THE BASICS OF INVESTING WITH RYAN JAMES: RUDIMENTARY TERMS

By Ryan James

Terms for Evaluating Stocks

When investing, individuals must partake in rigorous gauging and research to determine whether a particular stock is safe and valid. Services allot many resources to provide information on every publicly-traded security. Some of these statistics aid prospective stockholders in deciding whether to purchase the asset; others lend information pertaining to the company or security at hand.

“Before anything else, preparation is the key to success.” — Alexander Graham Bell

Terms of Valuation

Services provide the following terms. The exact purpose of this circumstance is to serve as the rudimentary informational aspects of the security.

Open: the price of the security at the opening bell.
Previous Close: the price of the security at the closing bell of the antecedent trading day.
High: the most comprehensive quantitative value of a single share during a given period.
Low: the least comprehensive quantitative value of a single share during a given period.
Day Range: the numeric extension between the day’s low and high, expressed as “l–h.”
52-Week High (52W High/52W H): The most comprehensive quantitative value of a single share over the past year.
52-Week Low (52W Low/52W L): The least comprehensive quantitative value of a single share over the past year.
52-Week Range: The numeric extension between the year’s low and high, expressed as “52W L–52W H.”
Bid: the price the buyer is willing to pay for a seller’s stock.
Ask: the price a seller is willing to receive for his or her shares.
Spread: the difference between the bid and ask prices.

Terms of Assessment

Market Capitalization (Market Cap): the total value of the company. To determine the market cap of a public company, multiply the share value by the number of outstanding shares. Small-cap companies have valuations below two billion United States Dollars; mid-cap stocks, two to ten billion USD; large-cap, over ten billion USD.
Earnings per Share (EPS): the total earnings per outstanding share.
Price-Earnings Ratio (P/E or P/E Ratio): the ratio of a company’s share price to earnings per share (EPS). It is only applicable to profitable companies and is used to determine whether a company is overvalued or undervalued. Investors consider the statistic meaningless for an unprofitable corporation.
Price-Sales Ratio (P/S or P/S Ratio): the ratio acts in substitution of P/E. Investors designate it for unprofitable companies. It measures sales in lieu of earnings.
Volume (Vol): the number of shares bought and sold. It can be indicative of significant price fluctuations.
Dividend: a quarterly, semiannual, or annual payment by a corporation to its shareholders. It incentivizes investors to buy and hold stock. Not all companies pay dividends; most that participate are large-cap stocks.
Yield, Percent Yield, or Dividend Yield: the proportion of the value per share received by stakeholders; via dividend. The payout received is the dividend per share multiplied by the number of shares held during the ex-dividend date.
Ex-Dividend Date: the date during which the price of the dividend and shareholders of record are determined.
Dividend Pay Date: the date on which shareholders of record on the ex-dividend date receive payment. Shares attained between the two dates are not subject to receive the dividend payment.

Projective and Performance Terms

Rally: when the market or security performs exemplarily.
Correction: when the market or security suffers a sharp downturn.
12 Month Objective: analysts’ projected price for a share of a security within the next year.
5 Year Estimated Growth (5 Yr. Est. Growth): the estimated percentage growth of a stock within the succeeding five years.
Bulls vs. Bears: information regarding the prospects of a stock from the perspective of supporters and critics, respectively.

Personal Informational Terms

Return on Investment (ROI): the growth or wavering of an investment. Realized and unrealized gain/loss and gain/loss (g/l) are alternatives. Realized and unrealized interpret as former and current holdings, respectively.
Dividend Reinvestment/Dividend Reinvestment Program: a system that automatically transfers the cash payments of dividends into shares of the same stock.

Types of Trades

Many different media of orders execute with varying purposes. An investor may utilize a particular type of trade for speed or to maximize gains and/or minimize losses.

Market Order: a trade that instantaneously executes at the current price.
Limit Order: a conditional order to buy or sell at or below a particular price that one may maximize profits or minimize potential losses.
Stop Quote Order: an order to buy or sell a security at a stop price, at which point it becomes a market order.
Short Order: an order that allows the trader to profit off the shortcomings of a security.

Summary and Bottom Line

In the article, we discussed many terms and the types of trades. Understanding the latter will permits investors to make trades with a certain purpose. The subsequent issue will mention the types of stocks and their significance.

Disclosure: All statements and opinions expressed in this article are objective and my own. I am not a financial advisor. I do not recommend the trade or use of any particular stocks or services. I acknowledge the risks of investing.