Common Stock Market Terms

  • 8/19/2013 4:29:00 AM
  • Daniel

Residual Owners:

    • These are the stockholders of the company. They are entitled to a dividend from a prorated share of the companies earnings but only after all of the other companies obligations are met. Some companies choose to reinvest this money back into the company rather than pay dividends to the shareholders.
    • Stocks can often provide a steady income stream through dividends.
    • The stock price can also increase over time providing capital gains. When a company reinvests profits back into the company a Shareholder expects to make capital gains on the stock.

Long and Short Positions:

    • Long purchasing is when an investor buys a stock and holds onto it for a long time. They aim to buy low and sell high.
    • Short Selling is a little more complex. It’s when an investor sells a stock they don’t own by borrowing the stock from another party. This process looks like:

      The short seller will borrow the stock from the lender with the intention of purchasing (covering) them at a lower price. If the price does decline the short seller will make money since the cost of repurchasing them is lower than the proceeds of the initial sale.

 

    • Investors will essentially make money when the stock price goes down.

Bull Market:

    • A market with rising prices and generally investors and consumers are very optimistic. This normally happens during periods of economic growth and at times when governments are trying to stimulate the market.

Bear Market:

    • A market with falling prices and generally investors and consumers are pessimistic. This can happen when the government is showing restraint and when the economy is slowing down.