Have you ever been confused by the jargon used on Wall Street? Allow me to translate some esoteric stock market terms into plain English.
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. (2)
Hedge: 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.
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.
Thin Trading: 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.
Volatility: 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.
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%.
Hopefully, this clears up some Wall Street jargon that you may have heard before but never fully understood. Of course, there are many more terms, but I will save those for another time.
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.