As noted in the article preceding this one which addresses general stock market terms whose first letters fall between the letters A – L, it can take a bit of time when you’re new to buying and trading corporate stocks to finally feel comfortable with all of the new terminology. However, once you start using it on a regular basis, it will become much easier to understand what your stockbroker and others are trying to discuss with you.
If you haven’t already read the first article, please feel free to go and review it by “clicking” on this link. Otherwise, you can go ahead and review the following alphabetical listings to increase your understanding of how best to navigate Wall Street and other markets and exchanges.
Common Stock Market Terms: M – Z
- Margin account: A brokerage firm may provide its best customers with this type of account that allows them to buy securities using money the firm loans to them;
- Mutual fund: Operated by an investment company, this type of fund “pools money from shareholders and invests in various instruments such as stocks, bonds, options, futures, currencies, or money market securities;”
- NASDAQ: This is the acronym for the National Association of Securities Dealers Automated Quotations. This national market is “comprised of over 3,000 companies whose shares trade via a computerized system that provides brokers and dealers with price quotes;”
- New York Stock Exchange (NYSE): This exchange was founded by in 1792 and is both America’s largest and oldest stock exchange. “The Big Board, as it’s known, lists more than 1,600 companies who meet stringent listing requirements. There are 1,366 seats on the NYSE, many of which are owned by partner or officers of securities firms, and which handle trades for the public;”
- Over-the-counter stocks: These generally involve small companies that cannot meet the NYSE or AMEX requirements for listings and are not traded on organized exchanges. These stocks’ trading procedures are “written and enforced by the National Association of Securities Dealers (NASD), a self-regulatory group;”
- Preferred shares: This specific class of stocks doesn’t usually include voting rights for the owners but they do provide dividends when available. A number of people only like to buy this type of stock since there’s a better chance of getting your invested funds returned to you if the company must quickly liquidate its assets – than if you only own common stock;
- Price/Earnings ratio (P/E): This is a “widely used valuation measure of the relationship between a stock’s price and its earnings per share – it’s also referred to as Multiple to Earnings or simply, The Multiple. Its formula is: current stock price per share divided by the most current earnings per share;”
- Price to book value of a stock: This concept is also referred to as the Multiple to Book Value. It’s a “measure of the relative risk/reward profile of a stock;”
- Selling short: This refers to selling a security or a futures contract that doesn’t belong to you. People try to do this in order to “take advantage of an anticipated decline in price or to protect a long position;”
- Shareholder’s equity: Some traders and brokers call this a stockholder’s equity and net worth. You determine this figure by taking the total assets of a corporation and subtract its total liabilities;
- Spot market: This simply indicates that it’s a market for immediate rather than future delivery;
- Stock option: This refers to an option “whose underlying asset is the common stock of a corporation.” Such options can become worthless when stock prices fall;
- Stock split: The board of directors of a company can authorize this process which results in “increasing the number of shares outstanding without changing the total market value of the company or diluting a shareholder’s percentage stake in the company;”
- Undervalued security: This refers to a “stock selling below its liquidation value or below the market value that analysts believe it deserves.”
Should you have any other terms you’d like to look up, you may want to visit the NASDAQ’s “Glossary of Investing Terms.”
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