symbol is AAPL, while Microsoft’s ticker symbol is MSFT. They are essentially a shorthand way of describing a company’s stock.
The volatility index, commonly known as the VIX, is a metric that investors occasionally reference. The VIX helps investors assess how severe the price fluctuations in the S&P 500 will be in the short term. An often-heard phrase among investors is “when the VIX is high, it’s time to buy. When the VIX is low, look out below.”
The ex-dividend date is the day on which a company’s dividend allocations are established. To be eligible for a dividend payment, an investor must own the stock before the ex-dividend date. If an investor purchases a dividend stock after the ex-dividend date, they will not be entitled to receive a dividend until the next allocation is made.
Stock Symbol Lookup
As mentioned earlier, stock symbols are 1-5 character symbols used to identify securities traded on public exchanges. Looking up these symbols provides traders with a wealth of information on that specific stock, including market capitalization and dividend yield. So, where is the best place to find a company’s ticker symbol?
One of the quickest ways is to Google the name of the company along with the word “stock.” For instance, if you search for “Apple Inc. stock,” you will see the ticker symbol AAPL on the right-hand side of the screen. However, this may not always be the best approach.
It’s possible for companies to have similar names or ticker symbols, and many investors have made the mistake of purchasing the wrong stock when trying to buy a stock quickly. If you’re unsure about the stock symbol of a company you want to invest in, it’s always best to look it up in the listing directory of the exchange it trades on.
For instance, if an investor wants to know the stock symbol for American Airlines Group, they can go to NYSE listings and locate the listing. The stock symbol will be on the left-hand side of the name, and in this instance, the stock symbol is AAL. The NASDAQ has a similar search function that traders can utilize to locate stock listings.
Twenty of the most popular stock market acronyms have been covered in this article, but this is not a complete list. When making stock market investments, investors should be conscious of a plethora of additional crucial acronyms.
Every opportunity should be taken by investors to keep learning about business. The famous quote from Warren Buffett goes, “The more you learn, the more you earn.”
Although learning about the stock market may seem intimidating at first due to abbreviations, once buyers are comfortable with them, they will become second nature and they may even recognize their value.